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Home My WebLink About1976 07 31 Other - Harris county Water control And improvement District No.133 1 V --ooOoo-- OTHER SUPPLEMENTAL INFORMATION HARRIS COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT NO. 133 HARRIS COUNTY, TEXAS -o- JULY 31 , 1976 --00000-- I I 1! --ooOoo-- !! I! C O N T ENT S I! Schedule OTHER SUPPLEMENTAL INFORMATION Ir ACCOUNTANTS' REPORT It QUESTIONNAIRE TO BE COMPLETED BY AUDITOR A QUESTIONNAIRE TO BE COMPLETED BY BOARD OF DIRECTORS B MANAGEMENT LETTER C !! BOARD MEMBERS, KEY ADMINISTRATIVE PERSONNEL AND LEGAL COUNSEL D CERTIFICATE OF THE BOARD OF DIRECTORS E I! ooOoo-- 1! 1, 4 A WHITE, PETROV & MCHONE CERTIFIED PUBLIC ACCOUNTANTS ROBERT A.WHITE 600 JEFFERSON SUITE 1150 JOSEPH W PETROV HOUSTON,TEXAS 77002 ROBERT W.MCHONE TELEPHONE (713) 659-1777 STEPHEN H.CORDILL,JR. JOHN B.MANTHEY October 15, 1976 MEMBERS AMERICAN INSTITUTE OF LORETTA M.TURNER CERTIFIED PUBLIC ACCOUNTANTS ORA F.HARRISON !! It Board of Directors Harris County Water Control and Improvement District No. 133 Harris County, Texas I! We have examined the financial statements of HARRIS COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT NO. 133 for the year ended July 31 , 1976, and have !! issued our report thereon dated October 15, 1976. Our examination was made in accordance with generally accepted auditing standards and accordingly in- cluded such tests of the accounting records and such other audit procedures It as we considered necessary in the circumstances. Nothing came to our atten- tion during the course of our examination to indicate that the questions listed in schedule A were not answered correctly. However, our examination was not Irdirected specifically toward answering such questions. In connection with our examination, nothing came to our attention that indicated the District had departed from general or special legislation under which the District was created, or from laws and regulations excerpted and included in the WATER DISTRICT ACCOUNTING MANUAL in Section 70-03-1 or from 1r requirements of the bond orders except as described in the management letter, schedule C. However, our examination was not directed primarily toward obtain- ing such knowledge. Our comments included in schedule C represent certain matters relating 44 to the District ' s system of accounting and internal control which we observed during our examination. We have not been engaged to conduct a comprehensive 11 review of the District's system of internal controls and therefore, we express no opinion thereon. If Schedules B and D were not prepared by us and therefore, we express no opinion thereon. atai 141. 51/7C14/41*14`' 411 Permit Number 14973 4 11 Our report is delivered to the client with the understanding that any publication, advertisement, or copy therefrom, in full or in part, shall be approved by us. II Schedule A Page 1 of 8 HARRIS COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT NO. 133 IIQUESTIONNAIRE TO BE COMPLETED BY AUDITOR JULY 31 , 1976 1! 1 . At the time that your firm was engaged by the Board of Directors of the above named water district to perform this audit , was a copy of the WATER DISTRICT ACCOUNTING MANUAL made available to X I! you? Yes No 2. The WATER DISTRICT ACCOUNTING MANUAL prescribes accounting principles and policies. After taking these into consider- !! did the local water district: a. Maintain a proper classification of expenses and revenues? X 1! Yes No b. Record expenses and revenues on the basis of full accrual accounting except for the specific revenue and expense !! items required to be maintained on the cash basis by the X WATER DISTRICT ACCOUNTING MANUAL? Yes No c. Maintain the double entry system of accounting? X Yes No d. Keep a general ledger in accordance with the uniform classification of general ledger accounts prescribed X !! in the WATER DISTRICT ACCOUNTING MANUAL? Yes No e. Adhere to other provisions of the WATER DISTRICT X !! ACCOUNTING MANUAL? Yes No If No is checked for any item under question 2, full dis- closure as to the nature and reason for the negative reply iris indicated in schedule C, Management Letter. 