Culbertson Officials Respond To Audit Concerns
The audit for the Town of Culbertson with the fiscal years ending June 30, 2023, and June 30, 2024, included many areas that needed improvements. The audit was conducted by Denning, Downey and Associates, CPAs.
Areas that needed corrections included capital asset, cash balancing, accounting errors, accounts receivable, prior period adjustments, segregation of duties, annual financial report, restricted cash, sewer net revenues, cash reserves for fiscal year 2024 and deferred inflows-special assessments for fiscal year 2024.
The accounting errors listed included total cash was out of balance by $17,320, unassigned fund balance was overstated by $441,367, restricted fund balance was understated by $441,367, capital assets in the proprietary funds were misstated by $153,322, net investment in capital assets in the proprietary funds was understated by $217,035, current portion of long-term debt was overstated by $4,460,944, non-current portion of long-term debt was understated by $4,460,944, accounts payable was understated by $25,020, accounts receivable were understated by $73,903, current portion of compensated absences was understated by $25,897 and non-current portion of compensated absences was overstated by $25,957.
The audit report reads that the bonds in the sewer fund require the town to maintain net revenues (net income without depreciation expense) to equal 125 percent of the maximum future sewer debt payments. The sewer fund had net revenues short of 125 percent of the maximum debt by $85,832 in fiscal year 2023 and $75,925 in fiscal year 2024.
Segregation of duties was a repeat finding from 2022. The audit report reads, “The town does not adequately segregate duties of collecting, receipting, recording deposits and reconciling among personnel.”
The town of Culbertson has submitted the following proposed corrective action plans:
• Capital assets: Steps have been taken to correct to verify the beginning balances of the depreciation schedule prior to completing current year depreciation schedule.
• Cash balancing: Will manually complete the bank reconciliation monthly to verify the cash balance agrees to the balance in the account system.
• Accounting errors: Have started to work with the Montana League of Cities and Towns to correct accounting records to avoid previous errors going forward.
• Accounts Receivable: Will review age summary report and will make sure the balances are being correctly recorded in the financial statements.
• Prior Period Adjustments: Will maintain documentation for all prior period adjustments.
• Segregation of Duties: This is a small entity with one full-time and one part-time administrative staff members. We try to segregate duties to the greatest extent possible within the limitations of our staffing.
• Annual Financial Report: Will work with the Montana League of Cities and Towns to complete the AFR in a timely and accurate manner.
• Restricted Cash: Will review bond requirements to ensure the restricted cash balances comply.
• Sewer Net Revenues: Will review bond requirements and review debt service fee to determine if our fees are adequate.
• Cash Reserve (fiscal year 2024 only): Clerical errors found when reviewing 2025 budget year. Completed budget amendments for found errors.
• Deferred Inflows/Special Assessments (fiscal year 2024 only): Error in entering tax assessment on tax table in accounting software has already been corrected.
