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TOWN OF WELSH, LOUISIANA

ANNUAL FINANCIAL REPORT

MAY 31, 2009

Under provisions of state law, this report is a public document A copy of the report has been submitted to the entity and other appropnate public officials. The report is available for public inspection at the Baton Rouge office of the Legislative Auditor and, where appropnate, at the office of the parish clerk of court.

Release Date Ic, '<î(^M

THIS PAGE LEFT BLANK INTENTIONALLY

INTRODUCTORY SECTION


ANNUAL FINANCIAL REPORT Year Ended May 31, 2009

T7\BLE OF CONTENTS

Page

Title Page Table of Contents List of Principal Officials

3-4 5

FINANCIAL SECTION

Report of Independent Auditors 7-8

Basic Financial Statements: Government-Wide Financial Statements:

Statement of Net Assets Statement of Activities

Fund Financial Statements: Govemmental Funds

Balance Sheet - Govemmental Funds Statement of Revenues, Expenditures and Changes in

P\ind Balances Reconciliation of Statement of Revenues, Expenditures

and Changes in Fund Balances of Governmental Funds to the Statement of Activities

1 0 -

1 2 -

1 6 -

1 8 -

- 1 1

-13

- 1 7

- 2 1

22

General Fund: Statement of Revenue, Expenditures and Changes in

Fund Balance - Budget and Actual - General Fund 23

Sales Tax: Statement of Revenue, Expenditures and Changes in

Fund Balance - Budget and Actual - Sales Tax 24

Sales Tax 1996: Statement of Revenue, Expenditures and Chemges in

Fund balance - Budget and Actual - Sales Tax 25

Proprietary Fund - Utility Enterprise Fund: Statement of Net Assets Statement of Revenues, Expenditures and Changes in

Net Assets Statement of Cash Flows

26

27 28

52-

56

-53 54

55 -57

Page

Notes to Financial Statements 29-48

Other Supplementary Information - Nonmajor Governmental Funds:

Combining Balance Sheet-Nonmajor Govemmental Funds 50-51 Combining Statement of Revenues, Expenditures, and Changes in

Fund Balance-Nonmajor Govemmental Funds Schedule of Compensation Paid to Goveming Board Schedule of Number of Utility Customers-Public Utility

Enterprise Fund Schedule of Insurance in Force

REPORT OF INDEPENDENT AUDITORS ON INTERNAL CONTROL AND COMPLIANCE

Report on Compliance and on Intemal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Govemment Auditing Standards 61-63

Schedule of Findings aind Questioned Costs 64-65

Summary Schedule of Prior Audit Findings Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 66-67


May 31, 2009

M^YOR

The Honorable Carolyn Louviere

BOARD o f ALDERMAN

Mr. Al len Ardoin MB. Leona Vanicor Mr. Char les Drake Mrs. G l o r i a Viney Ms. Becky Hudson

LEGAL COUNSEL

Mr, Richard M. Arceneaux

TOWN CLERK

Ms. Linda LeBlanc


MCELROY, QUIRK & BURCH A Professional Corporation • Certified Public Accountants • Since 1925

800 Kirby Street • P.O. Box 3070 • Lake Charles, LA 70602-3070

337 433-1063 • Fax 337 436-6618 • Web page: www.mqb-cpa.cam

m i l .000 Town of l*ol»h Audit 5/31/200» financial report

Cad W. Comcaux, CPA Gus W. Schram, m , CPA, CVA Robert M. Gani, CPA, MT MoUic C Broussard-Duncan, CPA Jasoo L, Guillory, CPA Greg P. Naquin, CPA CFP™ BiUy D. Fisher, CPA Joe G. PcshoCE; II. CPA, CVA

Mdiae/N.McGee,CPA David M. DesOnncaux, CPA

mg& OtttyJ. Woodi,Jr., CPA Inacrivc Robert F. C a r ^ CPA, Inactive WilHflin A. Mancuso, CPA, Inacdvc Barfcari liuWon Gonzales, CPA, Retired JudsonJ. McC«m,]r., CPA Retired Martin L Chchonky, CPA, CFE