46 3. Did the Board of Directors of the water district impose on 11 your firm any audit requirements in addition to those minimum X audit requirements of the WATER DISTRICT ACCOUNTING MANUAL? Yes No 4. Did you identify, during the course of your examination of the financial statements of the water district, any areas pertaining to accounting matters in which action should be taken by the Board of Directors of the water district? X 1! Yes No If Yes is checked for question 4, have these topics been cited in a management letter to the water district's Board X A of Directors? Yes No i 5. Did you obtain representation from the Board of Directors of the water district that all records of the water district 11 were made available to you for your examination? Yes No All known records have been made available to us. 110 See accompanying letter dated October 15, 1976. 11 Schedule A Page 2 of 8 HARRIS COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT NO. 133 IIQUESTIONNAIRE TO BE COMPLETED BY AUDITOR JULY 31 , 1976 11 6. Did the water district: 1! a. Use the construction fund, tax fund and debt service fund only for purposes authorized by the Board of Directors of the water district and/or within the provisions of appli- X ir cable bond resolutions? Yes No b. Properly segregate and maintain the required amount of cash escrowed by the Texas Water Rights Commission or disburse the escrowed cash according to the terms prescribed by the Texas Water Rights Commission? X., Yes No irc. Do business only with firms or corporations in which members of the Board of Directors had no pecuniary interest? Yes No The answer to this question does not fall within the scope of a normal audit engagement and has been answered by the Board of Directors in schedule B. Ird. Observe the conditions for obtaining grants, gifts, etc. , or observe agreements with governmental agencies for the purpose of securing funds or services? Yes No 1! The answer to this question does not fall within the scope of a normal audit engagement and has been answered by the Board of Directors in schedule B. ire. Have a contract for Social Security coverage for its employees with the Texas Department of Public Welfare, Social Security Division? Not Applicable Yes No f. Make remittances of Social Security taxes according to the terms of the contract for Social Security coverage with the Social Security Division of the Texas Department of Public Welfare? Not Applicable Yes No g. Deposit receipts to the proper funds kept by the approved X 11 depository bank? Yes No h. Draw checks only on funds approved by the Board of Directors and signed by authorized personnel ? X Yes No 1! 7. Do you issue a management letter to administrative officials of the water district at least annually which sets forth your comments (based on matters which came to your attention during your examination) for strengthening internal accounting X controls and improving administrative efficiency and procedures? Ye— s No Funds required to be escrowed by Texas Water Rights Commission in the amount of $400,000 on April 22, 1975 and released May 14, 1976 were not held in escrow by the District. See accompanying letter dated October 15, 1976. al Schedule A Page 3 of 8 HARRIS COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT NO. 133 II QUESTIONNAIRE TO BE COMPLETED BY AUDITOR 11 DULY 31 , 1976 11 If Yes is checked for question 7: a a. Were your recommendations explained to and discussed with X • administrative officials of the water district? Yes No IL b. The date of your. most recent management letter was 11 October 15, 1976. c. Is there evidence indicating that your previous year(s) recommendations have been or are being I! implemented? Not Applicable Yes No d. Has a copy of the management letter been filed with 7 the Texas Water Rights Commission? Yes No The answer to this question does not fall within the 11 scope of a normal audit engagement and has been answered by the Board of Directors in schedule B. 8. The Texas Water Code makes specific provisions relating to 1! security provided by depository banks. After consideration of the applicable laws pertaining to the specific water district, did the depository bank or savings association II provide adequate security of the correct type? Question answered as follows using securities at par value: Yes No Texas Bank Greenway Bank & Home Savings 11 a. Name of Depository Bank & Trust Trust of Houston Association or Savings Association: Houston, Texas Houston, Texas Houston, Texas 1! b. Amount of FDIC or FSLIC Coverage Demand Deposits 40 000 40 000 Time or Savings Deposits 100 000 100 000 100 000 11 c. Cash Balance at Year End Demand Deposits 35 001 -o- -o- Time or Savings Deposits 312 500 -o- 107 283 1! d. Amount of Bond or Par Value of Security 71 Pledged as of Year End (Not Including FDIC or Not FSLIC Coverage) 410 000 Applicable -o- 40 !! See accompanying letter dated October 15, 1976. Schedule A Page 4 of 8 HARRIS COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT NO. 133 11 QUESTIONNAIRE TO BE COMPLETED BY AUDITOR JULY 31 , 1976 1! 