Quincy port questions state audit findings

State finds district lacks financial reporting controls

QUINCY - The Port of Quincy is making corrections after the state Auditor's Office found the district lacks adequate controls over financial reporting.

But the port is questioning whether the office would have even made a finding if its commissioners had not called to inquire about how to handle what Commissioner Brian Kuest terms "an oversight."

Kuest said the port had already submitted its 2006 financial statement to the auditor for review.

"Once we had determined the supposed finding here was not included in that 2006 financial, our conversations back to the auditor's office were, do we correct 2006 or do we include it in 2007?" he explained. "That's the only question we really asked the auditor's office how they would like to have it presented. If we had said nothing and corrected it 2007, would there have even been a finding?"

The audit states the district "did not conduct adequate research of generally accepted accounting principles to ensure the accurate reporting of capital assets in the financial statements. As a result, its capital assets were not recorded accurately and in accordance with generally accepted accounting principles."

According to the audit, the port in 2006 incorrectly recorded and reported about $1.3 million in capital assets, incorrectly recorded and overstated depreciation of the assets by about $446,000 and as a result, the value of the port's capital assets was overstated by about $900,000.

The port in 2005 incorrectly recorded and report about $1.3 million in capital assets, incorrectly recording and overstating depreciation of the assets by $648,000, the audit stated, resulting in the value of the port's assets being overstated by about $700,000.

Land improvements made by the port should have been recorded as an expense at the time of construction, the audit stated, but because this did not happen, the port's development expense account was understated by about $546,000 in 2006 and by about $265,000 in 2005. In 2005 the amount of total depreciation was overstated by about $136,000 and the port's net income was overstated by about $129,000.

A prior period adjustment of about $571,000 was made in the 2005 financial statements to reflect an error in recording capital assets made in the 2004 financial statements, the audit added.

District personnel raised a question related to capital assets during the current audit, the audit states, but relied on the auditor's office to determine the proper accounting treatment related to those capital assets.

"Professional auditing standards do not allow the auditor to be a part of an entity's system of internal control for reasons of independence," the audit states.

In the port's response, the district says it did not rely on the auditor's office to determine the proper accounting treatment. Once the district, and not the auditor's office, determined an error had been made, they knew financial statements would need to be adjusted, according to the port response.

The question the district raised was to the timing of the adjustment, the response continues, not for a determination of the adjustment which needed to be made.

"We find it interesting that if the question of the timing of the adjustment had not been raised with the SAO and the District had just corrected the error in the 2007 financial statements as we first intended, this issue would not be a finding," the port's response stated.

Kuest said the port district has grown so much in the last four to five years.

"It was just an oversight in that specific situation that we didn't turn that asset over to the city from a book standpoint," he said. "It was just missed and it stayed on our books as an asset rather than being transferred to the city."

Prior to the oversight, Kuest said, the port district has had accounting firm LeMaster and Daniels do all of the accounting for the district.

"Even down to the bookkeeping portion of it, so that these oversights don't happen again," he said. "It shouldn't have been there to begin with, so we've caught it, it's been corrected. From an accounting standpoint, we're taking the appropriate measures to make sure it doesn't happen again and we're moving on."

Kuest works for LeMaster and Daniels, but said he is not doing any of the work for the port district.

"We're using others within the firm," he said. "We can gauge their services from an accounting standpoint to make sure this oversight doesn't happen again."