VLAWMO Annual Financial Report 2018

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Board of Directors and Management Vadnais Lake Area Water Management Organization Page 2 Material weaknesses (continued) Financial reporting process (continued) The Organization's personnel have not monitored recent accounting developments to the extent necessary to enable them to prepare the Organization's financial statements and related disclosures, to provide a high level of assurance that potential omissions or other errors that are material would be identified and corrected on a timely basis. If the financial statements are not properly monitored, the financial statements on a monthly basis may not be consistent with the annual financial statements. The outsourcing of this service is not unusual in organizations of your size and is a result of management's cost benefit decision to use our accounting expertise rather than to incur internal resource costs. Other deficiencies in internal control and other matters During our audit, we became aware of other deficiencies in intemal control and other matters that are opportunities to strengthen your intemal control and improve the efficiency of your operations. While the nature and magnitude of the other deficiencies in intemal control were not considered important enough to merit the attention of the board of directors they are considered of sufficient importance to merit management's attention and are included herein to provide a single, comprehensive communication for both those charged with governance and management. Documentation and review During our testing of internal controls, it was noted in several areas the documentation of review was not retained or indicated on the supporting statements. These areas include payroll registers, bank reconciliations, and joumal entries. We recommend the Organization review their policies and procedures and ensure a formal review process is in place for all areas. These review processes should include proper documentation of the reviews. Credit cards During our testing of credit card disbursements, it was noted the Administrator's credit card statements are being reviewed by the Water Resource Technician. Proper level of authority should be reviewing activity to ensure appropriate charges. We recommend the Administrator's activity be reviewed by a member of the board of directors periodically and that this review is documented. Fund balance policy During our preparation of the financial statements, it was noted the Organization is not meeting their own fund balance policy of keeping unassigned fund balance at 35-50% of next year's budgeted expenditures. In prior year unassigned fund balance was 13% of next year's budgeted expenditures and in the current year unassigned fund balance was 32%. Not aligning with policies related to fund balance can lead to cash flow problems in the future. We recommend reviewing the next year's budget and reviewing the fund balance policy to ensure proper cash flow and adherence to such policy.