1! Texas Bank Greenway Bank & Home Savings Trust Trust of Houston Association e. Was Security Adequate Houston, Texas Houston, Texas Houston, Texas at Year End Accord- ing to Criteria Enum- Not erated Above? Yes Applicable No f. Largest Cash Balance Amounted to Demand Deposits 233 640 304 Time or Savings Deposits 847 653 41 884 107 283 1! g. Date of Largest Cash Balance 12/12/75 8/5/75 6/1/76 1! h. Amount of Bond or Par Value of Security Pledged at Time of 1! Largest Balance (Not Including FDIC or None FSLIC Coverage) 710 000 Required -o- ir i . Was Security Adequate at Date of Highest Cash Balance Accord- ing to Criteria 1! Enumerated Above? No Yes No Ili University ` Savings Humble Savings and Main a. Name of Depository Bank Association Loan Association Bank didi or Savings Association: Houston, Texas Houston, Texas Houston, Texas b. Amount of FDIC or FSLIC Coverage Demand Deposits 40 000 Time or Savings Deposits 100 000 100 000 100 000 1 c. Cash Balance at Year End Demand Deposits -o- -o- -o- Time or Savings Deposits -o- 45 096 -o- d. Amount of Bond or Par 11 Value of Security Pledged as of Year End (Not Including FDIC or Not None Not 1! FSLIC Coverage) Applicable Required Applicable 4 See accompanying letter dated October 15, 1976. 1 ilSchedule A Page 5 of 8 HARRIS COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT NO. 133 11 QUESTIONNAIRE TO BE COMPLETED BY AUDITOR 11 DULY 31 , 1976 11 University Savings Humble Savings and Main Association Loan Association Bank 1! e. Was Security Adequate Houston, Texas Houston, Texas Houston, Texas at Year End Accord- ing to Criteria Enum- Not Not 11 erated Above? Applicable Yes Applicable f. Largest Cash Balance Amounted to 1! Demand Deposits -o- Time or Savings Deposits 100 000 93 566 100 000 g. Date of Largest Cash Balance 5/6/76 4/9/76 3/3/76 AZ h. Amount of Bond or Par Value of Security ir Pledged at Time of Largest Balance (Not Including FDIC or None None None 1! FSLIC Coverage) Required Required Required i . Was Security Adequate at Date of Highest 1! Cash Balance Accord- ing to Criteria Enumerated Above? Yes Yes Yes 41 Panhandle Savings and Loan Heights Savings Beaumont 1111 a. Name of Depository Bank Association Association Savings and Loan or Savings Association: Amarillo, Texas Houston, Texas Beaumont, Texas b. Amount of FDIC or FSLIC 11 Coverage Demand Deposits Time or Savings Deposits 100 000 100 000 100 000 c. Cash Balance at Year End Demand Deposits -o- -o- -o- Time or Savings Deposits 96 479 3 130 97 317 d. Amount of Bond or Par Value of Security Pledged as of Year End (Not Including FDIC or None None None FSLIC Coverage) Required Required Required 0111 See accompanying letter dated October 15, 1976. Schedule A Page 6 of 8 HARRIS COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT NO. 133 IIQUESTIONNAIRE TO BE COMPLETED BY AUDITOR IIDULY 31 , 1976 11 Panhandle iiii Savings and Loan Heights Savings Beaumont Association Association Savings and Loan e. Was Security Adequate Amarillo, Texas Houston, Texas Beaumont, Texas at Year End Accord- ing to Criteria Enum- None None erated Above? Required Required Yes f. Largest Cash Balance Amounted to 1! Demand Deposits -o- Time or Savings Deposits 96 479 3 130 97 317 g. Date of Largest Cash Balance 6/1/76 3/14/76 5/27/76 h. Amount of Bond or Par Value of Security il Pledged at Time of Largest Balance (Not Including FDIC or None None None 1! FSLIC Coverage) Required Required Required i . Was Security Adequate at Date of Highest Cash Balance Accord- ing to Criteria Enumerated Above? Yes Yes Yes 1! Allied American a. Name of Depository Bank Bank Surety Savings Association or Savings Association: Houston, Texas Houston, Texas b. Amount of FDIC or FSLIC 11 Coverage Demand Deposits 40 000 Time or Savings Deposits 100 000 100 000 11 c. Cash Balance at Year End Demand Deposits 100 Time or Savings Deposits 48 900 94 423 d. Amount of Bond or Par Value of Security Pledged as of Year End 11 (Not Including FDIC or None None FSLIC Coverage) Required Required 0111 See accompanying letter dated October 15, 1976. 