CPE - CciD6ed Food Bumincr hrr - Mntm of Tiution CVA- Cetdfled Vilu«ion AwOyn CFP - CanBed Finaujal PUnnn

REPORT OF INDEPENDENT AUDITORS

Honorable Mayor and Board of Alderman Town of Welsh Welsh, Louisiana

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of Welsh, Louisiana as of and for the year ended May 31, 2009/ which collectively comprise the Town's basic financial statements, as listed in the table of contents. These financial statements are the responsibility of the Town's management. Our responsibility is to express opinions on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Audi t ing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the govemmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of Welsh, Louisiana as of May 31, 2009, and the respective changes in financial position and cash flows, where applicable, thereof and the budgetary comparison for the general fund and major special revenue funds for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Mcaibcrs American Institute of Certified Public Accountants • Society of Louisiana Certified Public Accountants

http://www.mqb-cpa.cam

In accordance with Government Audi t ing Standards , we have also issued a report dated November 11, 2009, on our consideration of the Town of Welsh's intemal control over financial reporting and our tests of its coir̂ jliance with certain provisions of laws, regulations, contracts and grants. The purpose of that report 13 to describe the scope of our testing of intemal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the intemal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Govemment Auditing Standards and should be read in conjunction with this report in considering the results of our audit.

The Town of Welsh, Louisiana has not prepared management's discussion and analysis that the accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not required to be a part of, the basic fincincial statements.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town of Welsh's basic financial statements. The introductory section combining nonmajor fund financial statements and other supplementary information are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining nonmajor fund financial statements have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic fincincial statements taken as a whole. The introductory section and other supplementary information have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them.

Under Louisiana Revised Statute 24:513, this report is distributed by the Legislative Auditor as a pxiblic document.

Lake Charles, Louisiana November 11, 2009

GOVERNMENT-WIDE FINANCIAL STATEMENTS

TOWN OF WELSH , LOUISIANA

GOVERNMENT-WIDE STATEMENT OF

May 31,

ASSETS

Cash and cash equivalents Investments Receivables (net, where applicable, of

allowance for uncollectibles): Accounts Unbilled accounts Accrued interest Taxes

Inventory Prepaid expenses Intemal balances Other current assets Restricted assets:

Cash and cash equivalents Investments

Capital assets: Land improvements and construction

in progress Buildings, fumiture and equipment,

net of depreciation Other assets:

Bond issue cost, net Total assets

LIABILITIES

Accounts payable Accrued liabilities Cash overdraft Noncurrent liabilities:

Due within one year Due in more than,one year

Payable from restricted assets Total liabilities

10

NET ASSETS 2009

Governmental Activities

$ 482,039 254,202

59,123 --

2,637 --

1,783,147 10,307

-1,000,000

249,658

1,756,736

-5,597,849

65,655 -

745

138,172 192,106

-396,678

Business Type

Activities

$ 42,533 $ 64,179

251,335 € 7 , 0 0 0 2,284

-143,510 2,409

(1,783,147) 637

133,269 475,945

128,205

6,012,536

1,756 5,542,451

171,542 24,175

-

162,000 1,160,000

47,340 1,565,057

Total

524,572 318,381

310,458 € 7 , 0 0 0 2,284 2,637

143,510

2,409 -

10,944

133,269 1,475,945

377,863

7,769,272

1,756 11,140,300

237,197 24,175

745

300,172 1,352,106

47,340 1,961,735

{continued on next page)


GOVERNMENT-WIDE STATEMENT OF NET ASSETS

May 31, 20 0 9

NET ASSETS Governmental Activities

Business Type

Activities Total

Investment in capital assets, net of related debt

Restricted for: Debt service Various purposes-sales tax Capital project

Unrestricted

Total net assets

1,676,116

556,093 377,952

(745) 2,591,755

4,818,741 6,494,857

556,093 377,952 . (745)

