MODOC NATION

2019-1 ? Fund Accounting Reconciliations Criteria or specific requirement ? The Tribe is responsible for designing and following internal controls that provide reasonable assurance regarding the reliability of financial reporting, this includes maintaining and reconciling individual funds and the transfers between them. Condition ? The accounting department, which is responsible for preparing the financial information, was not able to provide accurate reconciliations of due to/due from and transfers between individual funds as presented in the trial balance. Cause ? Personnel are not properly reconciling due to/from accounts and transfers between funds. Effect ? Due to/due from accounts and interfund transfers between individual funds are not properly recorded in the financial statements. Recommendation ? We recommend that policies and procedures be written outlining the process and procedures for reconciliation of due to/due from accounts and interfund transfers. These reconciliations should be performed on a monthly basis. Managements Response ? The Council understands and will take appropriate steps to remedy the finding.

2019-2 ? Financial Reporting and Preparation of Year-End Trial Balance Criteria or specific requirement ? The Tribe?s system of internal control should allow it to prepare a properly adjusted trial balance at year end. This would include making year-end accounting entries to convert from a cash basis financial statement to an accrual basis financial statement in accordance with generally accepted accounting principles (GAAP). Condition ? The Tribe presented a year-end trial balance that did not include all required accruals which are necessary in order for the financial statements to be in accordance with generally accepted accounting principles (GAAP). Cause ? Accounting personnel currently lack the necessary knowledge and skills to prepare a trial balance in accordance with generally accepted accounting principles. Effect ? Without the proper accruals at year end, financial statements could be materially misstated and potential accounting errors would not be detected by accounting personnel in a timely manner. Recommendation ? We recommend that the Tribe designate an individual, or individuals, with suitable knowledge, skills, and experience to oversee the financial reporting process. Managements Response ? The Council understands and will take appropriate steps to remedy the finding.

2019-3 ? Payroll Tax Reporting Criteria ? The Tribe is required to withhold payroll taxes on all compensation paid to employees, including any bonuses or incentives. Condition ? The Tribe did not withhold payroll taxes on bonuses paid to employees. Cause ? Bonuses paid to employees were not processed through the payroll system. Effect ? Required payroll reporting would be incorrect, resulting in underreported tax liabilities and the possible addition of payroll tax penalties. Recommendation ? We recommend that all wages paid to employees, including bonuses and incentives, are processed through the payroll processing system. Managements Response ? The Council understands and will take appropriate steps to remedy the finding.

2019-4 ? Pooled Cash Reconciliation Criteria or Specific Requirement ? The Tribe is required maintain pooled cash reconciliations by individual fund. Condition ? Cash balances in the pooled cash account were not appropriately identified or accurately reported by individual fund. Cause ? Personal charged with the reconciliation of the pooled cash account did not maintain records to accurately identify cash balances by individual fund. Effect ? Without properly identifying cash balances by individual fund, cash could be misappropriated and subject to theft and fraud. Recommendation ? We recommend that the Tribe create a process and procedure for reconciling the pooled cash account by individual fund on a monthly basis. Managements Response ? The Council understands and will take appropriate steps to remedy the finding.

2019-5 ? Maintenance and Safeguarding of Capital Assets Criteria or Specific Requirement ? The Tribe is required to maintain adequate controls to safeguard and account for its capital assets. Condition ? Internal controls over property accountability were inadequate or nonexistent for capital assets. The Tribe has no written policies or procedures on recording, adjusting or inventorying capital assets, does not adequately monitor or inventory capital assets, does not record transactions in required general ledger accounts, and does not record capital assets in an approved capital asset inventory system that includes records for all assets that can be inventoried. Cause ? There are no written policies or procedures for the recording, maintenance, and safeguarding of capital assets. Effect ? Without adequate internal controls to ensure proper safeguarding, assets are at risk and vulnerable to misappropriation, misuse or loss, which would not be detected in a timely manner, if at all. Financial information is also inaccurately recorded for capitalized assets. Recommendation ? We recommend the Tribe implement internal controls in its property accountability by developing written policies and procedures that describe how capital assets will be recorded and managed, post transactions affecting capital assets to an approved capital asset inventory system, and perform timely inventories of capital assets on an annual basis. Managements Response ? The Council understands and will take appropriate steps to remedy the finding.