1 11 Schedule A Page 7 of 8 HARRIS COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT NO. 133 41 QUESTIONNAIRE TO BE COMPLETED BY AUDITOR JULY 31 , 1976 Allied American Bank Surety Savings Association e. Was Security Adequate Houston, Texas Houston, Texas 416 at Year End Accord- ing to Criteria Enum- erated Above? Yes Yes f. Largest Cash Balance Amounted to IP Demand Deposits 100 Time or Savings Deposits 48 900 94 423 g. Date of Largest Cash 411 Balance 7/16/76 7/21/76 h. Amount of Bond or Par Value of Security 11 Pledged at Time of Largest Balance (Not Including FDIC or None None 1! FSLIC Coverage) Required Required i . Was Security Adequate at Date of Highest "! Cash Balance Accord- ing to Criteria Enumerated Above? Yes Yes 41 9. The water district' s taxes were collected by an independent tax assessor-collector. 71 10. Was the tax assessor-collector bonded as required by law? X Yes No 11 . What was: a. The tax assessor-collector bonded for? 5 000 7! b. The greatest amount of the district 's taxes in the tax assessor-collector's possession at any one time? 87 267 c. The frequency of tax receipts deposits with the bonded 11 depository? (check one) (1 ) Daily (2) Weekly X (3) Monthly 7! * Coverage required by Texas State statutes-$10,000. Coverage increased to $10,000 4, subsequent to year end. See accompanying letter dated October 15, 1976. 11 Schedule A Page 8 of 8 HARRIS COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT NO. 133 QUESTIONNAIRE TO BE COMPLETED BY AUDITOR JULY 31 , 1976 d. The percent of the assessed valuation to fair market value? This information was furnished by the district without audit. 100% gi 12. We actually examined the records of the tax assessor collector. 11 13. As a result, were local tax revenues (including delinquent taxes and interest and penalties on taxes) properly X separated for debt service? Yes No 14. Was the water district in compliance with applicable bond resolutions, with the general or special legislation under which the district was created and with the specific statutes excerpted and included in the Legal Compliance it Guidelines in Section 70-03-1 of the WATER DISTRICT ACCOUNTING MANUAL? X Yes No Significant exceptions noted during the course of our audit of the financial statements are described in the management letter, schedule C. The answer to this question has also been answered by the I! Board of Directors in schedule B. 15. Other Comments of the Auditor: 41 None 71 71 7! 71 I See accompanying letter dated October 15, 1976. 11 Schedule B HARRIS COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT NO. 133 QUESTIONNAIRE TO BE COMPLETED BY BOARD OF DIRECTORS 11 JULY 31 , 1976 1 . Did the district: 11 a. Do business only with firms or corporations in which mem- X bers of the Board of Directors had no pecuniary interest? Yes No b. Observe the conditions for obtaining grants, gifts, etc. , or observe agreements with governmental agencies for the purpose of securing funds or services? Not Applicable Yes No 4, 2. Has a copy of the management letter been filed with the Texas Water Rights Commission? X Yes No 3. Was the water district in compliance with applicable bond resolutions, with the general or special legislation under itwhich the district was created and with the specific statutes excerpted and included in the Legal Compliance Guidelines X in Section 70-03-1 of the WATER DISTRICT ACCOUNTING MANUAL? - --- Yes No All significant exceptions known to the Board of Directors have been described in the management letter, schedule C. 11 1 7! 11 7I See accompanying letter dated October 15, 1976. 11 Schedule C Page 1 of 4 HARRIS COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT NO. 133 11 MANAGEMENT LETTER 114! OCTOBER 15, 1976 1! Board of Directors Harris County Water Control and Improvement District No. 133 Harris County, Texas Board Members; In connection with our audit of Harris County Water Control and Improvement District No. 133 for the year ended July 31 , 1976, we noted certain matters re- itto the system of internal control and accounting procedures which we are presenting for your consideration. All of our comments are based upon our ob- servations during the course of the audit of the District' s financial statements AAI in accordance with standard auditing procedures; we were not engaged to sepa- -= rately review internal control . 