TOWN OF MARINGOUIN ADVISORY SERVICES REPORT ISSUED MARCH 4, 2009

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1 TOWN OF MARNGOUN ADVSORY SERVCES REPORT SSUED MARCH 4, 2009

2 LEGSLATVE AUDTOR 1600 NORTH THRD STREET POST OFFCE BOX BATON ROUGE, LOUSANA LEGSLATVE AUDT ADVSORY COUNCL REPRESENTATVE NOBLE E. ELLNGTON, CHARMAN SENATOR NCHOLAS NCK GAUTREAUX SENATOR WLLE L. MOUNT SENATOR EDWN R. MURRAY SENATOR BEN W. NEVERS, SR. SENATOR JOHN R. SMTH REPRESENTATVE NEL C. ABRAMSON REPRESENTATVE CHARLES E. CHUCK KLECKLEY REPRESENTATVE ANTHONY V. LG, JR. REPRESENTATVE CEDRC RCHMOND LEGSLATVE AUDTOR STEVE J. THEROT, CPA DRECTOR OF ADVSORY SERVCES JOY S. RWN, CPA Under the provisions of state law, this report is a public document. A copy of this report has been submitted to the Governor, to the Attorney General, and to other public officials as required by state law. A copy of this report has been made available for public inspection at the Baton Rouge office of the Legislative Auditor and at the office of the parish clerk of court. This document is produced by the Legislative Auditor, State of Louisiana, Post Office Box 94397, Baton Rouge, Louisiana in accordance with Louisiana Revised Statute 24:513. Fourteen copies of this public document were produced at an approximate cost of $ This material was produced in accordance with the standards for state agencies established pursuant to R.S. 43:31. This report is available on the Legislative Auditor s Web site at When contacting the office, you may refer to Agency D No or Report D No for additional information. n compliance with the Americans With Disabilities Act, if you need special assistance relative to this document, or any documents of the Legislative Auditor, please contact Wayne Skip rwin, Director of Administration, at

3 LOUSANA LEGSLATVE AUDTOR STEVE J. THEROT, CPA March 4, 2009 THE HONORABLE JOHN F. OVERTON, MAYOR, AND MEMBERS OF THE BOARD OF ALDERMEN Maringouin, Louisiana My staff applied our Checklist of Best Practices in Government in providing advisory services for the financial operations of the Town of Maringouin (town). n addition, we reviewed your resolution of the audit findings reported in the town s September 30, 2007, audited financial statements. Attachment contains our findings and recommendations resulting from our assessment and Attachment provides the status of the September 30, 2007, audit findings. Management s response is presented in Appendix A. Our recommendations are intended to assist you in your efforts to (1) improve controls over the town s financial operations; (2) implement good business practices; and (3) ensure the town s compliance with the Louisiana Constitution and state laws. This assessment is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards; therefore, we are not offering an opinion on the town s financial statements or system of internal control nor assurance as to compliance with laws and regulations. Respectfully submitted, Steve J. Theriot, CPA Legislative Auditor RLT:ESS:JS:sr MARNGOUN NORTH THRD STREET POST OFFCE BOX BATON ROUGE, LOUSANA PHONE: FAX:

4 ATTACHMENT 1 Findings and Recommendations

5 TOWN OF MARNGOUN

6 FNDNGS AND RECOMMENDATONS The following are the findings and recommendations resulting from our advisory services. Management (mayor and aldermen) of the town should consider the costs of implementing the recommendations compared to the benefits they will provide. For those recommendations not implemented, if any, management should be aware of the risks. We reviewed these findings and recommendations with management of the town to provide management an opportunity for its response. Management s response is presented in Appendix A. Segregation of Accounting Duties Accounting duties were not adequately segregated for a proper system of checks and balances. Good business practices and proper controls dictate that duties be segregated to the extent possible so that no one individual performs/controls all duties (e.g., authorization, custody, recordkeeping, and reconciliation) related to an accounting function. Without segregation of duties and adequate oversight, errors or fraud could occur and not be detected, increasing the risk of loss or theft of town assets. Utility System - The utility clerk performed all accounting duties related to utility customer accounts and was the only town employee who had access to the accounts/data in the utility computer system. n addition, the utility clerk s work was not being reviewed and approved by the town clerk. The utility clerk (1) sets up new utility accounts; (2) enters meter readings in customer accounts; (3) makes meter reading adjustments to the system; (4) prepares and prints utility bills and reports; (5) collects money and posts payments to customer accounts; and (6) prepares bank deposits. Recommendation: The town clerk should be given full access (password, et cetera) to the utility computer system and be provided the necessary training to fully operate the system. Also, management should require the town clerk to review and approve the daily work of the utility clerk. Purchasing and Disbursements - The town clerk performed all accounting duties related to purchasing and disbursements, including (1) adding/deleting vendors in the computer system; (2) receiving invoices from vendors and matching to purchase orders; (3) recording purchases in the system for payment; (4) printing the checks; and (5) mailing the checks. Recommendation: The mayor should consider assigning certain duties/responsibilities to the utility clerk to provide an adequate crosscheck of duties. We also suggest that the mayor be involved by periodically reviewing the work of the town clerk. Payroll - The town clerk performed all accounting duties related to payroll, including (1) adding/deleting employees in the payroll system; (2) recording and making changes to pay - 1 -

