Beaver Water District of Washington and Benton CountiesLocal Government

Condition – For the year ended September 30, 2025, the District had a failure of controls over the investment section from a failure to recognize and record investment activity. The controls in place were not followed during the period. This condition resulted in incomplete activity and ending balances of investments. Criteria – Controls in place over investments include obtaining third party statements, recording and monitoring sales, trades, redemptions, purchases, and other investments routinely. Ongoing record is kept to verify accuracy of third party records and propose internal adjustments to investments. Effects – The failure to routinely monitor investment changes and activities resulted in the misrecognition of realized, unrealized, and cost basis of investments being misstated. Recommendation – Abacus has recommended a routine report to be updated along with periodic statements, with adjustments being posted in conjunction. Abacus also recommends an evaluation of current investment record keeping, and ease of use. Managements Response – Beaver Water District is committed to evaluating the current process of reconciling investments, including assessing the current investment record-keeping system, to ensure correct recording of investment changes.

Condition – During the year ended September 30, 2025, it was discovered depreciation methods for certain capital assets were applied inconsistently in current and prior years, resulting in the need to adjust depreciation expense and accumulated depreciation. Criteria – Controls in place over capital asset additions include obtaining purchase documentation, matching to accounting system, and using project codes and descriptions to input into capital asset software. Categories, methods, and lives are based on the inputs mentioned above. Effects – Clerical errors in descriptions, account or project grouping, and failure of review resulted in the capital asset group of land and land rights being depreciated incorrectly. Recommendation – Abacus has recommended a review of authoritative guidances on allowable depreciation methods, an evaluation of current capital asset control processes, and an additional evaluation of controls and abilities of capital asset management system. Managements Response – The misstatement of current year depreciation expense and accumulated depreciation amounts resulted from the misapplication of depreciation methods related to land and land rights. The affected assets represented a small portion of the total capital asset population and were primarily related to assets acquired in prior years. Current year depreciation expense was overstated by $57,000, representing 0.9% of the total depreciation expense of $6,557,584. The effect on accumulated depreciation for fiscal year 2025 was $330,000, representing 0.3% of $111,195,665 in accumulated depreciation. The 2025 financial statements have been adjusted to reflect the correct amounts. The District has committed to perform evaluations of the existing capital asset control processes and the abilities of the capital asset management system.

Condition – For the year ended September 30, 2024, the District had a failure of controls over the expense section from fraudulent vendor communications. The controls in place were followed and confirmed with the real vendor, which had confirmed the invoice had needed to be paid. The impersonator has intercepted communications inside the entity and posed as a known vendor. Criteria – Controls in place over expensing include staff submitting purchase orders to accounting department, which compare and match invoice and vendor information to confirm. Additional communication with vendor and comparing ACH or payment information is reviewed if necessary. Effects – The fraudulent vendor communications led to an ACH payment. When legal counsel and insurance company was contacted no claim could be submitted due to limited coverage, and the funds could not be tracked. The full amount was expensed. Recommendation – Abacus has recommended an increase in insurance coverage, and an evaluation of current expense controls. Additional controls to address phishing and vendor impersonation fraud. An evaluation of the IT environment and security is also recommended. Managements Response – Beaver Water District has committed to increase coverage and evaluate current controls. An additional evaluation of the IT environment and security.