Purpose of Audit

The purpose of our audit was to examine internal controls over the District’s financial operations for the period January 1, 2011, through August 31, 2012.

Background

The Lincoln Fire District is located in Madison County. The District’s general fund budget totaled about $136,000 for the 2012 fiscal year. The Board of Fire Commissioners consists of five elected members who are responsible for the District’s overall financial management.

Key Findings

• The Board Chairman told us that the Board conducts an internal review of the Secretary-Treasurer’s financial records, bank statements, and canceled checks two or three times throughout the year but could not provide us with any written evidence of this review.
• The Treasurer did not file the required annual financial reports with OSC for the 2009, 2010, and 2011 fiscal years.
• The Board was unable to provide us with an adopted investment policy and a code of ethics, which are required by law.
• As of August 31, 2012, the District reported an equipment capital reserve totaling $324,836 and a building capital reserve totaling $227,122. The Secretary-Treasurer does not maintain accounting records for each reserve fund as required. From January 1, 2010, to August 31, 2012, the Board financed the reserves with budgetary appropriations, operating surplus at the end of the year, and interest income, totaling $71,873 for the equipment reserve and $118,429 for the building reserve. The District did not make any expenditures from the reserve funds during this time period.

Key Recommendations

• Document the periodic reviews of the Secretary-Treasurer’s records.
• Ensure that the Secretary-Treasurer prepares and files annual financial reports with the State Comptroller’s Office within 60 days after the close of the fiscal year.
• Adopt an investment policy and a code of ethics as required by law.
• Require the Secretary-Treasurer to maintain separate accounting records for each reserve.