7 TOWN OF MARNGOUN rates, deductions, et cetera; (3) recording employee work hours in the computer system to calculate payroll; (4) printing the paychecks; and (5) distributing the paychecks. Recommendation: Payroll duties should be segregated among the clerks to the extent possible to provide an adequate system of checks and balances. Also, the computer-generated report of all payroll changes made in the system should be printed each pay period and presented to the mayor for review and approval. Cash Receipts Controls over cash receipts/collections at town hall need to be strengthened. Cash Drawer - The town clerk, utility clerk, and a part-time student worker at town hall were collecting cash (and other methods of payment) and using the same cash drawer. Recommendation: To provide accountability and controls over cash, management should require both clerks to maintain their own separate cash drawers/trays and prohibit them from working out of each others cash tray. Each cash tray should be maintained under lock at all times and balanced on a daily basis. n addition, we suggest that management consider prohibiting part-time workers from having access to funds of the town. Should management continue to allow part-time workers to collect payments and have access to cash, the town should obtain fidelity bond insurance coverage on the workers and require that they also maintain a separate cash drawer/tray. Daily Bank Deposits - Monies collected were not consistently deposited on the same day received. Recommendation: To strengthen safeguards over cash on-hand, we recommend that all funds be counted, reconciled, and deposited on the same day collected. Utility Customer Accounts n addition to the lack of segregation of duties over the utility system (see finding, Segregation of Accounting Duties), there are other control weaknesses that need to be addressed and resolved by management. 1. Bank Deposit Differences - Monies deposited into the town s bank account (Utility Fund) did not always agree with the payment amounts recorded as received from utility customers. We selected four days during the fiscal year and compared the payments posted in customer accounts (in the utility system) to the payments listed on the deposit slips and to the amounts shown on the customer s payment stubs. As summarized in the following - 2 -

8 FNDNGS AND RECOMMENDATONS table, we determined that on three of the four days selected, the amounts deposited by the utility clerk were less than the payments she posted to customer accounts. (A) Total Payments Shown on Payment Stubs (B) Total Payments Posted to Customer Accounts (C) Total Payments Listed on Deposit Slips (B-C) Bank Deposit Differences Date November 13, 2007 $2, $2, $2, February 11, , , , $36.57 June 26, , , , September 16, Total $7, $8, $7, $ There was no documentation or explanation for the deposit differences (shortages) and we discussed with the utility clerk who stated, must have posted the wrong amounts. Good controls dictate that utility payments are balanced on a daily basis and that any bank deposit differences (shortages and overages) are investigated and resolved immediately. The daily balancing process should ensure that monies deposited agree with amounts posted to customer accounts (in the utility system) and agree with customer receipt documentation (e.g., utility payment stubs). Recommendation: Management (or the town s contract accountant) should analyze utility records for the entire fiscal year to determine the extent/magnitude of shortages in bank deposits. f differences are determined to be caused by clerical errors, management should ensure that appropriate corrections are made to all affected customer accounts. However, if the deposit differences represent actual cash shortages, management should immediately consult with legal counsel and notify our office. n the future, management should require the town clerk to review and verify the daily deposit before it is taken to the bank. The town clerk should agree the deposit slip information to the Payment Register report (generated daily from the utility system) and to the payment stubs. Any differences in amounts should be investigated and resolved immediately. 2. Past Due Balances - Management was not consistently terminating/cutting off utility services on all past due accounts. On the date of our visit, the past due list included the utility clerk, utility supervisor, one alderman, and five other town employees, all of whom were continuing to receive utility services. n addition, it appeared that management was not actively trying to collect all past due balances. We caution management that continuing to provide utility services to customers with past due balances and not actively trying to collect past due balances may be prohibited by the Louisiana Constitution [Article V, Section 14(A)]. n addition, the continued operation and quality of services provided to customers depends on the town collecting for the services it provides

9 TOWN OF MARNGOUN Town records at November 6, 2008, reflect past due accounts totaling $168,510, which includes $3,491 owed by the following town officials and employees: Over 30 Days Over 60 Days Over 90 Days Over 120 Days Total Past Due Angie Smith, Utility Clerk $184 $155 $177 $2,220 $2,736 Edna Lee Mitchell John Simien Kirkland Anderson, Alderman Edward James Lee Butler, Utility Supervisor Charles Wright Janice S. Richard Total $537 $265 $226 $2,463 $3,491 Recommendation: Management should do the following: Take aggressive action to collect all past due balances, including legal action when necessary, and use a collection agency. Develop, adopt, and enforce a cut-off policy to ensure utility services are promptly terminated on all customers, including town officials and employees, who do not pay their bill in full by the due date. The cut-off policy should include the specific number of days allowed before services are discontinued and the fees assessed for disconnecting and reconnecting such services. Require the mayor to review the monthly accounts receivable aging report to ensure strict compliance with the town s cut-off policy. 3. Adjustments to Customer Accounts Not Approved by Mayor - Written authorization was on file for only eight of the 23 accounts adjusted by the utility clerk during the 2008 fiscal year. The mayor authorized two of the eight adjustments and the other six adjustments were authorized by the alderman who is chairman of the utility committee. Recommendation: The utility clerk should be strictly prohibited from recording any adjustments to customer accounts without written authorization. An authorization form should be prepared for each adjustment proposed, including the reason(s) for the adjustment, and be submitted to both the mayor and the chairman of the utility committee for their review and written approval. The authorization forms should be maintained on file and periodically verified to the adjustments recorded in the utility system. 4. Customer Balances Not Reconciled - The total balance owed by all customers (for water, gas, and sewer services) that is recorded in the utility system (subsidiary ledger) was not reconciled/agreed monthly to the total accounts receivable balance recorded in the accounting system (general ledger). The monthly reconciliation of these two - 4 -