(841,347) 1^750,408

5.201.171 3 3,977,394 $ 9.179,310

See accompanying notes to financial statements

11

Functions/Proqrams

Govemment activities:

General govemment

Public safety

Highway and street

Sanitation

Culture and recreation

Total governmental activities

Business-type activities:

Water utility

Sewer utility Electric utility

Total business-type activities

Total govemment

See accompanying notes to financ


GOVERNMENT-WIDE

STATEMENT OF ACTIVITIES

Year Ended May 31, 2009

Program Revenues |

Fees, Fines and

Charges for

Expenses Services

$ 440,313 $ 155,524

1,129,666 508,416

238,761

175.322 312,699

126,692 26,776

2,110,754 1,003,414

289,349 301,649

330,688 256,716

3,333,323 3,353,114

3,953,360 3,911,479

$ 6,064,114 S 4,914,893

General revenues:

Ad valorem taxes

sales taxes

Franchise taxes

Gaming taxes

Other taxes

Interest eamed MiacellaneouB

Transfers

Operating Capital

Grants and Grants and Contributions Contributions

$ - $ 261,265

---

261,265

---

-

S 261,265 $

Total general revenues |

and transfers

Change in net assets 1

Net assets at beginning of

Net assets at end of year

ial statements

12

year

Net (Expenses) Revenue

Chang

Governmental

Activities

$ (284,789)

(359,985)

(238,761)

137,376

(99,916)

(846,075)

--

(846,075)

81,093

754,910

40,223

21,218

12,157

25,192

128,490 299,000

1,362,283

516,208

4,684,963

$ 5,201,171

es in Net Assets

Business

Type

Activities

$ ----

12,300

(73,972)

19,791

(41,881)

(41,881)

-- ---

9,200

27,720 (299,000)

(262,080)

(303,961)

4,281,355

S 3,977,394

$

—

—

_

—

1

and

Total

(284,789) (359,985)

(238,761)

137,376 (99,916)

(846,075)

12,300

(73,972)

19,791

(41,881)

(887,956)

81,093

754,910

40,223

21,218

12,157

34,392

156,210

~

1,100,203

212,247

8,966,318

9,178.565

13


14

FUND FINANCIAL STATEMENTS

15

TOWTJ OF WELSH, LOUISIANA

BALANCE SHEET - GOVERNMENTAL FUNDS

May 31, 2009

ASSETS

Cash

Investments

Receivables:

Taxes

Accounts

Due from other funds

Other current assets

Restricted assets:

Investments

Total assets

General

$ 64,752

64,005

2,637 59,123

1,733,778 10,307

1,000,000

S 2.934,602

Debt Service Sales Tax

$

L

1996

213,480

142,779

--

199,834

-

_

556,093

Special Revenue

Sales Tax 1996

$ 70,898 47,418

--

66,366

-

_

$ 184,682

LIABILITIES AND FUND BALANCE

Liabilities:

Cash overdraft

Accounts payable

Due to other funds

Total liabilities

65,624

295,352

(136)

(136)

Fund balances:

Reserved

Unreserved

Total fund balances

1,000,000

1,573,626

2,573,626

556,093

556,093

184,818

184,818

Total liabilities and fund balances $ 2.934.602 $ 556.093 5 184,692

Amounts reported for governmental activities in the statement

of net assets are different because:

Total fund balance - total govemmental funds

Capital assets used in govemmental activities are not financial

resources and, therefore, are not reported in the funds

Long-term liabilities, including bonds payable, are not due and

payable in the current period and, therefore, are not reported

in the funds

see accompanying notes to financial statements

16

Sales Tax

163

75,626

Non-Major

Govemmental

Funds

$ 132,746

5,059

Total

Govemmental

Funds

$ 482,039

254,202

2,637

59,123

2,080,663

10,307

1,000,000

7 5.7fi^ $ 137.805 $ 3,^88,971

167

167

745

2,164

2,909

745

65,655

297,516 363,916

75,622

75,622

134,896

134,896

1,000,000

2,525,055

3,525,055

$ 3,888.971

$ 3,525,055

2,006,394

(330,278)

