Audit Committee Recommendations

March 9, 2022

IVGID Audit Committee Chair, Ray Tulloch presented the recommendations from the Audit Committee as highlighted below. The entire agenda item and materials may be found by clicking here.

Summary of Audit Committee Decision Points and Recommendations for the Board of Trustees

  1. The Audit Committee notes actions are being taken by management to address the identified issues in the Auditors Compliance Report related to Internal Controls and Construction Projects.

    The Audit Committee recommends that the FY 21-22 audit be expanded in scope to include enhanced review of internal controls.

  2. Management corrected prior years of capitalization for items considered to be maintenance and repairs. However, the FY 2019-2020 and 2020-21 ACFRs are inconsistent.

    a. For the Utility Fund, this is estimated to be $181,882 (see Comments and Concerns #2 and Section 3.1)

    b. For Community Services the amount is estimated to be $1,171,606 (see Concern 11, Section 3.3, and Appendix D). These were for preliminary stage activities which include conceptual formulation and evaluation of alternatives, determination of future needs, feasibility studies and development of financing alternatives, temporary repairs for the Burnt Cedar pool and temporary repairs at the Mountain Golf Course Clubhouse.

    c. Similar costs were expensed for 2019-2020 (as a prior period adjustment – Note 22 of CAFR) for the Parks Master Plan ($212,044) and the Incline Village Ballfield ($77,216). In FY 2020-2021 similar costs of $3,100,110 for the Effluent Pipeline were charged off as a prior period adjustment. This highlights the inconsistency of the financial statements.

    The Audit Committee recommends a prior period adjustment to expense items 2a & 2b for consistency and accuracy of our financial statements.

  3. Contained in the initial draft of the ACFR, the Auditor had identified an additional $866,503.70 of charge off to expenses items for items capitalized in past CAFRs. After review by Management, some items were removed including levee and roadway repairs at the wetlands, spot paving at various recreational venues, sewer line repairs and roof repairs which, as noted in #2 above, had been determined to be expense items rather than capital.

    Additionally, equipment items were grouped together to meet the capitalization threshold while Board Practice 2.9 states “In no case will the District establish a capitalization threshold of less than $5,000 for any individual item.”. The Audit Committee Chair reviewed this with the Auditor, after the financial report was complete, and she concurred that the Board Practice is clear and not open to interpretation. In addition, an Audit Committee member reviewed with Melissa Crosthwaite, District Legal Counsel, who also concurred the statement is clear. (see Concern 8 and Section 3.2)

    The Audit Committee recommends a prior year adjustment to expense these items for compliance with Board Practice and consistency and accuracy of our financial statements.

  4. Beginning in FY 2018-2019 investment income was credited to the General Fund instead of other funds which had cash deposits at LGIP. This caused the General Fund’s opening balance in the FY 2020-21 ACFR to be overstated by approximately $492K (over a 10% overstatement). This has not been corrected. The new process management has chosen to implement is allocating investment income not by the fund with cash invested at LGIP, but based on total cash equivalents by fund.

    The Audit Committee recommends a prior period adjustment removing investment income credited to the General Fund and included in the fund balances for the fund(s) which had cash invested at LGIP, as it had historically been done, prior to FY 2018-2019.

    Additionally, the committee recommends the approach for distribution of investment income be based solely on cash invested by fund or to have separate LGIP accounts by fund, like the Utility Fund, to avoid any confusion.

  5. For ease of transparency, and to align with best practices, the Audit Committee recommends the Capital Improvement budget contain only project costs that are to be capitalized. The Audit Committee recommends that projects or project elements related to preliminary stage activities, repair and maintenance items are separated and included in operating expenses. A separate line item in the Statement of Income, Revenue and Expenses and Change in Net Position for preliminary stage activities, repairs and
    maintenance is recommended for all funds.
    This will allow for cross referencing the expense items budgeted within Services and Supplies.