10 FNDNGS AND RECOMMENDATONS independent systems is very important and essential for a good system of controls over customer transactions (e.g., billings, payments, and adjustments). For example, at September 30, 2008, there was a difference of $3,646 between the two systems. The utility system reflected a total of $263,699 owed by utility customers and the accounting system reflected a total of $267,345. Recommendation: Management should determine the reason(s) for the $3,646 difference at September 30, 2008, and take appropriate action to resolve. n the future, these two systems should be reconciled monthly and any differences should be investigated and resolved immediately. 5. Meter Deposit Balances Not Reconciled - The town s liability for repayment of customer meter (water and gas) deposits recorded in the general ledger was not reconciled/agreed monthly with the cash maintained in the restricted bank account or with the customer meter deposit balances recorded in the utility system. Management of the town has a fiduciary responsibility to properly account for customer meter deposits. Recommendation: Management should determine the reason(s) for the differences at September 30, 2008, and take appropriate action to resolve. n the future, the meter deposit bank balance should be reconciled monthly with the general ledger balance and with the balance in the utility system. Any differences should be investigated and resolved immediately. 6. Broken Master Water Meter - The town s master water meter is broken. A properly functioning master water meter is essential in ascertaining and monitoring water losses. A master meter measures the total units of water produced by the town that can be compared to the total units of water sold/billed to customers each month. Recommendation: Management should ensure that the master water meter is repaired (or replaced) so that the amount of water losses can be determined. We suggest that the utility supervisor be responsible for documenting the master meter readings and the town clerk be responsible for reconciling those readings to the total units of water billed to customers. Management should monitor the monthly losses, identify the reasons for the losses (e.g., leaks in water lines, inaccurate customer meters, and unauthorized or nonmetered usage), and take appropriate corrective action to minimize the losses. Purchasing and Disbursements Controls over purchasing and disbursements need to be improved. 1. Public Bid Law - During the 2008 fiscal year, the town purchased a $178,947 emergency rescue vehicle. Statutorily, the town must follow the Public Bid Law (R.S. 38: ) for this purchase

11 TOWN OF MARNGOUN However, as we understand, rather than publicly bidding the purchase of the emergency rescue vehicle, the town purchased the vehicle off state contract (i.e., purchased directly from the vendor who had an existing procurement contract with the State of Louisiana for such a vehicle). The town is allowed to make purchases under existing state contracts only if it chooses to opt in and be subject to all or part of the Louisiana Procurement Code (LPC), the set of laws (R.S. 39: ) that govern the purchase of certain services, materials and supplies, and major repairs by most state agencies. We did not find written documentation (e.g., town ordinance or resolution) confirming that the town chose to adopt the LPC for the purchase of the emergency rescue vehicle. Recommendation: The board of aldermen should pass an ordinance or resolution confirming adoption of all or part of the LPC. Once the town has formally decided to become subject to all or part of the LPC, the town must follow the rules that apply to state agencies. 2. Piggyback Contract - During the 2008 fiscal year, the town purchased a dump truck costing $41,269. We were told that the town piggybacked onto a previously bid contract of the City of Alexandria for this purchase. However, the City of Alexandria s contract was not on file to confirm that the contract was a previously bid, viable contract and that the price paid by the town was the same (or lower) as the contract bid price. Recommendation: Management should obtain and retain appropriate contract documentation to confirm that the contract is a previously bid, viable contract and that the price paid by the town was the same (or lower) as the contract s bid price. n the future, before piggybacking onto a local government entity s previously bid contract, we suggest that management do the following: Determine that the contract is a previously bid, viable contract. Obtain and maintain a copy of the contract to confirm that the contract is written for the same item(s) that the town is seeking to purchase and is for the same (or lower) bid price. 3. Recurring Purchases - Recurring purchases of fuel and chemicals both exceeded $20,000 during the fiscal year and were not competitively bid. Although the individual purchases of fuel and chemicals did not exceed the dollar thresholds requiring competitive bids under the Public Bid Law (R.S. 38:2212.1), the Louisiana Attorney General has opined (A.G. Opinion ) that recurring purchases of similar items that in the aggregate exceed the bid limit must be advertised and let for public bid. Recommendation: n the future, management should competitively bid similar items purchased on a recurring basis that in the aggregate exceed $20,000. Also, for similar items purchased on a recurring basis that in the aggregate total between $10,000 and $20,000, management should obtain at least three written quotes as required by law

12 FNDNGS AND RECOMMENDATONS 4. Purchasing Not Centralized - Each department of the town does its own purchasing (e.g. materials and supplies, et cetera). Decentralized purchasing can result in less budgetary cost control and duplication of effort. n general, the more decentralized an operation is, the less control management has over it. Recommendation: To improve operational efficiency and budgetary control over town purchases, before purchases are made, the mayor should require purchase orders to be submitted to the town clerk to verify that the costs are budgeted and that adequate funds are available to pay for the item(s). 5. Duplicate Payments - Our limited assessment revealed four occasions during the fiscal year in which the town incorrectly paid vendors twice for the same items/services. Recommendation: Management should implement procedures that will eliminate the occurrence of duplicate payments. For example, the town clerk should (1) review payment records to ensure that items/services have not been previously paid; (2) only issue payments that are supported by original vendor invoices (not monthly statements) and the written approval of the mayor; and (3) cancel vendor invoices promptly upon payment by marking paid on the invoices and include the date paid and check number. Mayor s Court There was no documentation of the board of aldermen formally appointing the town attorney as the court magistrate. State law (R.S. 33:441.B) provides that upon the request of the mayor, the board of aldermen may appoint an attorney to be designated as court magistrate and who shall serve at the pleasure of the mayor and may from time to time be designated by the mayor to serve in his stead as the presiding official over the mayor s court. Recommendation: The mayor should comply with state law and request the board of aldermen to formally appoint the town attorney as the magistrate of mayor s court. Documentation of the appointment should be recorded in the minutes. Traffic Tickets/Citations No Accounting for Tickets - The town was not accounting for the numerical sequence of traffic tickets. Without an accounting, there is no way to determine whether tickets are issued, lost, or voided. Proper accounting for tickets is important to help ensure (1) fines are collected or appropriate action is taken for nonpayment; (2) compliance with relevant Louisiana laws; and (3) town funds are not misappropriated. Recommendation: Management should develop written policies/procedures for traffic tickets, including safeguarding, issuing, and accounting for tickets/citations. Ticket books should be issued to police officers only after the previously issued book has been accounted for and all issued citations were received from the police officer. The numerical sequence of all citations - 7 -

