NATCHITOCHES HISTORIC DISTRICT DEVELOPMENT COMMISSION

STATE OF LOUISIANA

FINANCIAL AUDIT SERVICES PROCEDURAL REPORT

ISSUED SEPTEMBER 7, 2016

LOUISIANA LEGISLATIVE AUDITOR 1600 NORTH THIRD STREET

POST OFFICE BOX 94397 BATON ROUGE, LOUISIANA 70804-9397

LEGISLATIVE AUDITOR DARYL G. PURPERA, CPA, CFE

ASSISTANT LEGISLATIVE AUDITOR FOR STATE AUDIT SERVICES

NICOLE B. EDMONSON, CIA, CGAP, MPA

DIRECTOR OF FINANCIAL AUDIT ERNEST F. SUMMERVILLE, JR., CPA

Under the provisions of state law, this report is a public document. A copy of this report has been submitted to the Governor, to the Attorney General, and to other public officials as required by state law. A copy of this report is available for public inspection at the Baton Rouge office of the Louisiana Legislative Auditor and at the office of the parish clerk of court. This document is produced by the Louisiana Legislative Auditor, State of Louisiana, Post Office Box 94397, Baton Rouge, Louisiana 70804-9397 in accordance with Louisiana Revised Statute 24:513. One copy of this public document was produced at an approximate cost of $0.40. This material was produced in accordance with the standards for state agencies established pursuant to R.S. 43:31. This report is available on the Legislative Auditor’s website at www.lla.la.gov. When contacting the office, you may refer to Agency ID No. 6185 or Report ID No. 80160113 for additional information. In compliance with the Americans With Disabilities Act, if you need special assistance relative to this document, or any documents of the Legislative Auditor, please contact Elizabeth Coxe, Chief Administrative Officer, at 225-339-3800.

Louisiana Legislative Auditor Daryl G. Purpera, CPA, CFE Natchitoches Historic District Development Commission September 2016 Audit Control # 80160113

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Introduction The primary purpose of our procedures at the Natchitoches Historic District Development Commission (Commission) was to evaluate certain controls the Commission uses to ensure accurate financial reporting, compliance with applicable laws and regulations, and overall accountability over public funds. The Commission was created under the provisions of Louisiana Revised Statute 25:791. The Commission was created for the purpose of planning and development of the Natchitoches Historic District, a national landmark, and for the development of tourism and maintenance of the historic integrity of that district. The board of commissioners (board) is comprised of 16 members holding designated title positions (or their designee) within the historical district.

Results of Our Procedures We evaluated the Commission’s operations and system of internal control through inquiry, observation, and review of its policies and procedures, including a review of the applicable laws and regulations. Based on the documentation of the Commission’s controls and our understanding of related laws and regulations, we performed procedures on selected controls and transactions relating to cash, contracts, nonpayroll operating expenditures, and budget.

Follow-up on Prior-year Finding We reviewed the status of the prior-year finding reported in the agreed-upon procedures report dated July 28, 2015, relating to inadequate segregation over cash collections. We determined that this finding has not been resolved and is addressed again in this report.

Current-year Finding Inadequate Segregation of Duties The Commission has not established segregation of duties over cash. An employee of the contracted CPA firm receives funds, makes deposits, writes checks, records all transactions in

Natchitoches Historic District Development Commission Procedural Report

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the general ledger, and reconciles the monthly bank statements. Although the checks are signed by two board members, there is no evidence of Commission management’s review of the bank statements, bank reconciliations, or transactions posted during the fiscal year. Inadequate segregation of duties increases the risk of error or fraud, although no such errors or fraud were identified based on the result of our procedures. Adequate segregation of duties requires these activities be performed by separate individuals. If controls cannot be properly segregated due to staff limitations, management should develop other controls to help mitigate these risks. The Commission should consider assigning the board treasurer or other designated board member to routinely compare the monthly bank reconciliation to payments, deposits, relevant supporting documentation, and transactions posted, which should partially compensate for the deficiency and serve as a monitoring function. Management concurred with the finding and outlined a plan of corrective action (see Appendix A).

Other Results of Our Procedures Cash The Commission maintains one operating account, which is used for general operations. There is one contracted person responsible for cash collection, entry into general ledger, disbursement, and reconciliation activities. Cash balance totaled $152,264 at April 30, 2016. We performed procedures to reconcile cash transactions to the Commission’s general ledger and bank statements, and evaluated the segregation of duties between the contracted person and the commissioners. Based on the results of our procedures, we found that cash responsibilities are not adequately segregated (see Current-year Finding section). Contracts The Commission had a contract in effect for the fiscal year ended June 30, 2016, for accounting and compilation services. Payments on the contract for the period July 1, 2015, through April 30, 2016, totaled $6,000 at $600 per month. We traced the payment made in April 2016 to supporting documentation and evaluated compliance with laws and regulations. Based on the results of our procedures, no exceptions were identified. Nonpayroll Operating Expenditures We reviewed the general ledger transactions for the period July 1, 2015, through April 30, 2016, selected transactions for marketing, special events, and historic projects; and examined supporting documents for each transaction. Based on the results of our procedures, no exceptions were identified.

