CABINET MOUNTAINS WATER DISTRICT Bonners Ferry, Idaho Financial Statements and Independent Auditor's Report. November 30, 2011

Transcription

1 Bonners Ferry, Idaho Financial Statements and Independent Auditor's Report

2 BONNERS FERRY, IDAHO TABLE OF CONTENTS INDEPENDENT AUDITOR'S REPORT 1 FINANCIAL STATEMENTS Statement of Net Assets 2 Statement of Revenues, Expenses and Changes in Net Assets 3 Statement of Cash Flows 4 Notes to Financial Statements 5-12 ADDITIONAL AUDITOR'S REPORT Independent Auditor's Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of Financial Statements in Accordance with Government Auditing Standards Schedule of Findings and Questioned Costs 15

3 LEONARD S. SCHULTE CERTIFIED PUBLIC ACCOUNTANT P.O. Box 266 Telephone (208) Bonners Ferry, ID Board of Directors Cabinet Mountains Water District Bonners Ferry, Idaho INDEPENDENT AUDITOR S REPORT I have audited the accompanying financial statements of the business-type activities of Cabinet Mountains Water District as of and for the year ended, which collectively comprise the District s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the District s management. My responsibility is to express an opinion of these financial statements based on my audit. I conducted my audit in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities of Cabinet Mountains Water District as of, and the respective changes in financial position and cash flows thereof, for the year then ended in conformity with accounting principles generally accepted in the United States of America. Cabinet Mountains Water District has not presented the Management s Discussion and Analysis (MD&A) that accounting principles generally accepted in the United States of America has determined necessary to supplement, although not required to be part of, the basic financial statements. In accordance with Government Auditing Standards, I have issued my report dated May 8, 2012 on my consideration of Cabinet Mountains Water District s internal control over financial reporting and my tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of my testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of my audit. May 8, 2012 Leonard S. Schulte 1

4 STATEMENT OF NET ASSETS ASSETS Current Assets: Cash and cash equivalents $307,553 Accounts receivable - water users 57,016 Prepaid expenses 3,656 Total Current Assets $368,225 Non-current Assets: Assets whose use is limited 230,367 Non-current accounts receivable 53,051 Property and equipment, net of accumulated depreciation of $2,825,666 5,523,202 Organization costs, net of accumulated amortization of $9,623 0 Total Non-current Assets 5,806,620 Total Assets 6,174,845 LIABILITIES Current Liabilities: Accounts payable 22,029 Accrued interest payable 23,250 Current portion of long-term debt 98,895 Total Current Liabilities 144,174 Non-current Liabilities: Water revenue bonds payable, less current portion 2,154,269 Total Non-Current Liabilities 2,154,269 Total Liabilities 2,298,443 NET ASSETS Invested in capital assets, net of related debt 3,270,038 Restricted for debt service 230,367 Unrestricted 375,997 Total Net Assets $3,876,402 The accompanying notes are an integral part of this statement. 2

5 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS For the year ended OPERATING REVENUES: Charges for services $476,402 Hook up and other fees 20,196 Total Operating Revenues $496,598 OPERATING EXPENSES: Accounting, legal and professional fees 44,008 Chemicals & water testing 410 Depreciation and amortization 211,510 Insurance, bonding & workmen's comp. 7,312 Office supplies & postage 4,473 Other 1,787 Payroll taxes & benefits 12,107 Permits and licenses 1,550 Repairs & maintenance 52,777 Salaries & wages 73,539 Utilities & telephone 44,191 Total Operating Expenses 453,664 OPERATING INCOME 42,934 NON OPERATING REVENUES (EXPENSES): Loss on disposition of assets (2,355) Interest income 4,835 Interest expense (117,507) Total Non operating revenue (expense) (115,027) CHANGE IN NET ASSETS (72,093) TOTAL NET ASSETS - BEGINNING 3,948,495 TOTAL NET ASSETS - ENDING $3,876,402 The accompanying notes are an integral part of this statement. 3

