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I APPENDIX III - MANAGEMENT LETTERS DEVELOPED AND ISSUED IN CONNECTION WITH LOCAL GOVERNMENT AUDITS I I TOWN OF SOUTHWEST RANCHES, FLORIDA SCHEDULE OF FINDINGS AND RECOMMENDATIONS SEPTEMBER 30, 2005 I I SECTION 1- CURRENT YEAR FINDINGS AND RECOMMENDATIONS I 2005-1 Significant Audit Adjustments I Condition: While performing audit procedures, we noted that the Town erroneously recorded a significant number of transactions. These included, but are not limited to, improper recording of revenues and receivables. prior year audit adjustments, loan proceeds & repayments, inventory of trees. interfund transactions, accounts payable and expenditures, deposit reimbursements, etc. I Cause of Condition: The increased complex nature of the types of transactions for 2005 and incomplete follow through on prior year receivables, accounts payables and audit adjustments. I Effect of Condition: Transactions as recorded do no reflect the actual result of the activities of the Town. Therefore balances reflected in the books during the year are misstated. I Recommendation: We recommend the Town record transactions in the accounting system to the proper accounts to reflect the actual activities of the Town throughout the year. I Management's Response: Management would agree with the recommendation of the finding and will utilize additional accounting services to provide necessary input, oversight and follow through. 2005-2: Incorrect Bank Reconciliations I Condition: While performing procedures for cash, we noted that reconciled book balances per the bank reconciliations did not agree to cash balances per the general ledger. Furthermore, there were reconciling items in transit outstanding for more than six months that have not been addressed by the Town. I Cause of Condition: Adjustments are made to the books subsequent to the preparation of the bank reconciliations. I Effect of Condition: By not preparing bank reconciliations that properly reconcile with the Town's cash account, the Town increases the risk that amounts may be processed and not be accounted properly in the general ledger. In addition, the lack of control over the deposit in transit and outstanding checks increases the potential for errors and the risk for misappropriation of assets. I Recommendation: We recommend the Town develop written policies and procedures over reconciling items outstanding for more than six months. In addition, steps should be taken to identify the reasons for the differences and corrective action taken as warranted. Town policies should dictate that monthly bank reconciliations are properly reconciled with the associated general ledger amount. I I I 9 I