13 TOWN OF MARNGOUN issued and the final disposition of those citations should be accounted for on at least a monthly basis. Traffic Violations Not Reported - The town was not reporting traffic violations to the Louisiana Department of Public Safety (DPS) as required by law. R.S. 32:393C(1)(b) requires the town to report all traffic violations, except parking violations, to DPS not later than 30 days after the date of such person s conviction and sentencing or the final disposition of the case. Recommendation: Management should comply with state law and ensure that traffic violations are properly reported to DPS. mproper Disposition of Citations - Contrary to state law (R.S. 32:398.2.B), not all citations were disposed of by trial or acceptance of a plea in open court. During the same time period that the town attorney was conducting mayor s court, the mayor was exercising judicial authority outside of court (e.g., dismissing violations). The attorney general has opined in Opinion that a mayor retains no authority to dismiss citations once a magistrate has been appointed to preside over mayor s court. We advise management that state law (R.S. 32:398.3.A) provides penalties if a citation is dismissed incorrectly and the attorney general has opined in Opinion that a violation of R.S. 32:398.3 may constitute malfeasance for a public official who disposes of traffic citations in an unlawful manner. Recommendation: Management should ensure that all traffic citations are presented and disposed of in open court. f a magistrate is appointed to conduct mayor s court, the mayor should refrain from exercising any judicial authority over citations. n addition, documentation of the reason(s) for dismissing/reducing tickets and the authorization of such action should always be clearly documented. Occupational Licenses The town may not be collecting occupational license fees from all businesses operating within town limits. According to town records, only 25 businesses paid for occupational licenses in 2008, whereas 32 businesses paid for licenses in n addition, the town does not have written policies/procedures for administering its occupational licensing program. Recommendation: Management should take immediate steps to ensure that annual occupational license fees are collected from all active businesses operating within town. n addition, management should develop and implement written policies/procedures for its occupational license program, including procedures for the following: dentifying new businesses and maintaining a list of businesses operating within town limits Mailing notification of license renewal Receiving, processing, recording, and depositing license payments - 8 -

14 FNDNGS AND RECOMMENDATONS Printing and mailing licenses Collecting delinquent license payments Selecting businesses for audit Payroll and Personnel n addition to a lack of segregation of duties over the payroll function (see finding, Segregation of Accounting Duties), our assessment revealed other control weaknesses. Time Sheets - The town clerk and utility supervisor were not preparing time sheets documenting hours worked and leave taken. Recommendation: Management should require all employees, including the town clerk and utility supervisor, to prepare daily time sheets that document hours worked and leave taken. At the end of each pay period, time sheets should be signed by the employees and reviewed/approved by a supervisor. n the case of the town clerk and utility supervisor, the mayor should review those time sheets and document his approval. Leave Records - The town did not have written records of vacation and sick leave earned or taken by employees. Without maintaining adequate documentation, management of the town cannot ensure that leave privileges are reasonable and not being abused. Recommendation: Management should ensure that detailed leave records are maintained on all employees which are updated periodically to accurately reflect leave balances. Employment Eligibility Form - The town did not have the U.S. Department of Homeland Security - Form -9, Employment Eligibility Verification, on file as required for all employees hired after November 6, Form -9, when properly completed, is documentation that the employer verified the employee's identity and established that he/she is eligible to accept employment in the United States. Recommendation: All employees hired after November 6, 1986, should complete the Form -9 as required, and the town should verify their identity and establish that they are eligible for employment with the town. Gasoline and Diesel Controls over gasoline and diesel (fuel) need to be improved. Good controls over fuel require that only town vehicles receive fuel, that supporting documentation for fuel usage identifies the vehicle and includes the odometer readings and pump meter readings, and that supporting documentation is reviewed promptly for reasonableness (number of gallons dispensed, miles traveled, and miles per gallon)

15 TOWN OF MARNGOUN Recommendation: The town should do the following: Maintain fuel pumps under lock at all times and restrict access to only authorized personnel. Maintain separate fuel logs for recording each type of fuel (gasoline, diesel, and off-road diesel) dispensed. The fuel logs should be accurate and include the date, number of gallons dispensed, pump meter readings, vehicle odometer readings (when applicable), and signature of the person receiving/dispensing the fuel. Reconcile the number of gallons dispensed with the pump meter readings daily. Prepare a monthly analysis or summary by vehicle that includes, at a minimum, the number of gallons dispensed, miles traveled, and miles per gallon (for those vehicles that have odometers). Require the mayor and board to review the analysis monthly to determine for each vehicle that the dates of use are reasonable and the number of gallons received, miles traveled, and miles per gallon are reasonable. Written Policies and Procedures The town s written policies and procedures were not formally adopted by the board of aldermen. Written policies and procedures are necessary to provide a clear understanding of what should be done, how it should be done, who should do it, and when it should be done and ensure the procedures followed meet management s expectations. Recommendation: The board of aldermen should annually review and formally adopt the policies and procedures of the town to ensure that the policies/procedures meet their expectations. We also recommend that management develop and adopt a written ethics/conflict of interest policy in accordance with applicable Louisiana law and require the mayor, aldermen, and employees to sign an annual certification letter attesting to their compliance with the ethics policy. Ordinances Ordinances adopted by the board of aldermen were not signed by the town clerk and filed in the town s ordinance book as required by state law. R.S. 33:406 requires the town clerk to sign every ordinance adopted by the board and to immediately file the originals in the town s ordinance book. Recommendation: Management should comply with Louisiana law and ensure that the town s original ordinances are signed by the clerk and filed in the ordinance book

16 FNDNGS AND RECOMMENDATONS Disaster Recovery Plan We recommend that a written disaster recovery/business continuity plan for the town be prepared and tested/revised annually. Having a written plan is good business practice as it will provide the steps to be performed to continue town operations in the event of a disaster, fire, or terrorist attack

