Residents Hear Audit Report

A meeting was held Monday, Aug. 17 to inform the POASC Board and property owners of the conclusions by the auditors, Gruenloh & Associates.

Approximately 50 property owners heard Wayne Gruenloh explain how the audit was done and the recommendations he has made.

He said two employees used POASC credit cards for personal expenditures. One had paid back the money in a timely manner and a small amount was paid back by May. The other employee, the Operations Manager who is no longer working in Spanish Cove, still owes approximately $1,600. He said this amount was recognized as a receivable on the audited financial statements in order to give fair presentation to the financial statements.

He said several credit card transactions were tested and in many instances there were no supporting receipts. Gruenloh recommends the board establish a credit card policy indicating who has the authority to use it and whether personal expenditures are allowed. He also recommends the board establish a documentation policy, including types of documentation and the length of time to retain each type.

Board Chairman Joan Fletcher said previous cards were in individual names, but the new card is in the name of POASC. Only she and two supervisors are authorized to use it, she said. Some in the audience recommended the cards be kept with individual names in order to keep track of who is purchasing items. In the event a person misuses the card, it can be traced back to the individual.

Gruenloh explained that in a larger company the person who approves purchases and the one who signs checks and reviews statements are different. However, in a small company like Spanish Cove, that control is not possible. In Spanish Cove the manager approves the purchases, reviews the statements and signs the check. Then the Treasurer reviews the statements and is the second signatory.

Fletcher explained that in one case in 2007, the manager held out a check to be signed. When the records were checked, all checks in sequence were signed by the Treasurer, except one. The Chairman at the time signed that one. Fletcher said sometimes a check needs to be written at a time other than when the others are scheduled. She feels this was done surreptitiously so the Treasurer would not question the payment. It was a check made out to an individual for the purchase of a laptop that allegedly was give to the manager’s daughter. The laptop is not in the POASC inventory.

The manager is no longer employed by POASC. He was given two weeks’ pay as well as pay for unused sick and vacation time. Steps are being taken to receive the outstanding balance of $1,600 as well as compensation for the laptop. It was not known at the time of the dismissal that these items existed.

The Chairman expects to introduce the new manager at the Regular Session of the Board of Directors at 6:30 p.m. Thursday, Aug. 20 in the Cove Clubhouse. The previous manager had the use of a truck as part of his contract with POASC in lieu of a raise. The truck will not be included in the agreement with the new manager.

Gruenloh also mentioned that cash transactions should be closely monitored.

1. Receipts should be given for all cash received.
2. The person who takes in the cash should not be the one who records it.
3. There should be proper oversight of cash transactions with daily deposits.
4. The Finance Committee should review cash income to see that it is property recorded.
5. Property owners should keep the receipts and make sure they are being properly recorded to their accounts, contacting the office if they are improperly charged. All property owners should monitor their accounts to be sure they are correct.

Other recommendations include:

1. Establishing and implementing a capitalization policy. Several equipment purchases were made during the year in which assets were improperly expensed. They should have been capitalized.
2. Establishing and implementing a policy for old or broken equipment that should approve the disposal, method of disposal, proof of disposal and accounting for the disposal on the financial statements. POASC has a procedure for Disposal of Durable Assets in the Operating Procedures, Section III-Financial Policies-H, however it does not address all the items Gruenloh suggests. He said several pieces of equipment were scrapped during the year without proper documentation.
3. Establishing and implementing a debt write-off policy, including approval standards such as who should approve write-offs and threshold amounts. Members of the Finance Committee or Board of Directors could do this.
4. Setting a policy that restricted account transfers be approved by and documented in the minutes of the Board of Directors or Finance Committee. Last year the Legal Fund was closed and funds deposited in the Operating Fund without documentation in the minutes of the board of directors.
5. Completing a thorough bank reconciliation each month on a timely basis with no over/short entries. Twice last year items were marked cleared that had not cleared the bank and twice items that cleared the bank were not marked cleared. This resulted in incorrect cash balances on the financial statements and would also create problems in future reconciliations.

A limited number of copies of the audit were available at the meeting, but property owners may pick up a copy at the POASC office.

Tags: Audit, Credit Cards, Finance, Operations manager, Recommendations