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R K O ~

Runyon Kersteen Ouellette

Certified Public Accountants and Business Consultants
December 9, 2011
To the Management of the City of Lewiston,
Maine and Lewiston Public Schools:
In planning and performing our audit of the financial statements of the governmental activities, the
business-type activities, each major fund, and the aggregate remaining fund information of City of
Lewiston, Maine as of and for the year ended June 30, 2011, in accordance with auditing standards
generally accepted in the United States of America, we considered City of Lewiston, Maine's internal
control over financial reporting (internal control) as a basis for designing our auditing procedures for the
purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an
opinion on the effectiveness of the City of Lewiston, Maine's internal control. Accordingly, we do not
express an opinion on the effectiveness of City of Lewiston, Maine's internal control.
Our consideration of internal control was for the limited purpose described in the preceding paragraph
and was not designed to identify all deficiencies in internal control that might be deficiencies, significant
deficiencies, or material weaknesses and, therefore, there can be no assurance that all such deficiencies
have been identified. In addition, because of inherent limitations in internal control, including the
possibility of management override of controls, misstatements due to error or fraud may occur and not
be detected by such controls. However, as discussed below, we identified a certain deficiency in
internal control that we consider to be a significant deficiency.
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 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. We did not identify any deficiencies in internal control that we considered to be material
A significant deficiency is a deficiency, or a 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. We consider the deficiency in the City of Lewiston, Maine's internal control and presented
in the "Schedule of Comments" attached to this letter, to be a significant deficiency. In addition, we
noted other matters involving internal control and its operation that we have reported in the section
"Other Comments."
The City of Lewiston and the Lewiston Department of Public School' s response to the deficiency
identified in our audit is described in the accompanying schedule of comments. We did not audit this
response and, accordingly, we express no opinion on it.
To the Management of the City of Lewiston,
Maine and Lewiston Public Schools:
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We wish to express our appreciation for the cooperation and assistance we received from the officials
and employees of the City of Lewiston, Maine and Department of Public Schools during the course of
our audit. We will review the status of these comments during our next audit engagement. We have
already discussed them with various City and School personnel, and we will be pleased to discuss them
in further detail at your convenience, to perform any additional study of these matters, or to assist you
in implementing the recommendations.
This communication is intended solely for the information and use of management, City Council, the
School Committee, and others within the organization, and is not intended to be and should not be used
by anyone other than these specified parties.
Very truly yours,
Schedule of Significant Deficiencies and Other Comments
June 30, 2011
(Non-material Weakness)
School Department Audit Adjustments (repeat from 2010, 2009, and 2008)
The Statement on Auditing Standards #112 requires external auditors to determine whether or not client
personnel designated as having responsibility over the financial reporting process possess the expertise to
identify all financial reporting matters in compliance with generally accepted accounting principles without the
reliance on external auditors. From a practical standpoint, the costs of maintaining the expertise in-house to
meet these requirements often exceed the benefit. As a result, it is common practice for governmental entities
to rely on assistance from their auditing firm to identify and propose audit adjustments, some of which are
material, during the preparation of the financial statements and the related disclosures and to assist in the
preparation of financial statements.
Unfortunately, when this approach is taken, the School Department is considered to have a control deficiency in
the design of internal controls over the preparation of the financial statements in accordance with generally
accepted accounting principles, and as a result, we are required to report this as such in this letter. We provided
management with a number of audit entries as a result of our audit procedures which we feel are more than
inconsequential. We recommend a more thorough review of monthly financial reports be performed to ensure
that misstatements are identified and corrected throughout the year.
Management's Response: The Lewiston School Department Business Office will conduct monthly reconciliations
of general ledger accounts to check for variances and eliminate the need for year-end audit adjustments. All
reversing entries will be made following the completion of the audit by the independent auditors.
Schedule of Significant Deficiencies and Other Comments, Continued
June 30, 2011
School Department Administration
During the past few years, we have noticed the School Department's difficultly in keeping up with all of its
administrative requirements. Part of this is due to the increase in federal funding and the complex
requirements that come with that funding. In order to improve the overall structure of the administration, the
School Department should consider splitting the Business Manager position into two positions: Controller and
Grant Administrator. The Controller would be directly responsible for the oversight of the accounting staff and
the accounting records. The Grant Administrator would be responsible for tracking the grant balances,
reconciling the accounting records with those of the grant directors, and ensuring that the School Department
has met its reporting requirements. The Grant Administrator would report to the Controller and assist the
Controller with the grant-related accounting records.
School Department Cash
Currently, the School Department has three separate bank accounts, one for its special revenue funds, one for
its school lunch program, and one for its adult education program. These accounts are tracked by three
separate individuals who must reconcile the accounts and track the cash receipts and cash disbursements. In
order to improve efficiency, the School Department should consider consolidating cash functions. If the School
Department had one checking account, it could consolidate cash receipt and cash disbursement functions, as
well as reduce the amount of time it takes to reconcile all three accounts and reduce the number of warrants
run during the year. The School Department should also consider assigning one of its personnel to track and
record all cash receipts, and another staff person to track all cash disbursements. In addition, the bank
reconciliations should be done by a staff person other than the personnel who track the cash receipts and cash
disbursements and should be reviewed and signed off by the Business Manager/School Department Controller.
