1993City of Bangor, Maine
MANAGEMENT LETTER
Year ended June 30, 1993
Certified Public Accountants
City of Bangor, Maine
MANAGEMENT LETTER
Year ended June 30, 1993
BRANTNER THIBODEAU & ASSOCIATES Certified Public Accountants
CONTENTS
Independent auditor's letter
Reportable conditions considered to be
material weaknesses
Other reportable conditions
Other recommendations
BRANTNER THIBODEAU & ASSOCIATES Certified Public Accountants
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BRANTNER THIBODEAU & ASSOCIATES
Certified Public Accountants
Key Plaza • 23 Water Street
Post Office Box 864
Bangor, ME 04402-0864
(207) 947-3325
March 4, 1994
To Honorable Mayor and City Council
City of Bangor, Maine
In planning and performing our audit of the financial statements of the City
of Bangor, Maine for the year ended June 30, 1993, we considered its
internal control structure in order to determine our auditing procedures for
the purpose of expressing our opinion on the financial statements and not to
provide assurance on the internal control structure.
However, we noted certain matters involving the internal control structure
and its operation that we consider to be reportable conditions under
standards established by the American Institute of Certified Public
Accountants. Reportable conditions involve matters coming to our attention
relating to significant deficiencies in the design or operation of the
internal control structure that, in our judgment, could adversely affect the
City's ability to record, process, summarize, and report financial data
consistent with the assertions of management in the financial statements.
Those matters that we consider to be reportable conditions are described on
the following pages.
A material weakness is a reportable condition in which the design or
operation of one or more of the internal control structure elements does not
reduce to a relatively low level the risk that errors or irregularities in
amounts that would be material in relation to the financial statements being
audited may occur and not be detected within a timely period by employees in
the normal course of performing their assigned functions.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be
reportable conditions and, accordingly, would not necessarily disclose all
reportable conditions that are also considered to be material weaknesses as
defined above. However, we noted reportable conditions that we believe to
be material weaknesses which are identified in the following pages.
In addition to the above, we became aware of several matters that are
opportunities for strengthening internal controls and operating efficiency.
Our comments and suggestions regarding those matters are as described in the
following pages.
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To Honorable Mayor and City Council
March 4, 1994
Generally, we found the City's' accounting records to be improved and we
received excellent cooperation from the Finance Department and other staff.
We would be pleased to discuss the above matters at your convenience, to
perform any additional study, or to assist you in implementing the
recommendations.
This report is intended solely for the information and use of the finance
committee, City Council, management and the federal cognizant agency.
Yours truly,
BRANTNER, THIBODEAU & ASSOCIATES
Gerald E. Thibodeau, CPA
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BRANTNER THIBODEAU & ASSOCIATES Certified Public Accountants
REPORTABLE CONDITIONS CONSIDERED TO BE MATERIAL WEAKNESSES
Bass Park - State Fair and Harness Racine
We noted that the supporting documentation for the 1992 State Fair gate
receipts and the 1992 Harness Racing Meets' admissions, program sales and
concessions had been discarded or could not be located. As a result, it was
not possible to verify the completeness of these deposits. We recommend that
the City review its procedures for controlling the cash receipts at the State
Fair and during Harness Racing Meets, and that documentation supporting such
receipts be retained.
Auditee Response:
The City has since implemented record retention procedures for the 1993
Harness Racing Meets' admissions, program sales and concessions revenue.
The City also implemented record retention procedures for the 1993 State
Fair.
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BRANTNER THIBODEAU & ASSOCIATES Certified Public Accountants
OTHER REPORTABLE CONDITIONS
Accounts Receivable
During our audit, we noted that the general fund accounts receivable is not
being reconciled timely between the general ledger and the subsidiary
ledger. As a result, discrepancies between the general ledger and the
subsidiary ledger apparently caused by timing differences are not corrected
on a timely basis. We recommend that reconciliations be done monthly for all
accounts receivable and that discrepancies be identified and resolved on a
timely basis.
Auditee Response:
Accounts receivable reconciliations are being performed during fiscal year
94. It is anticipated that with the acquisition of new hardware and
software, reconciliations will be easier to accomplish. The largest user of
the accounts receivable program is the Airport, which has reconciled it's
balances monthly for two years.
Taxes Receivable
At June 30, 1993, we noted that differences still exist between the
subsidiary ledger (master file) and the general ledger in amounts ranging
from $100 to $23,000. All real property, personal property, and tax lien
receivables should be reconciled between the general ledger and the master
file on a monthly basis. We recommend that reconciliations be performed on a
monthly basis and discrepancies be identified and resolved.
Auditee Response:
Taxes receivable reconciliations are being performed during fiscal year 94.
It is anticipated that with the acquisition of new hardware and software,
reconciliations will be easier to accomplish.
Sewer Liens
The City has not currently liened its delinquent sewer bills. As a result,
when a property with sewer bill delinquencies is sold, the City must attempt
to seek collection in the capacity of an unsecured creditor. We recommend
'that the City implement lien procedures so that the City will receive
delinquent sewer bill payments whenever a property is sold.
Auditee Response:
During fiscal year 1994, the City will be implementing a manual sewer lien
process on those outstanding sewer bills covered by the statute of
limitations. The City is also currently proceeding with the acquisition of
necessary computer equipment and services for a joint utility billing program
with the Bangor Water District.
