Lower Macungie Township Audit

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Lower Macungie Township 2007 Audit
Presented By Larry S. Shaub, CPA, Partner July
17, 2008
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• AUDIT HIGHLIGHTS

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Audit Highlights

• Year Ended December 31, 2007
• Auditor's Opinion Unqualified
• Financial statements prepared in accordance with
  accounting principles generally accepted in the
  United States.
• Audit conducted in accordance with auditing
  standards generally accepted in the United States
  

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Audit Highlights

• Increase in entity-wide net assets of 19.1
  million
• Increase in total revenues of 1.1 million
• Increase in total expenses of 850 thousand
• Increase in capital assets of 4.7 million
• Infrastructure now included as capital assets,
  resulted in 17.4 million prior period adjustment

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Audit Highlights

• Decrease in long-term debt of 890 thousand
• General Fund surplus 526 thousand
• Deficit in Capital Projects Fund of 3.2 million
• Positive variance on General Fund revenue of
  650 thousand
• Negative variance on General Fund expenditures of
  126 thousand
• Audit reports filled timely with DCED

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• REQUIRED COMMUNICATIONS

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Required Communications

• Significant Estimates
• Capital asset lives
• Fair value of donated infrastructure
• Allowances for uncollectible utility billings

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Required Communications

• Audit Adjustments 11 Audit adjustments (28 in
  2006) to books presented for audit. Significant
  entries include
• 6 entries related to adjustments to utility
  billing revenue and receivables
• Record Agency Fund on the accrual basis

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Required Communications

• No adoption of new accounting standards
• No unusual transactions
• No disagreement with management
• No consultations with other accounting firms
• No difficulties in performing the audit
• No passed adjustments

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• FINANCIAL RESULTS

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Financial ResultsGovernment Wide
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Financial ResultsGovernment Wide
1,148,883
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Financial ResultsGovernment Wide
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Financial ResultsGovernment Wide
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Financial ResultsGovernment Wide
REVENUES
2006
127,469,051
121,765,391
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Financial ResultsGovernment Wide
EXPENSES
2005
2006
2006
2007
113,281,368
108,668,237
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Financial ResultsGovernment Wide
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Financial ResultsGeneral Fund
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Financial ResultsGeneral Fund
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Financial ResultsGeneral Fund
BUDGET TO ACTUAL COMPARISON REVENUE - VARIANCE
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Financial ResultsGeneral Fund
BUDGET TO ACTUAL COMPARISON (Continued) EXPENDITUR
E- VARIANCE
BUDGET TO ACTUAL COMPARISON 2005
(Continued) EXPENDITURES - VARIANCE
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Financial ResultsGeneral Fund
BUDGET TO ACTUAL COMPARISON (Continued) EXCESS OF
REVENUES OVER EXPENDITURES
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Financial ResultsCapital Projects Fund
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Financial ResultsProprietary Activity
Net Income (Loss)
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Financial ResultsProprietary Activity
Net Income (Loss)
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• INTERNAL CONTROL COMMENTS

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Internal Control Comments

• Auditing Standards Statement 112 Communicating
  Internal Control Matters Identified in an Audit
• Control Deficiencies
• Significant Deficiencies
• Material Weaknesses

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Internal Control Comments

• 4 Material Weaknesses (4 in 2006 audit)
• 2 Significant Deficiencies (1 in 2006 audit)
• 10 Control Deficiencies Areas Reported (6 in
  2006 audit)

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Internal Control Comments

• Material Weaknesses
• Monthly financial reports reflecting actual and
  budget results for each major fund were not
  prepared and distributed to the Board of
  Supervisors
• The Township did not have the ability to prepare
  a complete set of GAAP financial statements and
  related footnote disclosures
• There was a lack of segregation of duties within
  the utility billing cycle. The same person who
  processes billings could also make adjustments to
  customer accounts
• There was no reconciliation of sewer and trash
  accounts receivable ledgers to the general ledger
  account balances

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Internal Control Comments

• Significant Deficiencies
• No independent review or approval of changes made
  to master accounts payable vender files
• Reconcilations of the accounts payable subsidiary
  ledger to the general ledger account balance was
  not prepared on a timely bases

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Internal Control Comments

• Control Deficiencies
• For most of the year, adjusting entries could be
  made by the Treasurer without review
• The Township has not implemented the Capital
  Asset module of the accounting software
• Property liens for delinquent sewer and trash
  receivables were not filed timely
• The general ledger code was not always noted on
  the invoice or purchase order

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Internal Control Comments

• Control Deficiencies (continued)
• Budget monitoring procedures were not in place to
  modify the original budget when actual
  expenditures exceed appropriations
• Escrow Fund Activity was recorded in Quickbooks
  and not part of the Townships accounting system
• Activity in the Escrow Fund was recorded on an
  interim basis on the cash basis of accounting
• Employees should have unique passwords when
  logging into PCs and the passwords should be
  changed at regular intervals

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Internal Control Comments

• Control Deficiencies (continued)
• PC workstations should be automatically password
  protected after a set period of inactivity
• Computer servers should be located in a separate
  secured server room that is properly secured and
  equipped

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• Thank you for the opportunity to serve you.