Natchitoches Historic District Development Commission Procedural Report

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Budget The Commission annually adopts a budget by majority vote of its board. We confirmed the adoption of the Commission’s budget and evaluated variances between budgeted amounts and actual revenues and expenditures for reasonableness. Based on the results of our procedures, no exceptions were identified.

Comparison of Activity between Years We compared the most current and prior-year financial activity using the Commission’s general ledger information to identify trends and obtained explanations from management for any significant variances that could potentially indicate areas of risk. Management provided reasonable explanations for all significant variances. As of April 30, 2016, revenues for fiscal year 2016 totaled $360,000, which is 100% state appropriations. The following chart shows the Commission’s fiscal year 2016 expenditures (cash basis) as of April 30, 2016.

Fiscal Year 2016 Expenditures, as of April 30, 2016

Under Louisiana Revised Statute 24:513, this report is a public document, and it has been distributed to appropriate public officials

Respectfully submitted, Daryl G. Purpera, CPA, CFE Legislative Auditor

KVL:BAC:BH:EFS:aa NHDDC 2016

$12,920 5%

$61,750 24%

$123,260 47%

$63,110 24%

Professional Services

Marketing

Special Events and HistoricProjects

Landscaping

Source: Commission's General Ledger

APPENDIX A: MANAGEMENT’S RESPONSE

Natchitoches Historic District Development Commission 814 Washington Street, Natchitoches, La 71457

Louisiana Legislative Auditor Da~IG.Pu~ern , CPA, CFE

P.O. Box 94397 Baton Rouge, LA 70804-9397

(318) 352-3652

August 12, 2016

Re: Natchitoches Historic District Development Commission

Dear Mr. Purpera:

The following is the response in regards to the finding of inadequate segregation of duties issued by the Louisiana Legislative Auditor to the Natchitoches Historic District Development Commission, "NHDDC," for the year ending June 30, 2015. Please note that the Natchitoches Historic District Development Commission concurs with the findings which are included in the Louisiana Legislative Auditor's report of August 9, 2016.

MANAGEMENT'S CORRECTIVE ACTION PLAN

The NHDDC is a solely volunteer based entity with limited funding. As a result, it is not economically feasible to add a sufficient number of employees to adequately segregate accounting duties. However, in order to compensate for the inadequate segregation of duties, the Commission has assigned the Commission 's Treasurer to compare the monthly bank reconciliation to payments, deposits, relevant supporting documentation and transactions posted. These actions will occur each month and also be supervised by the members of the Board 's Executive Committee.

Please contact me if you wish to discuss this further.

,,_p;;;;w___r;iU!f~J I .

PAY~t. ~~LLIAMS i Execv'Committee Board Member

A. 1

B.1

APPENDIX B: SCOPE AND METHODOLOGY

We conducted certain procedures at the Natchitoches Historic District Development Commission (Commission) for the period from July 1, 2015, through June 30, 2016. Our objective was to evaluate certain internal controls the Commission uses to ensure accurate financial reporting, compliance with applicable laws and regulations, and overall accountability over public funds. The scope of our procedures, which are summarized below, was significantly less than an audit conducted in accordance with Government Auditing Standards issued by the Comptroller General of the United States. We did not audit or review the Commission’s Annual Fiscal Report, and, accordingly, we do not express an opinion on that report. The Commission’s accounts are an integral part of the state of Louisiana’s financial statements, upon which the Louisiana Legislative Auditor expresses opinions.

We evaluated the Commission’s operations and system of internal control through inquiry, observation, and review of its policies and procedures, including a review of the laws and regulations applicable to the Commission.

Based on the documentation of the Commission’s controls and our understanding of related laws and regulations, we performed procedures on selected controls and transactions relating to cash, contracts, nonpayroll operating expenditures, and budget.

We compared the most current and prior-year financial activity using the Commission’s general ledger information and obtained explanations from Commission management for any significant variances.

The purpose of this report is solely to describe the scope of our work at the Commission and not to provide an opinion on the effectiveness of the Commission’s internal control over financial reporting or on compliance. Accordingly, this report is not intended to be and should not be used for any other purpose.