Management's Response: The Lewiston School Deportment will consolidate the cash accounts of special
revenue, school lunch, and adult education into one cash account. A staff person independent of the cash receipt
and cash disbursement process will be assigned to reconcile the account. The School Department Controller will
review and sign off the reconciliation.
Grant Balances-School Department
During our audit, we noted that the School Department has difficulty in tracking its grant balances. Part of the
reason is that the Department utilizes grant tracking software that only allows tracking of revenues and
expenditures, but not beginning or ending balances. In addition, all of the grants are recorded in the accounting
software under one fund number, so it is difficult to determine how much of the fund balance is allocated to
each grant. There is also a disconnect between the grant directors and the business office as the grant directors
track their grants based on the grant year, not the fiscal year. In order to improve the tracking of individual
grant balances, the School Department should consider either keeping a of the individual grants to
track their balances or consider going back to using individual fund numbers in the accounting software to track
Management's Response: The School Department will track all special revenue fund grants with a spreadsheet
for the purpose of reconciling individual grant balances. Grant directors will be given a copy of the spreadsheet
monthly. All requests for reimbursement will be signed off by grant directors.
Schedule of Significant Deficiencies and Other Comments, Continued
June 30, 2011
General Fund Reimbursements-School Department
During our testing, we noted that the School Department continues to have issues with the timing of
reimbursements from the other funds to the general .fund at year end. Checks are often cut and recorded in the
other funds before June 30th, but the cash receipts are not recorded in the general fund side until after year end.
This creates the need for adjusting journal entries every year to properly record the transactions. In order to
eliminate the need for these adjusting entries and improve the year-end reconciliation process, the School
Department should consider either doing the reimbursements after year end or doing the reimbursements as
wire transfers so they would clear in the general fund in the same day as they were recorded in the other funds.
In addition, we noted that many of these reimbursements are payroll-related as all payrolls are disbursed out of
the general fund and then reimbursed by the other funds. To eliminate the timing differences, the School
Department should consider doing the payroll reimbursements on the same day the payroll is paid, eliminating
the timing difference and the need to reconcile.
Management's Response: At year end reimbursements to general fund will be done after June 30th to eliminate
adjusting entries between funds. Also, payroll reimbursements will be done on weekly pay dates to eliminate any
timing differences.
MEDMS Reconciliation-School Department
During our revievy of the upload to the State's MEDMS system, we noted there were significant amounts that
were not included in the upload, including some federal amounts. In addition, some of the federal amounts
were reported under the correct funds as required by the State and some were reported with the local and
State grants. The School Department should ensure that all of the accounts are bridged with the system and
that they are bridged to the correct funds so that they upload properly. In addition, the School Department
should review the upload for accuracy and correct any amounts that are excluded or not reported correctly.
Management's Response: Quarterly MEDMS filings will be made and any account code errors will be corrected
to ensure all amounts are reported through ME OMS. Verification of amounts will be done through an ADS report
listing any amount excluded from the ME OMS report.
Activity Fund Cash Disbursements-School Department
During our testing of activity fund cash disbursements, we noted several instances in which back up
documentation was missing as evidence of the disbursement. The School Department should consider enforcing
its policy that all activity fund disbursements should be supported by an invoice or receipt prior to the actual
disbursement. In addition, there was one check that cleared the bank that was not signed and there were some
instances in which the checks required two signatures but only had one signature. The School Department
should ensure that all checks are signed by the proper signatory. In addition, the School Department should
consider revising its activity fund policy to implement procedures in all schools that are consistent (e.g. requiring
two signatures on all checks; requiring disbursement vouchers, etc.).
Management's Response: An updated procedure will be sent to all schools regarding proper procedure for any
activity funds. A training session will be held for school personnel to implement the updated procedure.
Schedule of Significant Deficiencies and Other Comments, Continued
June 30, 2011
Travel Advances/Reimbursements-School Department
During our testing of the School Improvement Grant disbursements, we found several travel advances and
reimbursements for which there was either no backup documentation or incomplete documentation. In order
to improve internal controls over travel advances, the School Department should ensure that all backup
documentation is acquired and reviewed.
Management's Response: A tickler file will be maintained by accounts payable to ensure that all backup
documentation is submitted before reimbursements are made to employees.
Journal Entries-School Department
During our review of journal entries, we noted that journal entries, including interfund transfers, do not have an
approval process. Although they are periodically reviewed by the Business Manager, there is no evidence that
they were reviewed. The School Department should consider implementing a system in which journal entries
over a certain dollar amount are approved by the Business Manager/Controller and documented by a signature.
In addition, journal entries made by the Business Manager/Controller should be periodically reviewed by the
Management's Response: A procedure will be implemented to require the Controller to review and sign journal
entries made by Business Office staff Journal entries made by the Controller will be reviewed by the
Superintendent monthly.
Journal Entries-City
During our review, we noted that the City does not have a process in which the Finance Director's journal entries
are reviewed. The City should consider implementing a process under which the Finance Director's journal
entries are reviewed on a periodic basis.
Capital Assets-City
During our testing of capital assets, we noted that some of the assets are tracked in very cumbersome
spreadsheets that are difficult to maintain and that are prone to error. In addition, the remaining capital assets
are tracked in Access software, which is limited in its capacity to produce useable reports. In order to improve
the accuracy of capital asset tracking and reporting, the City should consider investing in a software module
specifically designed to track capital assets. This would alleviate the difficulty of tracking items and reduce the
issues with error-prone spreadsheets.