6 STATEMENT OF CASH FLOWS For the year ended CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from water users $507,073 Payments for supplies and goods or services (156,995) Payments for employees (85,515) Net Cash Provided by Operating Activities 264,563 CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES: Operating transfers (to) or from restricted asset accounts (3) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from disposition of capital assets 500 Purchase of capital assets (30,838) Principal retired on water revenue bonds (94,141) Interest paid (118,472) Net Cash Used by Capital and Related Financing Activities (242,951) CASH FLOWS FROM INVESTING ACTIVITIES: Interest income 4,835 Net Cash Provided by Investing Activities 4,835 NET INCREASE (DECREASE) IN CASH 26,444 BEGINNING CASH AND CASH EQUIVALENTS 281,109 ENDING CASH AND CASH EQUIVALENTS $307,553 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income (Loss) $42,934 Adjustments to reconcile net operating income to net cash provided by operating activities: Depreciation and amortization 211,510 (Increase) / decrease in accounts receivable 10,474 (Increase) / decrease in prepaid expenses 397 Increase / (decrease) in accounts payable (752) Net Cash Provided by Operating Activities $264,563 The accompanying notes are an integral part of this statement. 4

7 NOTES TO FINANCIAL STATEMENTS Cabinet Mountains Water District (the District) is a municipal corporation organized and operated under the Constitution and laws of the State of Idaho. The District was formed to provide consistent and reliable water to residents within the District's boundaries, encompassing a large portion of southern Boundary County, Idaho. The financial statements of the District are prepared in accordance with Generally Accepted Accounting Principles (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations). Proprietary funds apply Financial Accounting Standards Board (FASB) pronouncements and Accounting Principles Board (APB) opinions issued on or before November 30, 1989, unless those pronouncements conflict or contradict Governmental Accounting Standards Board (GASB) pronouncements, in which case GASB prevails. The following notes are an integral part of the financial statements. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Reporting Entity In evaluating how to define the government, for financial reporting purposes, management has considered all potential component units. The decision to include a potential component unit in the reporting entity was made by applying criteria set forth in GAAP. The basic, but not the only criteria for including a potential component unit within the reporting entity, is the governing body's ability to exercise oversight responsibility. Based upon these criteria, there are no component units that should be included in the District's financial statements. Basic Financial Statements The District is engaged in only a single business-type activity and therefore presents the basic financial statements for an enterprise fund. The District s net assets are reported in three parts: invested in capital assets, net of related debt; restricted net assets; and unrestricted net assets. Enterprise funds are used to account for operations (a) that are financed and operated in a manner similar to private business enterprises - where the intent of the governing body is that the costs of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. 5

8 Basis of Accounting and Revenue Recognition CABINET MOUNTAINS WATER DISTRICT NOTES TO FINANCIAL STATEMENTS Basis of accounting refers to the point at which revenues and expenditures / expenses are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the "timing" of the measurement, regardless of the measurement focus applied. Business-type activities are presented on the accrual basis of accounting. Revenues from providing water services are recognized as operating revenues when earned and expenses are recognized when incurred. Non-operating revenue generally consists of interest earned on investments. Receivables All receivables are reported at their gross value and, where appropriate, are reduced by the estimated portion that is expected to be uncollectible. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Subsequent Events In preparing the financial statements, the District has evaluated events and transactions for potential recognition or disclosure through May 8, 2012, the date that the financial statements were available to be issued. NOTE 2 - CASH AND EQUIVALENTS The District's deposits at November 30, 2010 consisted of the following: Carrying Bank Amount Balance General Checking $307,553 $299,271 Restricted Funds: Reserve Savings $212,613 $212,613 Debt Service 17,754 17,754 $230,367 $230,367 6

9 NOTES TO FINANCIAL STATEMENTS The District considered all assets in highly liquid investments including restricted assets with maturity of three months or less when purchased to be cash equivalents. The entire bank balance is covered by FDIC insurance or collateralized by U.S. Government securities held by the trust department of Mountain West Bank. A formal policy that limits the allowable deposits or specific investments has not been adopted. Custodial Credit Risk For deposits and investments, custodial credit risk is the risk that, in the event of the failure of the counter-party, the District will not be able to recover the value of its deposits, investments or collateral securities that are in the possession of an outside party. The District does not have a policy for custodial credit risk outside of the deposit and investment agreements. Credit Risk Credit risk is the risk that an issuer of debt securities or another counter-party to an investment will not fulfill its obligation is commonly expressed in terms of the credit quality rating issued by a nationally recognized statistical rating organization such as Moody s, Standard & Poor s and Fitch s. The investments of the District are not rated and the District s policy does not restrict them to rated investments. Concentration of Credit Risk The District places no investment policy limit on the amount it may invest in any one issuer. Interest Rate Risk The District s investment policy is not limited to specific duration, but is structured to meet the anticipated cash flows and spending rate. NOTE 3 - ASSETS WHOSE USE IS LIMITED Cash is held by the District in accounts whose use is limited. A separate reserve bank account is maintained and, under the terms of Revenue Anticipation Notes, a reserve for debt service account has been established (see note 6). It is the policy of the District to first apply restricted assets when an expense is incurred for purpose for which both restricted and unrestricted net assets are available. NOTE 4 - COMPENSATED ABSENCES Full time employees accrue vacation each year. The liability for compensated absences has not been accrued because the amount has not been reasonably estimated. 7