17


STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

GOVERNMENTAL FUNDS


General

Debt

Service

Sales Tax

1996

Special

Revenue

Sales Tax

1996

Revenues:

Taxes

Licenses and permits

Intergovemmental

Charges for services

Fines and forfeits

Interest income

Vending machine commission

Jeff Davis Sanitary Landfill

Grants

Miscellaneous

Total revenues

126,759

116,595

23,077

502,816

311,969

19,384

21,218

106,134

256,285

11,049

1,495,286

$ 377,455

4,140

381,595

Expenditures:

Current:

General government

Police

Fire

Street

Sanitation

Recreation

Cemeteries

Airport

Health and welfare

Pavi ng/s t ree t e Economic development

Debt Service:

Bond principal

Bond interest

Total expenditures

486,142

952,633

127,091

71,052

147,562

120,471

10,801

3,431

5,022

Excess (deficiency) of revenuet

over expenditures

-23,229

57,350

8,929

2,013,713

(518,427)

--

89,000

10,213

99,213

(99,213)

146,905

-

--

145,905

234,690

18

Sales Tax

Non-Major

Governmental

Funds

Total

Gove mmen t a 1

Funds

1 $ -

1 377,455

-

932

-

-

-

-

378,387

7,946

-

-

-

-

-

-

-

-

-

I -

-

7,946

370,441

$

-

-

72,034

-

736

-

-

-

_

72,770

52,304

-

-

-

-

-

-

-

-

-

-

-

-

52,304

20,466

$

2

2

504,214

116,595

23,077

952,305

311,969

25,192

21,218

106,134

256,285

11,049

,328,038

546,392

952,633

127,091

71,052

147,562

120,471

10,801

3,431

5,022

146,905

23,229

146,350

19,142

,320,081

7,957

19

(continued on next page)


STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS

Year Ended May 31, 2009 (Continued)

Debt Special Service Revenue Sales Tax Sales Tax

General 1996 1996

Other financing sources (uses): Operating transfers in 670,000 189,192 Operating transfers out 1„ ^ I_ (189,192)

Total other financing sources (uses) 670,000 189,192 (189,192)

Excess (deficiency) of revenues and other sources over expenditures and other uses 151,573 89,979 45,498

Fund balance at beginning of year 2,422,053 466,114 139,320

Fund balance at end of year S 2.573.626 $ 556.093 $ 184,818


20

Non-Majo r T o t a l

G o v e r n m e n t a l G o v e m m e n t a l

S a l e s Tax F u n d s Funds

8 5 9 , 1 9 2

( 3 7 1 , 0 0 0 ) : _ ( 5 6 0 , 1 9 2 )

( 3 7 1 , 0 0 0 ) ^_ 2 9 9 , 0 0 0

(559) 2 0 , 4 6 6 3 0 6 , 9 5 7

7 6 , 1 8 1 1 1 4 , 4 3 0 3 , 2 1 8 , 0 9 8

$ 75,,,622 5 1 3 4 . 8 9 6 $ 3 , 5 2 5 . 0 5 5

2 1


RECONCILIATION OF STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS

TO THE STATEMENT OF ACTIVITIES Year Ended May 31, 2009

Amounts reported for govemmental activities in the statement of activities different because:

Net change in fund balance - total govemmental funds

Govemmental funds report capital outlays as expenditures. However, in the statement of activities the costs of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period.

