Budget variances among few findings in audits

Both Morgan City Court and the 6th Ward marshal in Morgan City had budget variances of over 5 percent, but didn’t have any major findings in their annual audit reports.
Kolder, Champagne, Slaven & Co. performed both audits for the year ended Dec. 31, 2014. The Louisiana Legislative Auditor released the audit reports Monday on its website.
The auditor issued unmodified opinions on the financial statements of the City Court’s governmental activities, each major fund including the general fund and juvenile services center special revenue fund and the aggregate remaining fund information.
During the audits, auditors discovered that both the City Court and marshal incurred budget variances in excess of 5 percent in the general fund. A state statute requires the chief administrative or executive officer to notify the governing authority when actual revenues are lower than the budgeted amount by 5 percent or more, total actual expenditures exceed budgeted expenditures by 5 percent or more, or the actual fund balance fails to reach the actual fund balance by 5 percent or more, the report stated.
The auditor recommended that the court and marshal periodically compare actual activity to budgeted amounts and adopt budgetary amendments as necessary to cause compliance with state statutes.
City Court and 6th Ward marshal management responded by stating that they will more closely monitor budget to actual comparisons and adopt the necessary amendments to ensure compliance with state statute.
In the reports, auditors found that the City Court and marshal’s accounting and financial functions were not adequately segregated.
Failure to adequately segregate accounting and financial functions increases the risk that errors and irregularities including fraud may occur and not be prevented or detected, the auditor stated.
Due to the size of the operation and the cost-benefit of additional personnel, it may not be feasible to achieve complete segregation of duties, the auditor said. A management response was not deemed applicable for either entity, the report said.
The auditor also stated that City Court management and staff lacked the expertise or experience in the selection and application of generally accepted accounting principles, as applicable to governmental entities, in the financial statement preparation process.
The condition resulted from a reliance on the external auditor as part of the internal control process, the auditor said. Financial statements and related notes may reflect a material departure from generally accepted accounting principles.
The auditor recommended that the additional costs required to achieve the desired benefit may not be economically feasible.
City Court management stated that they determined that it would be more cost effective to outsource the preparation of the Court’s financial statements to its independent auditors rather than incur the costs to employ someone with the appropriate skill and expertise to prepare the financial statements in accordance with generally accepted accounting principles.