02-06-13 LPRDA/TIRZ - Laserfiche WebLink

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Board of Directors La Porte Redevelopment Authority Material 'Weaknesses Draft - subject o, change Page 2 The Authority's management consists of an appointed Board of Directors ("Directors"). Day-to- day operations are performed, by private companies ("Consultants") under contract with the Authority. The Directors supervise the performance of the Consultants; however, although the Consultants can be part of the Authority's system of internal control, the Consultants are not members of management. Ultimately, the Directors are responsible for design and implementation of the system of internal control, As is common within the system of internal control of most small organizations, the accounting function of the Authority does not prepare the financial statements complete with footnotes in accordance with accounting principles generally accepted in the United States of America. Accordingly, the Authority has not established internal controls over the preparation of its financial statements. This condition is considered to be a material weakness of the Authority's system of internal control over financial reporting. During the course of performing an audit, the auditor prepared journal entries to present the financial statements on the government -wide basis of accounting, Management's reliance upon the auditor to detect and make these necessary adjustments is considered to be a material weakness in internal control. SAS No. 115 does not make exceptions for reporting deficiencies that are adequately mitigated with nonaudit services rendered by the auditor or deficiencies for which the remedy would be cost prohibitive. We agree with the objective of SAS No. 115 to inform an organization of all the conditions in its internal control that interfere with its ability to record financial data reliably and issue financial statements free of material misstatement. Communication of the material weaknesses above helps to emphasize that the responsibility for financial reporting rests entirely with the organization and not the auditor. Management's Response The Authority's Board of Directors is appointed from the general population and do not necessarily have governmental accounting expertise. The Board engages consultants who possess industry knowledge and expertise to provide financial services, as well as legal services. Based on the auditor's unqualified opinion and after reading the financial statements, the Board believes the financial statements are materially correct. The Board does not think that the addition of an employee or consultant to oversee the annual financial reporting process is necessary nor would it be cost effective.