Presentation and discussion: Draft Annual Comprehensive Financial Report for Fiscal Year ending June 30, 2021 and results of the audit.
Jennifer Farr, of Davis Farr LLP the District’s independent auditor, gave a PowerPoint presentation and took questions from the Audit Committee. The District’s Director of Finance Paul Navazio and the District’s Controller were both available to answer questions from the Committee. The entire draft report may be found here.
Ms. Farr explained the name/acronym change from CAFR to ACFR had been initiated by the recent Statement 98 of the Government Accounting Standards Board (GASB).
Much of the discussion centered around the identified material weaknesses and deficiencies identified in the auditors compliance report (found here), a subset of this year’s findings were also identified as material weaknesses in the prior year’s audit. The discussion also questioned as to whether or not recommendations from the Moss Adams report, presented to the Audit Committee roughly a year ago, had been incorporated regarding recommendations on the capitalization of certain assets that Moss Adams identified to be expensed. At the request of the Committee, Mr. Navazio posted additional materials (the summary of the fixed assets adjustments found here; the adjusting journal entries found here) on the District website so both the Committee members and the public can see which items have now been expensed at the request of the auditor. The Compliance section will be revisited and staff will add to the management responses to indicate where improvements have either already been made or are planned.
Audit Committee At-Large member, Cliff Dobler, who had reviewed the items charged to the funds collected for the Effluent Pipeline Project, questioned whether the roughly $5M spent on maintenance, repairs, studies and preliminary plans had been expensed, since the total in the presentation appeared much lower than his estimates. He recommended more work is needed in this regard.
Bidding on professional services contracts was also called into question. Trustee Schmitz reminded the group that Moss Adams had also recommended that IVGID implement a new policy for putting such contracts out to bid. Jennifer Farr concurred that best practices would call for public bidding for professional services, even though it may not be required by Nevada statutes or current policy.
Mr. Dobler noted several errors in the Capital Assets summary. The auditor agreed to revisit and make necessary corrections. Mr. Dobler also made a recommendation, supported by the committee, that the notes on fund balance include dollar amounts, especially in light of the fact that fund balance in the Community Services and General Fund vastly exceed the amounts required by Board policy.
Chair Tulloch expressed concerns of community members that funds accumulated for the Effluent Pipeline Project will not be used for that purpose, nor refunded to ratepayers, if a bond is approved for the project (as is now likely).
Trustee Dent recalled that the Audit Committee recommended, and the Board accepted their recommendation, to expense previously capitalized assets at their meeting in February of 2021. Trustee Schmitz referred to the minutes of that meeting and confirmed his recollection. GM Winquest said he didn’t think that was “direction”, but both he and Mr. Navazio agreed they would expense remaining items if that is what the Board directed.
Trustee Schmitz wanted to know the status of the Tahoe Waters Suppliers Association. Ms. Farr explained that it does not fit the definition of a fiduciary fund because it provides some benefit to the District.
Trustee Dent expressed the desire to restore credibility. Trustee Schmitz felt that if 2 paragraphs were devoted to a GFOA award, 2 paragraphs should be included regarding issues with internal controls. In the interest of transparency, the committee asked for an addition to the transmittal letter, noting the issues that were identified and what steps were being taken to avoid them in the future.
Director of Finance Navazio will bring back a revised document, incorporating requested suggestions/corrections, to the Audit Committee at their next meeting and to the Board at their December meeting.