10 NOTES TO FINANCIAL STATEMENTS NOTE 5 - CAPITAL ASSETS - PROPERTY, PLANT, AND EQUIPMENT All enterprise funds are accounted for on a cost of service or "capital maintenance" measurement focus. This means that all assets and all liabilities (whether current or non-current) associated with their activity are included on their balance sheets. Capital assets purchased or acquired are reported at historical cost including infrastructure assets. Additions, improvements and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. The District does not have a dollar threshold to distinguish between capital outlay and repairs. Depreciation in the amount of $210,875 has been provided using the straight-line method over an estimated useful life of 40 years for the water system and 7 years for tools and equipment for the year ended. Following is a summary of the changes in capital assets: Historical Cost: 11/30/ Additions 2011 Deletions 11/30/2011 Water System $7,397,879 $6,355 $7,404,234 Buildings 724, ,934 Land & Easements 57,496 57,496 Equipment & Other 63,791 24,483 (3,995) 84,279 Wells 77,925 77,925 $8,322,025 $30,838 ($3,995) $8,348,868 Accumulated Depreciation: 11/30/ Deprec Deletions 11/30/2011 Water System $2,339,847 $185,026 $2,524,873 Buildings 247,498 18, ,621 Equipment & Other 28,586 7,726 (1,140) 35,172 $2,615,931 $210,875 ($1,140) $2,825,666 NOTE 6 - LONG-TERM DEBT, also see Note 10 Subsequent Events The changes in long-term debt are as follows: 11/30/2010 Decrease 11/30/2011 Water Revenue Bond Series A $991,331 $41,580 $949,751 Series B 1,250,166 48,420 1,201,746 Series C 105,808 4, ,667 $2,436,921 $94,141 $2,253,164 8

11 NOTES TO FINANCIAL STATEMENTS Water Revenue Bond Series A Cabinet Mountains Water District Resolution No. 96-2, adopted October 3, 1996, provided for the issuance and sale of $1,400,000 principal amount of water revenue anticipation bond designated "Cabinet Mountains Water District Water Revenue Bond, Series A". The Bond was issued for the purpose of paying part of the cost of the acquisition, construction and installation of improvements to the water system and facilities of the District. The Bond is dated October 3, 1996, and is issued as a single, registered, transferable bond without coupons. The Bond bears interest on the unpaid balance at a rate of Five and One- Eighth percent (5 1\8%) per annum from its date to the date of maturity or prior redemption. The Bond is payable in amortized installments of principal and interest in the amount of $92,386 on each October 1st to the date of maturity or prior redemption of the Bond. The final annual installment may be in such greater or lesser amount as is necessary to fully retire the Bond. Interest is calculated on the basis of a 365-day year. Both principal of and interest on the Bond are payable on or before October 1, Under the terms of the Bond the District is required to establish a reserve account and accumulate 10% of an annual payment for ten years until one annual payment has been accumulated. As of the District was in compliance with the reserve account requirement. Water Revenue Bond Series B Cabinet Mountains Water District Resolution No. 97-1, adopted August 26, 1997, provided for the issuance and sale of $1,705,000 principal amount of water revenue anticipation bond designated "Cabinet Mountains Water District Water Revenue Bond, Series B". The Bond was issued for the purpose of paying part of the cost of the acquisition, construction and installation of improvements to the water system and facilities of the District. The Bond is dated September 2, 1997, and is issued as a single, registered, transferable bond without coupons. The Bond bears interest on the unpaid balance at a rate of Five percent (5%) per annum from its date to the date of maturity or prior redemption. The Bond is payable in amortized installments of principal and interest in the amount of $110,928 on each September 2nd to the date of maturity or prior redemption of the Bond. The final annual installment may be in such greater or lesser amount as is necessary to fully retire the Bond. Interest is calculated on the basis of a 365-day year. Both principal of and interest on the Bond are payable on or before September 2, Under the terms of the Bond the District is required to establish a reserve account and accumulate 10% of an annual payment for ten years until one annual payment has been accumulated. As of the District was in compliance with the reserve account requirement. 9