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18 ATTACHMENT Summary of Audit Findings

19 TOWN OF MARNGOUN

20 SUMMARY OF AUDT FNDNGS The following represents a summary of the audit findings reported in the September 30, 2007, audited financial statements (reported by the town s independent auditor) and the disposition of those findings based on our inquiries and general observations as of November 3, Management s response is presented in Appendix A. September 30, 2007, Audit Findings Disposition as of November 3, Lack of Segregation of Duties - There is not sufficient segregation of duties to have effective internal controls. 2. Purchasing Procedures - The town did not have written policies and procedures for purchasing. 3. mprove Collections of Receivables - Collection efforts are not pursued on accounts over 90 days past due. 4. Traffic Tickets - For five tickets that were dismissed, there was no documentation of the reason(s) for dismissal or the name of the person authorizing the dismissal. 5. Utility Bill Edit Procedures - Utility bill edit sheets do not always contain evidence of approval. 6. Occupational Licenses - The town is not following its policy for collecting delinquent occupational license fees. Unresolved. Although management hired a CPA firm to, among other things, review the town s monthly bank reconciliations and prepare the monthly financial statements, there is still a lack of segregation of duties. (See finding, Segregation of Accounting Duties.) Resolved. Unresolved. (See finding, Utility Customer Accounts.) Unresolved. (See finding, Traffic Tickets/Citations.) Unresolved. (See finding, Utility Customer Accounts.) Unresolved. (See finding, Occupational Licenses.) - 1 -

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22 APPENDX A Management s Response

23 TOWN OF MARNGOUN

24 TOWN OF MARNGOUN February 21,2009 Mr. Steve Theriot Louisiana Legislative Auditor Office oflouisiana Legislative Auditor 1600 North Third Street Baton Rouge, LA Dear Ms. rwin: n response to your staffs recent review of the Town of Maringouin and your report dated February 5,2009, we have the following for your consideration: Segregation of Accounting Duties This matter has been reported in previous audits provided to the Town of Maringouin. As a result, we are aware of this matter. The achievement of adequate segregation of duties has been desirable by management of the Town. However, since the Town has two employees responsible for financial administration, achievement of segregation of duties has been considered cost prohibitive. On the other hand, the Town has the following procedures in place relative to financial oversight: The Town exerts a significant amount of energy monitoring disbursements, which are summarized as follows: o o o o o o The Mayor reviews all vendor invoices prior to cash disbursement. The Mayor signs all check disbursements, including payroll. The Mayor receives all bank statements monthly unopened and reviews cleared check disbursements for reasonableness. The Mayor and Town Council monitor budget adherence monthly through review ofon-going operating results compared to the adopted budget. The Town Council is provided a detailed listing of check disbursements monthly for the previous month's payments that is itemized by check number and discloses the vendor or employee. The Town hired an independent CPA firm to assist with the monthly preparation ofthe Town's financial statements. Furthermore, during the year under review, the Town replaced the Town Clerk and Utility Clerk with individuals new to the governmental environment. As a result, several of the errors disclosed in the report relate to the inexperience ofthe Town's staff.

25 Mr. Steve Theriot Page 2 Segregation of Duties (continued) With respect to specific recommendations, the following is for your review: Utility System The Town agrees that additional procedures should be implemented to strengthen control over the financial administration of utilities. Subsequent to your review, the Town has implemented the following: 1. A daily reconciliation is performed with the billing system receipts to the bank deposit. The daily reconciliation is provided to the Town Clerk for review and signature. 2. The Town clerk has always had access to the utility program. However, the Town Clerk will obtain reports from the billing system monthly relating to outstanding receivables, monthly revenue billings and customer adjustments. These reports will be obtained independent ofthe Utility Clerk. 3. Customer adjustments, in their entirety, are provided to the Mayor for review and approval. Such adjustments, including approval, will be maintained for each month to document this process. 4. Finally, the Mayor is reviewing delinquent accounts with appropriate action taken for unpaid amounts. Previously, the Town's Utility Chairman serving on the Town Council was responsible for this oversight. The responsibility has been moved to the Mayor. Purchasing and DisbursementslPayroll The Town does not believe use of the utility clerk to perform functions assigned to the Town Clerk with respect to purchasing and disbursements is practical at this time. Furthermore, the Mayor is performing a number of functions as described on page one to mitigate risks of centralized duties with the Town Clerk. The Town is presently satisfied with most practices in place. However, the Mayor will begin initialing the monthly bank statements, invoices and payroll reports after review and submission to the Town Clerk. Furthermore, the CPA firm will begin initialing the prepared bank reconciliations to document approval of this monthly process. Finally, the CPA firm will review the general ledger and supporting schedules for financial reporting oversight.

26 Mr. Steve Theriot Page 3 Cash Drawer Cash receipts Management agrees with one portion of the comment. The Utility Clerk is the primary person collecting cash for utility payments. However, the Town Clerk and part-time worker did collect cash on-behalfofthe Utility Clerk as needed in times when (a) multiple individuals were paying utility bills or (b) when the Utility Clerk is on lunch break. n response to your recommendation, the part-time worker has been prohibited from receiving cash from individuals paying utility bills prospectively. Furthermore, to the extent the Town Clerk collects cash for utility payments, such collections will be segregated and balanced daily. As a result, each person will maintain a separate cash drawer. Finally, the Utility area has been secured with access granted to those currently bonded by the Town. Daily Bank Deposits The Town disagrees with this comment. The Town Clerk deposits cash on a daily basis for amounts received from governmental sources. On the other hand, we understand that the utility payment cut-off for deposit was done daily at noon. As a result, collections received from noon to close of business were done the next business day. However, the Town has started processing utility payment deposits at the end of each day to include reconciliation to the billing system. Finally, the matter has been communicated to the Town Clerk and Utility Clerk to ensure that daily deposit offunds is made consistently. Bank Deposit Differences Utility Customer Accounts The Town believes that the deposit differences relate to clerical errors in the daily processing of utility payments. As previously mentioned, the Town prepared daily cash deposits based on collections made from noon to noon of the following day. As a result, each bank: deposit included 12 day on every deposit. This was a long-standing practice performed by the Town. Based on the above practice, it is difficult to reconcile deposits made to the date processed in the billing system. This is because the dating was recorded in the system based on actual date received, which is not always consistent with the date deposited. t some cases, there is a one day lag.

