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I I SECTION II PRIOR YEAR CORRECTED FINANCIAL STATEMENT FINDINGS AND RECOMMENDATIONS I No. 2005-1 -Cash in Bank I Observation During our tests of the bank reconciliation process for the FAU bank account, we noted that there was no indication that the bank reconciliation prepared by the Finance Manager was reviewed by a responsible person. We understand that the Finance Manager is normally responsible for review of all bank reconciliations; however, for the months July to September, the Finance Manager helped to prepare the bank reconciliations for this bank account as part of the training of another staff member who was having some difficulty in completing the reconciliation process. In the event that the Finance Manager must prepare bank reconciliations, they should be reviewed by an appropriate level of management. I I The evidence of a signature on the bank reconciliation would provide evidence that the bank reconciliation process and results were performed and reviewed in a timely manner and that reconciling items, if any, are questioned and investigated for validity. I Recom mendation Bank reconciliations should be prepared on a monthly basis, signed and dated by the person preparing as evidence of timely preparation. Management should review and sign off on all bank reconciliations monthly and obtain explanations for unusual items. I Current Year Status This recommendation has been implemented and will not be repeated. I No. 2005-2 Prepaid Insurance I Observation During our audit, we noted that the proper allocation of prepaid expenses was not used for certain insurance charges. As a result, prepaid expenses were overstated for general liability and understated for property insurance. Although the net adjustment was not considered material, failure to allocate the prepaid expenses appropriately based on policy terms and uniformity will distort monthly financial reports and annual insurance expense. I Recommendation We recommend that the prepaid expenditure be properly allocated over the policy term and that management adheres to an appropriate method of allocating charges. I Current Year Status This recommendation has been implemented and will not be repeated. I No. 2005-3 Capital Assets I Observation We understand that a fixed asset register was installed during the year, We noted that the accumulated depreciation was understated by approximately $364,000. The reason for this error was the result of depreciation calculated using a single estimated life for all assets within a category instead of recognizing the individual life for each asset. The financial statements have been adjusted to reflect the corrected balance. I Recom mendation We recommend that management take the necessary steps to ensure that reviews are made monthly on the depreciation charge recorded. I Current Year Status This recommendation has been implemented and will not be repeated, I I I