12 NOTES TO FINANCIAL STATEMENTS Water Revenue Bond Series C Cabinet Mountains Water District Resolution No. 97-2, adopted October 14, 1997, provided for the issuance and sale of $145,000 principal amount of water revenue anticipation bond designated "Cabinet Mountains Water District Water Revenue Bond, Series C". The Bond was issued for the purpose of paying part of the cost of the acquisition, construction and installation of improvements to the water system and facilities of the District. The Bond is dated October 17, 1997, and is issued as a single, registered, transferable bond without coupons. The Bond bears interest on the unpaid balance at a rate of Four and Seven- Eighths percent (4.875%) per annum from its date to the date of maturity or prior redemption. The Bond is payable in amortized installments of principal and interest in the amount of $9,299 on each October 17th to the date of maturity or prior redemption of the Bond. The final annual installment may be in such greater or lesser amount as is necessary to fully retire the Bond. Interest is calculated on the basis of a 365-day year. Both principal of and interest on the Bond are payable on or before October 17, Under the terms of the Bond the District is required to establish a reserve account and accumulate 10% of an annual payment for ten years until one annual payment has been accumulated. As of the District was in compliance with the reserve account requirement. Required Payments to Maturity The annual requirements to retire Water Revenue Bonds Series A, B & C are as follows: Requirement Principal Sinking Fund November 30, 2012 $98,895 $212,613 November 30, , ,613 November 30, , ,613 November 30, , ,613 November 30, , ,613 November 30, ,789 1,063,065 November 30, ,865 1,060,666 November 30, , ,176 $2,253,164 $3,305,972 NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS The District s financial instruments consist of cash and cash equivalents, receivables, accounts payable, and long-term debt. The recorded values of cash and cash equivalents, receivables, and accounts payable approximate their fair value based on their short-term nature. The recorded values of long-term debt approximate it s fair value, as interest approximates market rates. 10

13 NOTE 8 - RISK MANAGEMENT CABINET MOUNTAINS WATER DISTRICT NOTES TO FINANCIAL STATEMENTS The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The District is a member in the Idaho Counties Risk Management Program (ICRMP). ICRMP was created to provide risk management and insurance services to public entities in Idaho. ICRMP itself is a public entity. The District pays an annual premium for all risks of physical loss or damage to real and personal property, general liability, board legal liability and employee dishonesty. A deductible applies to each type of coverage to the extent of the first $5,000 per policy period per policy period except for flood or earthquake losses which maximum deductible is $10,000. The District has had no significant reduction in insurance coverage from prior years. The District has had no settlements exceed insurance coverage for the past five years. NOTE 9 - PENSION PLAN The Public Employee Retirement System of Idaho (PERSI), a cost sharing multiple-employer public retirement system, was created by the Idaho State Legislature. It is a defined benefit plan requiring both the member and the employer to contribute. The plan provides benefits based on members years of service, age, and compensation. In addition, benefits are provided for disability, death, and survivors of eligible members or beneficiaries. The authority to establish and amend benefit provisions is established in Idaho Code. Designed as a mandatory system for eligible state and school district employees, the legislation provided for other political subdivisions to participate by contractual agreement with PERSI. Financial reports for the plan are available from PERSI upon request. After 5 years of credited service, members become fully vested in retirement benefits earned to date. Members are eligible for retirement benefits upon attainment of the ages specified for their employment classification. For each month of credited service, the annual service retirement allowance is 2.0% (2.3% for police/firefighters) of the average monthly salary for the highest consecutive 42 months. The contribution requirements of the District and its employees are established and may be amended by the PERSI Board of Trustees. For the fiscal year ended November 30, 2010 the required contribution rate as a percentage of covered payroll was 6.23% for general members and 7.65% for police/firefighters. The employer rate as a percentage of covered payroll was 10.39% for general members and 10.73% for police/firefights. The District s contributions required and paid were $5,788, $5,584 and $3,519 for the fiscal years ended November 2011, 2010 and 2009, respectively. 11

