Maner, Costerisan & Ellis, p.e.

Transcription

1 ..A Maner, Costerisan & Ellis, p.e. Certified Public Accountants Lamo nte T. Lato r Bruce). Dunn Jeffrey C. Steve ns Linda. Schirme r Steven W Scott David M. Raeck Robert E. Miller, Jr. Steven B. Robbins James E. Nyquist James R. Dedyne Timo thy H. Adams David B. Caldwell Edward L Williams, 1l Timo thy J O rians Dennis D. The is Walter P. Mane r, Jr. Floyd L Costerisan Leon A. Ellis ( ) November 14, 2003 To the Audit Committee Michigan Association of County Drain Commissioners Lansing, Michigan We have audited the financial statements of Michigan Association of County Drain Commissioners for the year ended September 30, 2003, and have issued our report thereon dated November 14, Professional standards require that we provide you with the following information related to our audit. 1. Our Responsibility under Auditing Standards Generally Accepted in the United States of America As stated in our engagement letter dated February 15, 2001, our responsibility, as described by professional standards, is to plan and perfonn our audit to obtain reasonable, but not absolute, assurance that the fmancial statements are free of material misstatement and are fairly presented in accordance with accounting principles generally accepted in the United States of America. Because an audit is designed to provide reasonable, but not absolute assurance and because we did not perform a detailed examination of all transactions, there is a risk that material errors, fraud, or illegal acts may exist and not be detected by us. As part of our audit, we considered the internal control of Michigan Association of County Drain Commissioners. Such considerations were solely for the purpose of detennining our audit procedures and not to provide any assurance concerning such internal control. 2. Significant Accounting Policies Management has the responsibility for selection and use of appropriate accounting policies. n accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by Michigan Association of County Drain Commissioners are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during We noted no transactions entered into by Michigan Association of County Drain Commissioners during the year that were both significant and unusual, and of which, under professional standards, we are required to inform you, or transactions for which there is a lack of authoritative guidance or consensus. 544 Cherbourg Drive Suite 200 e Lansing, Michigan (517) Fax (517) n

2 To the Audit Committee 2 November 14, 2003 Michigan Association of County Drain Commissioners 3. Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. Management's estimate of the functional allocation of expenses is based on management's estimate of the use of personnel and resources. We evaluated the key factors and assumptions used to develop the functional allocation of expenses in determining that it is reasonable in relation to the financial statements taken as a whole. 4. Audit Adjustments For purposes of this letter, professional standards define an audit adjustment as a proposed correction of the financial statements that, in our judgment, may not have been detected except through our auditing procedures. An audit adjustment mayor may not indicate matters that could have a significant effect on the Michigan Association of County Drain Commissioners financial reporting process (that is, cause future financial statements to be materially misstated). n our judgment, none of the adjustments we proposed either individually or in the aggregate, indicate matters that could have a significant effect on the Association's financial reporting process. 5. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. 6. Consultations with Other ndependent Accountants n some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. f a consultation involves application of an accounting principle to the Association's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. 7. ssues Discussed Prior to Retention of ndependent Auditors We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Michigan Association of County Drain Commissioners auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.

3 To the Audit Committee 3 November 14, 2003 Michigan Association of County Drain Commissioners 8. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing our audit. This information is intended solely for the use of the Audit Committee and management of Michigan Association of County Drain Commissioners and is not intended to be and should not be used by anyone other than these specified parties. Very truly yours, (J:\lm\2001\MlAssocCoWltyDrainComm-SAS)

4 v Maner, Costerisan & Ellis, P. C. Certified Public Accountants Lamonte T. Lator Bruce J. Dunn Jeffrey C. Stevens Linda. Schirmer Steven W Scott David M. Raeck Robert E. Miller, Jr. Steven B. Robbins James E. Nyquist James R. Dedyne Timothy H. Adams David B. Caldwell Edward L. Williams, Timothy J. Orians Dennis D. Theis Walter P. Maner, Jr. Floyd L. Costerisan Leon A. Ellis ( ) November 14, 2003 To the Board of Directors Michigan Association of County Drain Commissioners Lansing, Michigan n planning and performing our audit of the financial statements of Michigan Association of County Drain Commissioners for the year ended September 30, 2003, we considered the Association's internal controls in order to determine our auditing procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on internal control. However, during our audit we became aware of certain matters that are opportunities for strengthening internal controls. The comments and suggestions regarding those matters follow. This letter does not affect our report dated November 14, 2003, on the financial statements of Michigan Association of County Drain Commissioners. nternal Controls t is inherently difficult in an organization with a limited staff size to maintain adequate internal controls, especially the segregation of incompatible duties. Oversight of the Board of Directors or Audit Committee is often a key compensating control in these environments. Marketing for conference registrations is done through a general mailing to potential interested parties. Those electing to attend the conference submit their registration fees directly to the Association. Registration fees are deposited when received as part of the Association's regular cash receipts process. The Association should consider the cost benefit of having an individual independent of the cash receipts 544 Cherbourg Drive 0 Suite Lansing, Michigan (517) Fax (517) ,