27 Mr. Steve Theriot. Page 4 Utility Customer Accounts (Continued) Management has changed the process so that a deposit is prepared at the conclusion of each day based on that day's receipts only. As a result, based on January 2009 processing, the daily deposits made reconcile to the amounts processed in the billing system. Furthermore, the Town Clerk is reviewing and approving the daily reconciliation to ensure accuracy and timeliness of preparation. Management and the CPA firm will compare the deposits made and billings posted to the utility system for the entire fiscal year ending September 30, f such amounts are significant, appropriate action will be taken that will include investigation of any significant differences found. PastDue Balances The Mayor was unaware of the past due amounts owed by employees of the Town. Based on a review of the February 9, 2009 receivable listing, all of the individuals listed have paid these balances due, including the Utility Clerk. The Mayor and Town Council are very disappointed with the results communicated. The Town's Utility Committee was responsi1?le for reviewing this matter. On the other hand, the Mayor has assumed responsibility of reviewing the delinquent list and receivable listing for employees ofthe Town on a monthly basis to review with the Town's Utility Manager. Finally, the Mayor will review cut-off procedures with the Town Council for appropriate action. Management considers this matter resolved. Adjustments to Customer Accounts notapprovedby Mayor Generally, adjustments to customer accounts are provided by either the Mayor or Utility Committee Chairman. Small insignificant adjustments were not consistently approved. However, beginning in January 2009, all adjustments are being approved by the Mayor. Such adjustments are maintained by month with other relevant utility processing information. n addition, daily adjustments are provided to the Town Clerk for entry into the general ledger so that a monthly matching can be made between the billing system and financial statements. Previously, adjustments were not consistently provided to the Town Clerk. Management of the Town considers this matter resolved based on the actions taken.

28 Mr. Steve Theriot Page 5 Customer Balances not Reconciled Utility Customer Accounts (Continued) As a result, of billing system adjustments, certain activity was not recorded in the Town's general ledger. On-going adjustments are being posted prospectively which should eliminate discrepancies between the billing system and the general ledger. The Mayor believed this was being perfol1l1ed monthly by the Town Clerk and contracted CPA finn. The reconciliation was perfol1l1ed monthly in past years, but was not consistently performed during the year under review. A process was put in place to ensure the balance is perfonned monthly on a prospective basis. The reconciliation was performed for January Management considers this matter resolved. Meter Deposit Balances not Reconciled As described above with utility customer accounts, this account was periodically reconciled to the general ledger. The reconciliation is currently being perfonned. Furthennore, the amount of activity occurring is not significant in terms of volume, so management does not expect any discrepancies in the future. Additionally, the discrepancy identified in your report was not considered significant by the Town. Furthel1l1ore, the Town is comparing the cash on hand with the liability account in the general ledger. The cash held for utility customers is in excess of the liability amount. As a result, the Town has sufficient cash to honor all customer deposits held. The excess at December 31, 2008 was approximately $2,000 which represents interest earned on these idle cash accounts. Broken Master Water Meter The Mayor was unaware of this matter as well as the time that has elapsed since the meter required repair. This matter was reviewed with the Town's Utility Manager for resolution. A meter has been ordered and will be installed upon receipt. The Town anticipates receiving the meter before the end of February. Furthermore, monthly readings will be secured by the Utility Manager and supplied to the Town Clerk for monthly reconciliation to usage billed to customers. These results will be reported to the Mayor monthly.

29 Mr. Steve Theriot Page 6 Public Bid Law Purchasing and Disbursements The Town believes the purchase of the emergency rescue vehicle under state contract was a prudent course of action relative to financial administration. The current Town administration is unaware ofany ordinance or resolution adopting any portion ofthe Louisiana Procurement Code. The Town will review this matter with the Town Legal Counsel for appropriate action. Piggyback Contract The Town has the infonnation requested on file. The appropriate documentation obtained from the City ofalexandria is attached for your review. Recurring Purchases Management will review current purchases that may exceed the limit described to set procedures for public bid. Management intends to bid such items for 2009 and prospective years. Purchasing not Centralized Management appreciates the suggestion to consolidate purchasing. However, certain department managers, i.e. Utility and Police Chief, have a better understanding of items purchased than the Town Clerk. The Town believes it is more prudent to leave purchasing responsibility with those individuals rather than assigning to the Town Clerk. The Town Clerk will be responsible for receiving all purchase orders for comparison to amounts budgeted to verify available funds. Duplicate Payments Management is aware of a few duplicate payments made by the Town during the period under review. Such payments were either returned or credit was provided on the Town's account. This matter was discovered during 2008 and addressed with the Town Clerk. On the other hand, the duplicate payments disclosed were at various times during 2008~ with one duplicate payment made subsequent to this discussion. n any event, the Town Clerk will begin discarding vendor statements prospectively and mark invoices when paid so that duplicate payments are avoided.