    The Audit Committee recommends the additional prior period adjustments should be made to the 2020-2021 ACFR.

Chair Callicrate and Trustee Wong would like Trustee Tonking to participate in the discussion on this matter. She was not present at the meeting. Additionally, Chair Callicrate requested a review of the recommendations and management comments by Jennifer Farr of Davis Farr LLP, the District’s auditor, for everyone’s benefit.

Trustee Schmitz commented the Auditor accepts management’s representations regarding financial statements and the recommendations presented are related to Board Policy, consistency, and the Moss Adams recommendations [which are management responsibilities].

Trustee Dent stated that from a consistency standpoint, the recommendations are something the Board should move forward with. He then made a motion to accept the recommendations as put forth by the Audit Committee. Trustee Schmitz seconded the motion.

Trustee Wong stated it is “wholly ridiculous” to do prior period adjustments when we have an approved ACFR and audited financials. “It’s a ridiculous recommendation.” This would “demonstrate we have no idea what we are doing.” She requested that this be discussed with our Treasurer Tonking present.

Chair Callicrate requested that the auditor weigh in on the recommendations and look for opportunities for improvement. He too would like Treasurer Tonking to be part of the conversation and will not support the implementation until Trustee Tonking, the auditor and management weigh in.

Trustee Dent stated that the agreement before hiring Moss Adams was to settle the issues by having Board and staff “buy-in” to the recommendations, regardless of the outcome. He questioned why the District would hire consultants to then pick and choose what recommendations to follow. He went on to say that we had all agreed to accept the recommendations and move forward. He stated the Board isn’t holding staff accountable for not following the Moss Adams recommendations.

Trustee Schmitz clarified that the Audit Committee voted unanimously not to accept this year’s ACFR; and when it was brought to the Board, both she and Trustee Dent, who are Audit Committee members, voted against approving the ACFR. She explained that before the consulting agreement was approved with Moss Adams, the Audit Committee, Management and community members who have brought forward concerns over the years all agreed to accept the recommendations of Moss Adams and settle the issues once and for all. The Moss Adams findings didn’t agree, in some cases, with community member opinions; however, they agreed and have let the issues go. Management has implemented some of the recommendations but not all, and they are still being discussed.

Trustee Wong stated that the District has spent over $100K on consultants and not one earth-shattering recommendation has come forth. Additionally, she stated nothing has shown there is anything pervasively wrong with the financials. She went on to say that the ultimate problem is that staff isn’t trusted and spending money on consultants won’t solve that issue.

Trustee Schmitz clarified that the recommendations have nothing to do with trust, but are about consistency in our financial reporting and following Board policy. The Audit Committee’s role is to assist the Board, and the Board’s responsibility, it’s fiduciary duty, is to oversee the financials and internal controls. The recommendations are clear and documented and have nothing to do with lack of trust of staff.

The vote was taken on the motion to “accept the recommendations as put forth by the Audit Committee”. Trustees Dent and Schmitz voted in favor, Trustees Callicrate and Wong were opposed. This will be brought back before the Board on March 30th.

Get notified when a new post is published on a specific topic.

Enter your email and select what topics you'd like to be notified about. You may also select all topics. This is not the newsletter. If you want to subscribe to the newsletter, please click subscribe in the menu at the top of the page.

Upcoming Events

Calendar of Events

S Sun

M Mon

T Tue

W Wed

T Thu

F Fri

S Sat

0 events,

0 events,

0 events,

0 events,

0 events,

0 events,

0 events,

0 events,

0 events,

0 events,

0 events,

0 events,

0 events,

0 events,

0 events,

0 events,

0 events,

1 event,

1 event,

-

IVGID Audit Committee

1 event,

-

IV/CB Community Forum

0 events,

0 events,

0 events,

0 events,

0 events,

0 events,

0 events,

0 events,

0 events,

1 event,

1 event,

1 event,

0 events,

1 event,

-

IV/CB Community Forum

0 events,