5 / To the Board of Directors 2 November 14, 2003 Michigan Association of County Drain Commissioners process perform a reconciliation of conference attendees with the registration revenues reported in the Association's accounting records. Auditing Standards The American nstitute of Certified Public Accountants (AlCP A) recently issued "Statements on Auditing Standards #99: Consideration of Fraud in a Financial Statement Audit". This statement, which is effective for the Association's year ended September 30, 2004, requires the independent auditor to perform additional procedures to reduce the risk that material fraud may go undetected. The Association should be aware that these additional procedures reduce the risk, however, they do not eliminate the risk that a material fraud could go completely undetected. The new standard requires proper documentation in regards to the auditor's understanding of internal controls and their effectiveness in preventing fraud. Disclosures in the financial statements will also be examined more closely to ensure that they are complete and provide accurate and timely information to users of the financial statements. Teamwork between us as your auditors, and the Association is essential to prevent fraud. Creating a proper working environment and tone from the top is critical. There are areas of concern outlined in the appendix to this SAS #99 that your management should review. We have provided a copy to management. This report is intended solely for the information and use of Michigan Association of County Drain Commissioners, management, and others within the organization and is not intended to be and should not be used by anyone other than these specified parties. We appreciate the cooperation we received from your staff during our engagement and the opportunity to be of service. Very truly yours, J:\LM\2003\M Assoc of County Drain.doc

6 MCHGAN ASSOCATON OF COUNTY DRAN COMMSSONERS REPORT ON FNANCAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2003 AND 2002

7 CONTENTS ndependent auditors' report... 1 Financial statements Statements of financial position... 2 Statements of activities Statements of cash flows... 5 Notes to financial statements

8 Maner, Costerisan & Ellis, p.e. Certified Public Accountants Lamonte T. Lator Bruce J. Dunn Jeffrey C. Stevens Linda. Schirmer Steven W Scott David M. Raeck Robert E. Miller, Jr. Steven B. Robbins James E. Nyquist James R. Dedyne ndependent Auditors' Report Board of Directors Michigan Association of County Drain Commissioners Lansing, Michigan Timothy H. Adams David B. Caldwell Edward L. Williams, Timothy J. Orians Dennis D. Theis Walter P Maner, Jr. Floyd L. Costerisan Leon A. Ellis ( ) November 14, 2003 We have audited the accompanying statements of financial position of Michigan Association of County Drain Commissioners as of September 30, 2003 and 2002, and the related statements of activities and cash flows for the years then ended. These financial statements are the responsibility of the Association's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we 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_ We believe that our audits provide a reasonable basis for our opinion. n our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Michigan Association of County Drain Commissioners as of September 30, 2003 and 2002, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United states of America. 544 Cherbourg Drive 0 Suite LanSing, Michigan (517) Fax (517)

9 MCmGAN ASSOCATON OF COUNTY DRAN COMMSSONERS STATEMENTS OF FNANCAL POSTON SEPTEMBER 30, 2003 AND 2002 ASSETS 2003 CURRENT ASSETS: Cash $ 57,055 Grant receivable 20,409 Accounts receivable 8,495 TOTAL CURRENT ASSETS $ 85,959 LABLTES AND NET ASSETS CURRENT LABLTES: Accounts payable $ 25,995 ncome taxes payable 440 Deferred revenue 13,934 TOTAL CURRENT LABLTES 40,369 UNRESTRCTED NET ASSETS 45,590 TOTAL LABLTES AND NET ASSETS $ 85,959 See notes to financial statements $ 42,634 21,476 7,117 $ 71,227 $ 22, ,198 39,352 31,875 $ 71,227 2

10 REVENUES: Grants: CREP GS APA Conferences: Exhibit fees Registration fees Sponsorships Dues: Members Associate members Publication advertising: Directory Pipeline nvestrnentincome Other revenue MCDGAN ASSOCATON OF COUNTY DRAN COMMSSONERS STATEMENTS OF ACTVTES YEARS ENDED SEPTEMBER 30, 2003 AND 2002 TOTAL REVENUES EXPENSES: Grants: CREP GS APA Conferences Printing, design and distribution: Directory Pipeline Legal Legislative monitoring Lobbying Contracted services See notes to financial statements. $ ,330 44,474 25,905 14,250 49,368 12,475 12,113 26,643 14,615 37, ,497 22,330 44,474 25,905 19,051 11,090 41,878 22,786 33,185 3,600 14,820 $ ,870 25,444 11,625 48,886 9,600 9,119 25,983 12,935 35, , ,870 25,444 20,364 10,588 44,270 21,717 14,855 3