30 Mr. Steve Theriot Page 7 Mayor's Court The Town Council approved the Town Attorney to serve as Court Magistrate in However, the Town did not document this approval in the minutes at this meeting.. As a result, the Town will draft a resolution for the Town Council to approve so that documentation is in place to reflect this previous action and Town appointment. No Accountingfor Tickets Traffic Tickets/Citations n past years, management maintained this information in a software database. However, the computer system crashed during the period under review and the Town was unable to restore the previous database. Furthermore, management disagrees with the description of the comment used in the report. Management is correctly accounting for processed tickets and related cash receipts provided by the Police Officers and Court Magistrate. However, the Town is not maintaining an accounting of tickets by ticket number. Management has obtained an access database from the Town's CPA firm which provides for a full accounting of the numerical sequence of tickets. Management intends to implement the software immediately. Traffic Violations not Reported Management will review this matter with the Court Magistrate and Chief of Police for appropriate action and resolution. Furthermore, the program described above provides reports that can be utilized to identify unpaid tickets. The reports will be utilized monthly for reporting to the State of Louisiana. mproper Disposition ofcitations The Mayor will review with matter with the Court Magistrate for appropriate future action.

31 Mr. Steve Theriot Page 8 Occupational Licenses The Town will compare the list for 2008 to 2007 and identify delinquent licenses. This action is currently being taken. Furthermore, the Town has obtained an occupational license database from the CPA firm to track and issue occupational licenses. As a result, the Town will automate the process of notification of businesses for annual license, license issuance and tracking of fees received and delinquent licenses. Time Sheets Payroll and Personnel The Town does not feel the use of time sheets for these individuals is essential. As such, timesheets were not previously maintained. However, management will review this matter and plans to begin preparing timesheets for these two individuals. Leave Records Management disagrees with the comment. Management has maintained manual records ofleave by employees in past years that were annually provided to the Town's auditors. However, in 2008, the Town Clerk began inputting leave in the Town's accounting system. The Town Clerk was inputting beginning leave hours and leave used in the Town's accounting system. Unfortunately, the method used for input does not track the time effectively and is not the input method suggested in the accounting software. This change has been implemented immediately. The information will be tracked m an automated manner which will allow for reporting of time by automated reports. This matter will be resolved in Employment Eligibility Form The Town will prepare the Form 1-9 for the personnel files of active employees. All personnel files will be reviewed as well.

32 Mr. Steve Theriot Page 9 Gasoline and Diesel Management is performing the following with respect to gasoline and diesel usage. 1. Presently, the Town secures the fuel pump under lock at all times and restricts access. The Utility manager is primarily responsible for access to the fuel pump. 2. The Town is maintaining a daily log of fuel dispensed, which includes date, number of gallons, vehicle identification and signature. On the other hand, the Town has obtained the suggested log format available on your website and will begin utilizing the forms prospectively. As a result, the Town will begin capturing odometer readings on the daily log and include this information on the monthly report to the Mayor. To the extent there are any unusual or unreasonable items, the Mayor will handle such matters accordingly. Written Policies and Procedures The Town will complete the written policies and procedures and have the Town Council adopt the suggested manual. However, the Town will maintain the document in an efficient manner which will be useful to Town employees. The Town will also adopt a conflicts of interest policy to include ethics matters described in the Louisiana Code of Governmental Ethics. The Town agrees with the recommendation concerning obtaining an annual compliance statement signed by all employees of the Town, to include elected officials. Ordinances The Town Clerk will sign all ordinances and maintain a comprehensive :file of these enacted items. Furthermore, the Town Clerk has been registered for training relating to municipal clerk matters. As SUCh, the Town intends to enhance the Town Clerk's skill set by attending these ongoing training opportunities. Disaster Recovery Plan The Town is presently using the Parish wide plan adopted by the Parish of berville, which the Town considers sufficient at this time. On the other hand, the Town will review the development of an internal document tailored for specific issues confronting the Town.

33 Mr. Steve Theriot Page 10 The Town appreciates your recommendations and will pursue implementation of procedures considered effective for the Town. When the current Town administration began in 2003, the audit report included significant findings which have been addressed over the last several years. The Town management believes it has operated the Town in a fiscally responsible manner, but realizes that enhancements to current processes can always be found to better the current situation. Management will review your recommendations thoroughly and implement the most prudent actions considered necessary and as described in this correspondence. We wish to thank your staff for their effort during this process and appreciate the advice provided by your office. f you have any questions, please contact me. R:\2009\58213\CAO 2809.doc

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36 FROM :PC MAN. BARN FAX NO. : Feb :22RM P4 \ \, ' J~n lo:23am HixSON FLEET :! 31B.. ""as85-\!,, p. ""'. PUR JlASl ORJ) ~,: ',!.,.', TOWN Olr MAR!;OUN ', p.o. Boa: 10 ' ' :. ' }llfarifjlzoufn, Lould~a "S"].' ~-62s-.2~30. i + ; --H:t...:..:)C.pw-i1.t.:1Y~_'---,---,,&!:bft,, t.~..; :,! i:.. 1f'~~1,.':'. ;. ' i ;".. i i " i., ' ' ", 't '.... ~...' '..' ".. ;.,. ~'.,.,... " ~ _--., : ,.~---ip'':''''~---jl~...,..-_t_'_:_-.,, ;......!.". J '.!,...": l-' '. :,1,.,', ~. i': "...,.[!; '. '.. D1PARTME1. NQ 28-1 ~..", "~~d.vj22fj:"',,hi "owopj>mj....,..,,,. :. ':~ ,: - :-: :: 7 : :',." "."-";..--.-, ,..., ::--~ +_..-.:_._-::-.:. -., :-~7 ;.. ' '.'" ' "_':~'.' :~.; "... ;.--.~~ _.-f--... ~:._... :.._.:....' ': -...,i... '".,", ~'... -:';;.-~:.:-... ~:.~ :.'-'-~~-. '.w.~- " :,1..~ :.;. '1'".. ~.,:-.:-::-.. -;:~...,: ". :------:-'-.,-.-r -~ :._~.-r~---,-~. _-.. o :~.,.": ~:::=~. :. '. ' :.;. " i '. ' ' '