14 NOTES TO FINANCIAL STATEMENTS NOTE 10 - SUBSEQUENT EVENTS On January 19, 2012 Cabinet Mountains Water District adopted a resolution approving issuance of a Revenue Refunding Bond in the amount of $2,095,000 with the Idaho Bond Bank Authority. The purpose of the refunding was to repay prior bonds consisting of Water Revenue Bond Series A dated October 3, 1996, Water Revenue Bond Series B dated September 2, 1997 and Water Revenue Bond Series C dated October 14, 1997 which originally financed all or a portion of the costs of design and construction of improvements, for the water system of the Cabinet Mountains Water District, Boundary County, Idaho. On February 9, 2012 the prior bonds were paid in full. The debt service requirements of the new loan are as follows: Requirement Principal Sinking Fund November 30, 2012 $60,000 $103,125 November 30, , ,775 November 30, , ,925 November 30, , ,900 November 30, , ,450 November 30, , ,525 November 30, , ,800 November 30, , ,500 $2,095,000 $2,789,000 Payments on the new loan are secured by a pledge of System Net Revenues. NOTE 11 BUDGET Cabinet Mountains Water District adopts a budget on the cash basis of accounting. The budget is summarized as follows: Cash Operating Income $492,000 Cash Operating Expenses (341,000) Net Cash Operating Income 151,000 Other Cash Receipts 15,500 Other Cash Requirements (174,000) Excess - (Deficit) ($7,500) 12

15 LEONARD S. SCHULTE CERTIFIED PUBLIC ACCOUNTANT P.O. Box 266 Telephone (208) Bonners Ferry, ID REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Directors Cabinet Mountains Water District Bonners Ferry, Idaho I have audited the financial statements of the business-type activities of Cabinet Mountains Water District of Bonners Ferry, Idaho, as of and for the year ended, which collectively comprise the District s basic financial statements and have issued my report thereon dated May 8, I conducted my audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control over Financial Reporting Management of Cabinet Mountains Water District is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing my audit, I considered Cabinet Mountains Water District's internal control over financial reporting as a basis for designing my audit procedures for the purpose of expressing my opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Cabinet Mountains Water District s internal control over financial reporting. Accordingly, I do not express an opinion on the effectiveness of the District s internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. My consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. I did not identify any deficiencies in internal control over financial 13

16 reporting that I consider to be material weaknesses, as defined above. However, I identified certain deficiencies in internal control over financial reporting, described in the accompanying schedule of findings and questioned costs (item ) that I consider to be significant deficiencies in internal control over financial reporting. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Compliance and Other Matters As part of obtaining reasonable assurance about whether Cabinet Mountains Water District's financial statements are free of material misstatement, I performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of my audit and, accordingly, I do not express such an opinion. The results of my tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. I noted certain other matters that I reported to management in a separate letter dated May 8, The District s response to the findings identified in my audit is described in the accompanying schedule of findings and questioned costs. I did not audit the District s response and, accordingly, I express no opinion on it. This report is intended solely for the information and use of management, the Board of Directors, and federal agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. May 8, 2012 Leonard S. Schulte 14

17 SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the year ended SUMMARY OF AUDITOR'S RESULTS 1) The auditor s report expresses an unqualified opinion on the basic financial statements of Cabinet Mountains Water District. 2) One reportable condition disclosed during the audit of the basic financial statements is reported as findings or questioned costs (see item below.) The reportable condition was not considered a material weakness. 3) The audit did not disclose any non-compliance that is material to the financial statements. 4) Audit requirements under OMB Circular A-133 did not apply. Reportable Conditions in Internal Control: Finding Condition: The size of the District s staff is not large enough to permit adequate segregation of duties for an effective system of internal control. Criteria: An effective system of internal control requires that closely related duties be segregated. Effect: The existing system does not reduce to an acceptable level the risk that noncompliance with laws and regulations may occur and not be detected by employees in the normal course of their assigned duties. Cause: The District s staff is too small to allow adequate segregation of duties. Recommendation: Segregate the functions to the extent economically feasible. District officials need to be aware the condition exists. District Response: Management and the Board of Directors are aware of this condition and have made a decision to accept the resulting degree of risk because of cost considerations. The District will consider the economic feasibility of adding office staff to further segregate duties and responsibility. 15