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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 (CONTINUED) I I SECTION 1- CURRENT YEAR FINDINGS AND RECOMMENDATIONS (CONTINUED) 2005-2: Incorrect Bank Reconciliations (Continued) I Management's Response: Management provides a monthly bank reconciliation balanced with the Town records. The reconciliation is completed prior to the presentation of the monthly financial report. Verified copies of the reconciliation are maintained in Town records as required. The 2005 financial system had a system flaw that allows transactions to be placed in a prior month. This occurs even after the books are reconciled with the bank statement and creates what would appear to be an out of balance situation. This situation occurred as a part of the September 30, 2005 closed books that was turned over for the audit. I I In 2006, the new financial system does not allow for adjustments that will produce the situation described by the audit. I Management will provide for a process that will address items in transit to provide for the recommendations from the audit. 2005-3: Sales taxes payable I Condition: While performing procedures for sales of trees from the Fishing Hole Nursery, it was noted that the sales tax collected from customers was being improperly included as revenue, and it has not been remitted to the Florida Department of Revenue on a monthly basis. As a result, the Town is not only liable for the amount of sales taxes collected, but it may be liable for related penalties and interest. I Cause of Condition: The amount received from the nursery for the sale of trees is not being properly classified between sales revenue and sales tax. !I I Effect of Condition: The revenues for the sales of trees are overstated. Also, there is no liability to record the sales tax which the Town should have submitted to Florida Department of Revenue, and the Town might be liable for penalty and interest on the unsubmitted amount. I Recommendation: We recommend that the Town record cash receipts submitted from the sale of trees net of sales taxes collected and properly reflect sales taxes collected as a liability. Furthermore. we recommend that the Town submit sales taxes collected within a month by the 20th day of the following month to Florida Department of Revenue. I Management's Response: Management agrees with the recommendation of the audit and will implement the recommendations. I I I 10 I