37 f FROM :PC MAN.BARN FAX NO. : , Feb :23AM P5 Jan :23AM H XSON FLEET!, ' i : ~,... '-'. Dclel'lpl4olofPropaMl: fwiiilhid& 9'V... A W BGl'~at: ~pjq\lf_ City ~ "'\.--. ~ Awudtd ti)t HXSON Atn'OPLEX Attn: 'M. Doll Simm:ma 2506 MacArttmr Drive Al~ LA 713Dl Ph~31&-427 J04L FDC31~"854!, i. The owner ~ ~ ho ld'ldersiped hili GC)n~ tho'~ ~lnbmituld a. ~ ~~ ckacrib04 ~! l~.'. ~(oib:notl""abd~dd5tobiddmsdated6ddll".7;"'.'j't3. i. ;.!. ~!. ". : : n ~1bat t e eo the ~ i.rrefet of We! ~~ ace. yo!' bid 11\ '!be ~ ara qoted, you are laarm;b:y! ft9tifie41bat}'ouf~ hal bmt. aocepted ti)r; ythlcltf Mould!Ulll@ -!!JlfUA' lbis c:onnot $hall rem1i» in, ~ for 1*104 of ~M (12) ~ fr()ll1 bid ~ da&.eo...t ufoa. ~, avan.~ 01 t'bd~... t..~:1lbjltr..rtlle.llcccufd ~...' Ch ~uoted ~ prtc., die CUJ r1lm'vw to...be _..~.tnet fer. pritjd of tip, 10 hr. (2) ~GM1,-..,. Be 1eAr...Wffli.. abty (60) d1l,. fuula& D.t ela-..o. :',1. '. : - CitY ofalaj'ndrjf,: ~ BY:~~ ~ Dtr. ~ :uujlo? i.. " : i ::_.. _wg'"'-~l.o. ~_, '

38 FROM :PC MAN.BARN Jan :23AN... '...,~. fy"r-~ "3:2 FAX NO. : Feb :23AM P6 HfXSON FLEET ,1 31p ; ORoNAta ; AN OfWNANCE AUTHO NG THE MA R OF. p.e; P.02 ACo:PT;TltE LOW B SUBMmED F l ANNUAl. VEHtCLe t> FOR USE Ni ~AUOUS DE ARTMENTS, AS RliFLEm~eD6 RECEVE1 AND TO ENTER N CQNTTW..i FOR. 5A1O Veil AND OiHeR i MATnRS WTH i SPccr,.HERETO. ;'.._ S:CTON : BE T ORDANED by th~ toundl of the City of AleXandria, louisiana, n le9al SGSSon cqnvel'1ed, tl\at; the Mayor of the Cltv ofalexlndrla s hereby luthortzeel to 8cceJ:lt the low bid ~ubml~ by: Hixton Autople)!: lit lrice5 ~s bd, for annual vehcle bltj for u$e-hy various departments, 5!me being the.,,,west and best bd. received which conipheo wfth spe/:i11catlons and this or~lnanc:e Mvlng been previously ntrod4cec:! Qnd laid over for publleattot'l of tlottre. : :. i ~. SfCTON : BE rr FU!UHER ORO~NED, ett-, t'at: ~i Mayor or the Cty of Alexandra be authorized to :pay S!lcllowl~der rroltl the ~0Q6{2007 budget and to do Galen iilnd every o;her act or dee<! r!~ad or necessary to,=onsummate said triln~ction.. ;.,..!!. SECTlON : ee T FUR.THER. ORD;AtNED, etx' r that this ordinance shall b@oome l!ff'ectlve upon Slgl'lsture by ttle MlWOr; Of, f not signed or vetoed by the Mayor, upon expiration oft~! time for ~rtaneas-to b~me law w~ut slgnature by the Mayor,' : \ '. '.., secrron V: BE T f~rther.or.o~eo, etc., tha~ tf,l1ny provislo-tl or tem. ofthis ordinance or the' applcation ttlere'or s held ilwalld~ suthlnv'!udlty shall not affect other provlslorj$, lems 01" appi~ns tj this oj'dinance whch can be gfven ert'ect without the invalid prnvsloj1s,ltems, or a~p~tatlons, and to ths end the provsons of thl5 OrQlnance ere her~by declared SlNf!'l'ibe.! ' :. SECflON V: BE T RJRTliER ORDANeD, etc., tha~ all orcllnanc:es ~r parts of ordinanc1!!5 in conflict herewith are h-ereby repealed..,!! ; TtfS OROlNANCE was ntroduqd1on the 10 th ~v ~f Apr1l, ' NOnCE PUeLSHEO ON THe 13 1i1 ~J of Aprl, ;. i! THS ~ONANCE hailing been supniittec in wrttlng, ntroduced and published, was then submitted to a flna~ vote as awhalel the vote thereon being ~stollows: ' : ; YEAS; NAYS: Fowler, JOhnso/'l, uw~~, Sliver, Smlth[ Hobbs, Marshall. None. i, _! '

39 FROM: PC MAN. BARN FAX NO. : Feb :23AM P7 i J~n :2~AH HixSON FLEET als443sb541 p.? APR-3l :33 '.a:ja PlJR~NG 3~8 441 SiBS P.e:3 j. :,,. ; : ASSENT: None.!. :. AND THE ORDNAN~iwas cfedarej a~opred Ol'l thl~ the 241!'l day of Apnl, 2001 F.lOO tlm publla\1on w~s made n ~e Alexandria D8'1Y TOwn. Talk on tne 27~ day of Aprfl~ 2007.!... '-~i:;~ crty~c ~2 t i RESJPl'tlT ~~ REceVED: DATE: 't~n 216 = {~:. EL:,U l.u Jll.~ als ml7 DElMRED: DATE: ~~_'TMt:~--=1 m+. 1 '! i ', ;.r--'.. j. TOTl't.. P.B3

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