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BRANTNER THIBODEAU & ASSOCIATES Certified Public Accountants
OTHER RECOMMENDATIONS
Excise Taxes Receipts
During our audit, we noted that the City fell behind in filing the excise tax
receipts (the green copies and voids) - making it difficult to control and
test the accountability of the excise tax receipts. We recommend that
procedures be implemented for the systematic filing of excise tax receipts
before the data is misplaced.
In fiscal year 1994, the City implemented a specialized excise tax receipting
computer program/system which should improve control over excise tax
receipting.
School Department - EFM-45 Revortin
We noted that the EEM -45 Form which the School Department filed with the
State did not reconcile with the general ledger. Also, the report omits
capital projects activity which should be disclosed. We recommend that the
School Department file an amended EFM-45 to properly report current year
activity which reconciles to the general ledger.
Auditee Response:
The School Department will file an amended EFM 45 for fiscal year 1993.
Special Revenue
When loan payments are received, cash is debited, revenue is credited, and
the subsidiary loan detail is credited. An additional entry should have been
made simultaneously on the general ledger to adjust the loan receivable
account and the deferred revenue account for the principal payment received.
We recommend that the City post the general ledger entry for the principal
payments at least on a monthly basis and perform simultaneous reconciliations
of subsidiary loan receivable detail to the general ledger loan account
balance.
It is our understanding that the City has taken steps in fiscal year 1994 to
implement the above.
Sewer Fund
At June -30, 1993, the City maintained a reserve for uncollectible sewer bills
of $20,000. At that time, sewer bills that had been delinquent for more than
one year exceeded $378,000. We recommend that the reserve be reviewed to
determine if it accurately reflects the amount of sewer receivables which are
unlikely to be collected.
Auditee Response:
With the advent of the sewer lien process, the reserve will be adjusted as
needed to reflect uncollectible amounts.
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BRANTNER THIBODEAU & ASSOCIATES Certified Public Accountants
OTHER RECOMMENDATIONS (CONTINUED)
Kirstein Student Loan Fund
The City has loans totaling $21,620 at June 30, 1993 for which payments are
past due. We recommend that the City implement procedures to review the
outstanding loans on a regular basis to ensure compliance with the terms of
student loan funds.
The City has since entered into an agreement to have an independent company
manage these funds - which includes collections.
Aeencv Funds
During our audit, we noted that certain accounts in the Agency Fund should be
reported in the fund originating the transaction. We recommend that the City
review all agency accounts to determine whether they should be reported in
the Trust and Agency Fund or the fund originating the transaction.
Auditee Response:
Agency Funds - As part of the implementation of the new hardware and software
all accounts are being analyzed to determine where the accounts should be
reported.
Fixed Assets
A fixed asset survey has been performed on the City assets during fiscal year
1994, and the City is awaiting a final fixed asset inventory listing. This
listing, however, only covers City assets and not the School's. We recommend
that the School conduct an inventory of its fixed assets so that a complete
record will exist.
Grants. Contracts, Single Audit Act
No one individual in City government monitors contracts and federal and state
grants. There is no master listing of contracts and grants authorized,
outstanding or applied for. Also, the City should provide their program
directors with a copy of the Office of Management and Budget "Compliance
Supplement for Single Audits of State and Local Governments". The lack of
oversight enhances the possibility that grants and contracts might be
mismanaged or that compliance requirements may not be met. We recommend that
the City designate one individual to monitor all federal and state contracts
and grants to ensure overall compliance.
We understand that duties in the Finance Department are being realigned to
allow one staff member to serve as contract compliance officer.
H.
BRANTNER THIBODEAU & ASSOCIATES Certified Public Accountants
OTHER RECOMMENDATIONS (CONTINUED)
Truncation
During our audit, we noted a truncation problem on the encumbrance report
(ENC050). We recommend that the City review all computer programs to
determine which ones have incompatible field sizes and to make necessary
programming adjustments.
The City is currently in the process of replacing its financial and
administrative software, which should eliminate this problem in the future.
School Trust and Agency Deficit Fund Balances
Certain school trust and agency fund balances have deficit balances of
$109,178 at June 30, 1993. These funds represent programs that are supposed
to be self-supporting. We recommend that the school department monitor these
accounts to prevent future overspending of these funds and develop a plan to
fund the existing deficit balances.
Auditee Response:
Approximately $80,000 of the deficit was a result of a timing difference
between when the funds were expended and the receipt of the funding. The
School Department will develop a plan to fund any remaining fund deficits.
Workers Compensation Liability
Consistent use of allocation methods from one accounting period to another
enhances the use of financial statements to users by facilitating analysis
and understanding of comparative accounting data.
During our audit, we noted that the City changed its method of calculating
the allocation of workers compensation liability among the funds. We
recommend the City in the future consider how changes in allocation methods
and other accounting estimates may affect the financial statements and ensure
that such changes do not distort comparative financial statements.
Auditee Response:
Workers Compensation Liability - The City will maintain the current
methodology, which is to book the actuarial gain or loss to the general fund
liability rather than apportion the liability to other funds. The general
fund has the largest expense and experience. Since much of the actuarial
gain or loss is due to IBNR (Incurred But Not Reported), rather than
estimated costs per claim retaining that expense within the general fund will
not distort the enterprise funds, which are financial sensitive to IBNR
changes.
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BRANTNER THIBODEAU & ASSOCIATES Certified Public Accountants