Principal payments of long-term debt

Loss on disposal of assets

Change in net assets of governmental activities

$ 306,957

59,615

155,589

(5,953)

$ 516.208


22

TOWN OT WELSH, LOUISIANA GENERAL FUND

STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL


Revenues: Taxes Licenses and permits Intergovemmental Charges for services Fines and forfeits Interest income Vending machine income Grants Landfill Miscellaneous

Total revenues

Expenditures: Current:

General govemment Police Fire Street Sanitation Recreation Cemeteries Airport Health and welfare Economic development

Total expenditures

Excess (deficiency) of revenues over expenditures

Other financing sources (uses): Operating transfers in

Budgeted Amounts Original

$ 110,730 101,851 20,159

439,232 272,519 16,933 18,535

223,876 92,713 9,652

1,306,200

514,647 1,008,491

204,708 75,218 156,215 127,535 11,434 3,632 5,317

24,591 2,131,788

(825,588)

668,000

Final

$ 110,730 $ 101,851 20,159

439,232 272,519 16,933 18,535

223,876 92,713 9,652

1,306,200

514,647 1,008,491

204,708 75,218

156,215 127,535 11,434 3,632 5,317

24,591 2,131,788

(825,588)

668,000

Actual

126,759 116,595 23,077

502.816 311,969 19,384 21,218

256,285 106,134 11,049

1,495,286

486,142 952,633 193,370 71,052

147,562 120,471 10,801 3,431 5,022

23,229 2,013,713

(518,427)

670,000

Variance With Final Budget

Positive (Unfavorable)

$ 16,029 14,744 2,918

63,584 39,450 2,451 2,683

32,409 13,421 1,397

189,086

28,505 55,858 11,338 4,166 8,653 7,064

633 201 295

1,362 118,075

307,161

2,000

Excess (deficiency) of revenue and other financing sources over expenditures and other uses

Fund balance at beginning of year

Fund balance at end of year

(157,588) (157,588) 151,573

2,422,053 2.422,053 2,422,053

307,161

$ 2.264.465 S 2,264,465 $ 2,573.626 5 307.161


23


SALES TAX

STATEMENT OP REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL


Budgeted Amounts

Original Final Actual

Variance With

Final Budget

Positive

(Unfavorable)

Revenues:

Taxes

Interest income

Total revenues

$ 375,074 $ 375,074 $ 377,455 $ 2,381

926 926 932 6

376,000 376,000 378,387 2,387

Expenditures:

Current:

General government ,000 7,946 54

Excess (deficiency)

of revenues over

expenditures 3 68,000 368,000 370,441 2,441

Other financing sources (uses)

Operating transfers out (368,000) (368,000) (371,000) (3,000)

Excess (deficiency) of

revenue and other

financing sources

over expenditures

and other uses



76,181 76,181

(559)

76,181

76.181 S 76.181 S 75.622

(559)

(559)


24


SALES TAX 1996

STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL


Revenues: Taxes Interest income

Total revenues

Expenditures: Current:

Paving/streets


Budgeted Amount Oriqinal

$ 376,000 10,000 386,000

220,825

165,175

$

—

Final

376,000 10,000

386,000

220,825

165,175

s

$

Actual

377,455 4,140

381,595

146,905

234,690

Variance With Final Pos

(Unfav(

$

Budget Itive arable)

1,455 (5,860) (4,405)

73,920

69,515

Other financing sources (uses):

Operating transfers out

Excess (deficiency) of

revenue and other

financing sources

over expenditures

and other uses



(284,390) (284,390) (189,192?

20,105

95,198

(119,215) (119,215) 45,498 164,713

139,320 139,320 139,320 ^ -

164,713


25

TOWN OF WELSH, LOUISIANA PROPRIETARY FUND - UTILITY ENTERPRISE FUND

STATEMENT OF NET ASSETS May 31, 2009

ASSETS

Cash and cash equivalents Investments Receivables:

Accounts Estimated uncollectibles and allowances Unbilled accounts Accrued interest

Inventory Prepaid expenses Other current assets Due from other funds Restricted assets:

Cash and cash equivalents Investments

Capital assets: Land, improvements and construction in progress Buildings, fumiture and equipment, net of depreciation

