The City of Natalia received an unmodified opinion, the highest possible, on the 2017-2018 fiscal year audit performed by accounting firm Beyer & Company, though it also received a warning for backdated Municipal Court receipts and an insufficient segregation of duties.
Mary Shearrer, a CPA and audit supervisor with Beyer & Company, presented the audit results at the Natalia City Council meeting held July 15.
The City had $123,074 in current assets as of Sept. 30, 2018, compared to current liabilities of $115,661, which Shearrer said was essentially a one to one ratio.
“You would like to get it to about a 1.5,” Shearrer said.
The General Fund finished with a net gain of $4,734.
“Your net change in your fund balance is approximately one-fifteenth of your expenditures, or about six percent,” Shearrer said. “You would like to have a 25 percent coverage, but it’s an improvement.”
The Natalia Municipal Development District also finished in the black, with $30,069 in revenue.
“This year, your beginning fund balance was $175,482,” Shearrer said, “and you ended with a fund balance of $205,551.”
Operating revenues for the Utility Fund increased by $125,000 over the previous fiscal year.
“There was a change in water rates, and so this year you ended up with a positive operating income, which was a great improvement from the prior year,” Shearrer said.
Total pension liability increased in 2017 to $331,641. The City has $290,962 in the pension plan, leaving a liability of $40,679.
“Notice that your planned fiduciary net position as a percentage of your total pension liability was 81.61 percent in 2016,” Shearrer said. “It’s now 87.73 percent, so it has increased. You like an 85 percent or better, and you’re sitting at 87.73 percent, so that’s good news.”
However, a material weakness was found with Municipal Court.
Shearrer described a material weakness as a deficiency or a combination of deficiencies in internal control that allow for a reasonable possibility that a material misstatement of the City’s financial statements will not be prevented if not corrected in a timely basis.
“During the test month, we found the City was missing 103 receipt numbers,” Shearrer said. “The receipts were posted at a later date and backdated to when they were deposited into the bank account instead of being posted the day of the receipt.
“Therefore, it appears that several people paid tickets, but payments were not entered until months later.”
Shearrer said that the court’s receipts have to balance to the monthly State report, and suggested that all payments be receipted into the court’s computer system when received, rather than backdated.
“If this is not corrected, it could cause you to have a modified opinion next year,” Shearrer said.
Municipal Court clerk Nicole Bermea said the receipts had been entered out of sequential order, but were not missing.
“Every transaction I do in this system assigns a receipt number,” Bermea said, and explained that Council had recently voted to write off nearly $1 million in uncollectible Municipal Court citations (see story in June 5 edition of The Devine News). “When I go in to clear out and mark it as uncollectible–because if I don’t, those amounts are going to show up on that report that I give you–so I have to actually go in and zero out every fine and fee and all that. And because I’m doing that as a transaction, it assigns a receipt number, but it will not show up on that payment summary report.”
Bermea added that the Municipal Court reports to DPS on a quarterly basis, and that only convictions are reported.
Shearrer also addressed a significant deficiency with the City staff’s segregation of duties, which she said was not as problematic as a material weakness but still warranted attention.
“We consider segregation of duties to be a significant deficiency, and that’s due to the limited number of people working in the office,” Shearrer said. “Many critical duties are combined and given to available employees.
“To the extent possible, duties should be segregated to serve as a check and balance on the employees’ integrity, and to maintain the best control system as possible.”
By Marly Davis