11 WATER DISTRICT ACCOUNTING MANUAL As required by State statute, the Texas Water Rights Commission established 11 the WATER DISTRICT ACCOUNTING MANUAL (the Manual ) which is applicable to all Texas utility districts having a fiscal year end of March 31 , 1976 and subse- quent. The Manual requires that certain changes be made in the accounting pro- cedures and reporting formats of these districts. The accounting policies in- 11 cluded in the Manual are those utilized in the audit report for the year ended July 31 , 1976. The Manual left many accounting and reporting questions unanswered. After substantial research, discussions with the Texas Water Rights Commission Audit Division, and discussions with members of the accounting profession, many of 11 these questions have not been answered to our satisfaction. The Manual does not make it clear whether the procedural and record-keeping information included in the Manual are mandatory or constitute only guidelines. 11 Also, this Manual was written for a district that keeps all of its records under one roof. In our opinion, adoption of the Manual on a literal basis would not be practical and would substantially increase the cost to the District without 11 commensurate benefits. Our view is that the District is in compliance with the Manual if it prepares its reports in accordance with the Manual , follows the accounting policies and legal requirements of the Manual , maintains adequate 71 internal accounting controls, even though the bookkeeping procedures and records described in the Manual have not been adopted. None of the recommendations that follow are intended to be in conflict with the Manual . These suggestions are interpretations by our firm, and thus, others may interpret them differently. I 11 Schedule C Page 2 of 4 HARRIS COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT NO. 133 MANAGEMENT LETTER 11 OCTOBER 15, 1976 11 General The District has contracted with various companies to maintain records, 11 operate the system, collect taxes and to provide professional advice. The Manual is not appropriate, in many respects, for districts with segmented accounting functions. We recommend that the District modify contracts, as necessary, to allow companies employed by the District to adopt the recommendations that follow. 11 Internal Control We have not made an adequate study of companies employed by the District to determine if such companies have adequately segregated their internal func- 4 tions. The size of these companies may place certain limits on their ability to segregate functional responsibilities, and size of the District precludes good segregation of duties if all accounting functions were handled by an employee of the District. 11 One way the District can protect its assets is to require that all persons employed by the District who receive or disburse the District's funds be bonded. The District's bonds are listed in schedule 5 of the audit report. We recommend that these bonds be reviewed to determine if coverage is adequate. At July 31 , 1976, the tax assessor-collector was not adequately bonded. Inter-Fund Payables and Receivables Inter-fund payables or receivables should not be recorded unless the Dis- trict intends to liquidate such balances on a timely basis. Also, the creditor fund should have the ability to pay the recorded liability. General Fixed Asset Fund Amounts contributed to the general fixed asset fund must be identified ac- cording to source so the fund balance amount can be allocated. We recommend that the full cost of taps be recorded as an asset of the District and that such amounts be shown as allocated from net system revenues in the fund balance section. The Manual prescribes much more limited capitalization policies for district organizational costs (note 2 of the notes to financial statements) than those which have been followed in the past. Under the Manual 's procedures, the capitalization of amounts in the general fixed asset fund will no longer be directly related to expenditures by the construction fund. These accounting policies have been applied to the audit report for the year ended July 31 , 1976, 111 and we recommend that they be continued for all future bond issues. 