El Dorado County Fire Safe Council
Financial Audit 2009-2010
January 11, 2011
REPORTING ON SIGNIFICANT DEFICIENCIES IN INTERNAL CONTROL
El Dorado County Fire Safe Council Diamond Springs, CA
In planning and performing my audit of the
financial statements of the El Dorado County Fire
Safe Council as of and for the year ended June 30, 2010, in accordance with auditing standards
generally accepted in the United States of America, I considered the Organization's internal
control over financial reporting (internal control) as a basis for designing my auditing procedures
for the purpose of expressing my opinion on the financial statements, but not for the purpose of
expressing an opinion on the effectiveness of the Organization's internal control. Accordingly, I
do not express an opinion on the effectiveness of the Organization's internal control.
M consideration of internal control was for the limited
purpose described in the preceding
paragraph and would not necessarily identify all deficiencies in internal control that might be
significant deficiencies or material weaknesses. However, as discussed below, I identified certain
deficiencies in internal control that I consider to be significant.
A deficiency exists when the design or operation of a control
does not allow management or
employees in the normal course of their functions, to prevent or detect misstatements on a timely
basis. A significant deficiency is a control deficiency, or a combination of control deficiencies,
that adversely affects the Organization's ability to initiate, authorize, record, process, or report
financial data reliably in accordance with generally accepted accounting principles such that there
is more than a remote likelihood that a misstatement of the Organization's financial statements
that is more than inconsequential will not be prevented or detected by the Organization's internal
control. I consider the following deficiencies to be significant deficiencies in internal control.
Included is management's response.
1. Organizational Structure
Condition: The size of the organization's accounting and administrative
staff precludes certain
internal controls that would be preferred if the office staff were large enough to provide optimum
segregation of duties. This situation dictates that the Board of Directors remains involved in the
financial affairs of the organization to provide oversight and independent review functions.
Criteria: Good business practices dictate a separation of duties
between recording, custody,
authorization and monitoring in cash receipts, cash disbursement and the payroll cycle. The size
of the organization prevents this ideal separation of duties.
Recommendation: Expand the staff in the administration of the
Organization to implement a
broader separation of duties.
Response: Normal segregation of duties is difficult to accomplish
within a small organization.
The Board of directors is mindful that the situation is not ideal, but considers the cost of
additional staff is better spent within the program purposes.
2. Cost Allocation Methodology
Condition: The operation manager, an independent contractor,
works on all of the programs for
the organization. The costs billed to each grant are based on estimated time spent with no
supporting documentation.
Criteria: When services are billed to several grants a
functional time record must be maintained
so the allocation of costs is based on actual time spent.
Recommendation: Documentation to support allocation to
multiple programs should be
maintained.
Response: A functional time record for those spending time on
multiple programs will be
maintained in the future. The allocation will be based on the weighted average method.
3. Written Purchasing and Procurement Policy
Condition: The organization sub-contracted services that
were over the definition of a major
purchase of $25,000 without documenting the procurement policy. There is no policy to assure
the organization is acquiring goods at a reasonable price.
Criteria: Organizations managing large purchases should
have policies to promote fair and
reasonable competition for minimizing the costs to the organization.
Recommendation: It is recommended that the organization
make a written purchasing and
procurement policy. The contract award process should be documented and maintained in the
files.
Response: A written policy will be developed and
applied to all purchases of the organization.
The Board will document major purchases approvals and document such approval in the minutes.
El Dorado County Fire Safe Council's written response
to the significant deficiencies identified
in my audit was not subjected to the auditing procedures applied in the audit of the financial
statements and, accordingly, I express no opinion on it.
This information is intended solely for the use
staff and board of directors of the El Dorado
County Fire Safe Council and is not intended to be and should not be used by anyone other than
these specified parties.
Jeanine J. Mays January 11, 2011
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