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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) 2005-4: Inventory of Trees I I Condition: While performing audit procedures on revenues from the sale of trees from the Fishing Hole Nursery, we noted that the Town did not calculate and record the cost of trees sold and reduce the trees inventory accordingly. Furthermore, we noted that the Town did not take a physical inventory count of the trees at the end of the year. I Cause of Condition: The Town administration was unaware that inventory needed to be kept on the Fishing Hole nursery and cost of trees sold recorded as expenditures; therefore, reducing inventory. I Effect of Condition: There is no accurate count of the tree inventory at year end. By not maintaining and reconciling the inventory with the trees that were sold or moved to another location the Town increases the risk that amounts may be processed and not be accounted properly in the general ledger. In addition, the lack of controls over the trees increases the potential for errors and the risk for misappropriation of assets. I Recommendation: We recommend the Town take a physical inventory count of trees at the end of each fiscal year, record the cost of trees sold and reconcile the trees sold or moved to another location with the ending inventory in order to be able to have proper internal control over the inventory of trees. I I Management's Response: Management initially classified the nursery trees as a capital asset and had a full physical inventory completed. Nursery operations provide for weekly sales of trees and shrubs under our contracted management program. All sales include specific identification of the number and type of trees on invoices submitted to the Town. Management did not treat this acquisition as an inventory item until it was identified while audit was being conducted. I Management would agree that under an inventory classification at least one annual physical inventory shall be conducted at end of the fiscal year and updated inventory records shall be maintained monthly. I 2005-5 Budget Amendments Condition: Florida Statute 166.241 states that no amendment could be made to the budget after 60 days of the year end. While performing audit procedures, we noted that the Town made budget amendments more than 60 days following the end of the fiscal year. I Cause of Condition: Budget amendments were considered necessary after 60 days following the end of the fiscal year. I Effect of Condition: The Town is not in compliance with Florida Statute 116.241. I I 11 I