4 11 4 11 Schedule C Page 3 of 4 HARRIS COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT NO. 133 MANAGEMENT LETTER OCTOBER 15, 1976 41 Construction Fund The construction fund should be recorded in accordance with past practices 4111 except that construction in progress should be carried in this fund for incom- plete projects. Any completed project should be transferred to the general fixed asset fund. 1! It is necessary to set up reserves in the construction fund for the dif- ferent sources of the funds received by this fund. Assets acquired with these Ir funds would need to be related to these contributions in order to make the accounting entries in the general fixed asset fund and the construction fund. We recommend that the District transfer funds to the general operating 40 fund to pay operating expenses. This transfer should be recorded as a fund balance transaction, and the operating expenses should be recorded by the general operating fund. Debt Service Fund Bond discount should be transferred from the general fixed asset fund to 1! the debt service fund and amortized in relation to the principal of the bonds outstanding. The discount may be amortized on a sum-of-the-years digit method as a constant percentage of the interest paid or any other method which relates 7! the amortization to the bonds outstanding. General Operating Fund A complete general ledger is maintained by the District's operator for the general operating fund. We recommend that the bookkeeper for the District record only the cash accounts she controls. Transfers between the operator and book- ', keeper should be reconciled. 41 The operator's billing records and the general ledger should be reconciled and adjusted currently. Bond Order and Legal Requirements The District was not in compliance with certain requirements as described in detail in note 4 of the notes to the July 31 , 1976 financial statements. We recommend that these comments be reviewed and all practical steps be taken to correct such non-compliance. 1! Schedule C Page 4 of 4 HARRIS COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT NO. 133 !! MANAGEMENT LETTER 11 OCTOBER 15, 1976 411 Account Numbers and Titles The Manual prescribed a four digit account number and standard account 11 titles for recording all transactions of the District. We suggest that these standard account numbers and names be used in the general ledger, journals and source documents. We appreciate the courtesy and assistance extended by the District's ir personnel during the course of our examination. If you have any questions concerning the matters presented herein or need assistance in implementing any of these changes, please contact us. 411 Yours truly, 1#/ • 5tflG a 11 !I I I I II Schedule D HARRIS COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT NO. 133 BOARD MEMBERS, KEY ADMINISTRATIVE PERSONNEL AND LEGAL COUNSEL !! JULY 31 , 1976 Relationship With Major Land Owners , Term of Board Members Engineer, Office Resident Attorney & qr Elected & Annual of Tax Assessor- Name and Address Expires Salary Title District? Collector- Howard L. Martin 7763 Water Park Lane 4/07/76 Houston, Texas 77086 4/07/78 President Yes None 411 Bennie Negy 9614 Shady Tree 5/14/75 Vice- Houston, Texas 77086 5/14/77 President Yes None 41! Jacquelyn Randall AO 9722 Willowood 4/07/76 Houston, Texas 77086 4/07/78 Secretary Yes None Avery Murrah 9627 Shady Tree 4/07/76 1.1.! Houston, Texas 77086 4/07/78 Director Yes None James E. Harding 9703 Shady Tree 5/14/75 Houston, Texas 77086 5/14/77 Director Yes None Key Date Administrative Hired Personnel Ill District Legal Counsel Fees Accrued Current Year Smith, Rowe, Hay & Bacon 1811 Houston Natural Gas Bldg. Houston, Texas 77002 5/20/70 965 District Tax Assessor-Collector 4111 Fees Accrued Current Year Bob Lea red Box 727 Alief, Texas 77411 3/12/75 4 564 -;Includes business or family relationship. See accompanying letter dated October 15, 1976. I 11 Schedule E 11 HARRIS COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT NO. 133 HARRIS COUNTY, TEXAS CERTIFICATE OF THE BOARD OF DIRECTORS 4111 tot We, the undersigned, do hereby certify that the audit report of the above named Water District for the year ended July 31 , 1976 (under separate cover) and the other supplemental information included herein werereceived by the Board of 41 Directors on and were reviewed and approved-; disapproved* at a meeting of the Board of Directors of the Water District on 111 Signature of Board President I Signature of Board Secretary 4 4 4 *Strike out the word which does not apply. 41 4