11 EXPENSES (Concluded): Office supplies ncome taxes Committee Computer/web maintenance Dues and subscriptions Travel Procedures manuals Other expenses MCmGAN ASSOCATON OF COUNTY DRAN COMMSSONERS STATEMENTS OF ACTVTES YEARS ENDED SEPTEMBER 30, 2003 AND 2002 TOTAL EXPENSES CHANGE N NET ASSETS NET ASSETS: Beginning of year End of year See notes to financial statements $ , ,782 13,715 31,875 $ 45, $ 905 5, ,132 4,330 1, ,270 28,918 2,957 $ 31,875 4

12 MCHGAN ASSOCATON OF COUNTY DRAN COMMSSONERS STATEMENTS OF CASH FLOWS YEARS ENDED SEPTEMBER 30, 2003 AND NCREASE (DECREASE) N CASH: Cash flows from operating activities: Change in net assets $ 13,715 Adjustments to reconcile change in net assets to net cash provided by operating activities: Grants and accounts receivable (311) Accounts payable 3,341 Deferred revenue (2,264) ncome taxes payable (60) Total adjustments 706 Net cash provided by operating activities 14,421 CASH: Beginning of year 42,634 End of year $ 57,055 See notes to financial statements $ 28,918 35,464 (52,720) 5,876 (11,380) 17,538 25,096 $ 42,634 5

13 MCHGAN ASSOCATON OF COUNTY DRAN COMMSSONERS NOTES TO FNANCAL STATEMENTS NOTE 1 - SUMMARY OF SGNFCANT ACCOUNTNG POLCES These financial statements have been prepared on the accrual basis of accounting. Accordingly, revenues are recorded when earned and expenses are recorded when incurred. The Association is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted and permanently restricted. Unrestricted net assets are resources over which the governing board has discretionary control to use in carrying on the operation of the organization in accordance with the limitations of its bylaws. The Association has only unrestricted net assets. Grants receivables consist of amounts due from the State of Michigan under a GS System for Michigan CREP Grant. Accounts receivable consist primarily of advertising revenue receivable. An allowance for doubtful accounts is recorded, when necessary, for receivables that may become uncollectible. Dues are billed to members and associate members on a calendar year basis. Dues are recorded as revenue as earned. The unearned portion of dues received is recorded as deferred dues revenue. Certain pipeline advertising revenues attributable to periods after year end are deferred. NOTE 2 - NATURE OF ORGANZATON, RSK AND UNCERTANTES The Association is organized for the purpose of organizing, educating, and updating its drain commissioner members and associate members regarding any and all issues relating to the duties and responsibilities of the office of the drain commissioner, including but not limited to: ~ Continuing education for members and associate members and interested members of the public on the statutory requirements under the drain code and drain office management, on the statutory requirements of related laws, and on the latest techniques for the engineering, environmental construction and administration ofprojects administered through member drain offices ~ Cooperative information exchanges between member drain offices ~ Achieving and enhancing partnering relationships with related governmental agencies The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts. 6

14 MCHGAN ASSOCATON OF COUNTY DRAN COMMSSONERS NOTES TO FNANCAL STATEMENTS NOTE 2 - NATURE OF ORGANZATON, RSK AND UNCERTANTES (Concluded) Approximately 26% and 48% of the organization's total revenue for 2003 and 2002, respectively was received from the Michigan Department of Environmental Quality. The Association is required to disclose significant concentrations of credit risk regardless of the degree of such risk. Financial instruments which potentially subject the Association to concentrations of credit risk consist principally of accounts receivables. Accounts receivable consist of amounts due from members, associate members, and vendors located throughout the State of Michigan. NOTE 3 - NCOME TAX STATUS AND CONTNGENCY n April 2001, the Association received tax-exempt status under Section 501(c)(6) of the nternal Revenue Code. Prior to that date the Association acted informally as a nonprofit organization since its inception in October The Association is subject to taxes at regular corporate rates on unrelated business income which consists of publication advertising revenue. There was no unrelated business income tax for 2003 and NOTE 4 - FUNCTONAL ALLOCATON OF EXPENSES The functional allocation of the Association's expenses as they relate to the various programs and management and general functions for the years ended September 30 are as follows: CREP Grant $ 22,330 $ 115,870 GS Grant 44,474 25,444 APA Grant 25,905 Publications 54,874 56,516 Conferences 22,864 23,680 Legislative 38,691 1,658 Management and general 37,578 39,772 Member services 66 4,330 Total $ 246,782 $ 267,270 7