Other assets: Bond issue cost, net

Total assets

LIABILITIES

Accounts payable Accrued liabilities Noncurrent liabilities:

Current portion of long-term debt Due in more than one year

Payable from restricted assets

Total liabilities

NET ASSETS

Investment in capital assets, net of related debt Unrestricted

Total net assets


26

$ 42,533

64,179

347,658 (96,323) 67,000 2,284

143,510

2,409 637

(1,783,147)

133,269 475,945

128,205 6,012,536

1,756

L^r?^2,451

$ 171,542 24,175

162,000 1,160,000

47,340

? 1,56?,057

$ 4,818,741 (841,347)

S 3.977.394

TOWN OF WELSH, LOUISIANA PROPRIETARY FUND - UTILITY ENTERPRISE FUITO

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN NET ASSETS Year Ended May 31, 2009

Operating revenues: Charges for services $ 3,906,980 Tap fees 4,500 Miscellaneous 27, 720

Total operating revenues 3,939,200

Operating expenses: Public utility 3,702,162 Depreciation 205,976 Amortization 884

Total operating expenses _ 3,909,022

Operating income 30,178

Nonoperating revenues (expenses): Interest income 9,200 Interest expenses (44,339)

Total nonoperating expenses (35,139)

Income before operating transfers (4,961)

Operating transfers (299̂ OOP)

Cheuige in net assets (303,961)

Net assets at beginning of year 4,281,355

Net assets at end of year S 3^977.394


27

TOWN OF WELSH, LOUISIANA PROPRIETARY FUND - UTILITY ENTERPRISE FUND

STATEMENT OF CASH FLOWS Year Ended May 31, 2 00 9

CASH FLOWS FROM OPERATING ACTIVITIES Operating income Adjustments to reconcile operating income to net

cash provided by operating activities: Depreciation Amortization Changes in assets and liabilities:

Decrease in investments Decrease in receivables and accruals Decrease in inventories (Decrease) in accounts payable and accruals Increase in liabilities payable from restricted assets

Net cash provided by operating activities

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Increase in amounts due to other funds Operating transfers out

Net cash provided by noncapital financing activities

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of fixed assets Principal paid on bonds Interest paid on bonds and capital lease obligations

Net cash (used in) capital and related financing activities

CASH FLOWS FROM INVESTING ACTIVITIES Interest income

Net (decrease) in cash and cash equivalents

Cash and cash equivalents: Beginning of year

End of year

Cash and cash equivalents at end of year consisted of: Restricted cash Unrestricted cash


28

$ 30

205,

62 56 10

(258

4 113

491 (299 192

(54 (244 (44

(343

9

(27

203

$ 175

$ 133 42

$ 175

178

976 884

926 323 755 195) 505 352

811 000) 811

862) 000) 340)

202)

200

839)

641

.802

,269 ,533

.802


NOTES TO BASIC FINANCIAL STATEMENTS May 31. 2 009

Note 1. Summary of Significant Accounting Policies

The Town of Welsh, Louisiana was incorporated September 4, 1951, under the provisions of the Lawrason Act. The Town operates under a Mayor-Town Council form of govemment.

The accounting and reporting policies of the Town of Welsh, Louisiana conform to accounting principles generally accepted in the United States of America as applicable to governments. Such accounting and reporting procedures also conform to the. requirements of Louisiana Revised Statutes 24:517 and to the guidance set forth in the Lou is iana Municipal Audit and Accounting Guide, and to the industry audit guide. Audits of S t a t e and Local Governmental Un i t s .

The Govemmental Accounting Standards Board (GASB) Statement Number 20 (effective for financial statements for periods beginning after December 15, 1993) provides guidance on accounting and financial reporting for proprietary fund types and allows proprietary fund types to choose one of two options in applying pronouncements issued by the Financial Accounting Standards Board (FASB) after November 30, 1989. The Town of Welsh has elected to use the first option for reporting its activities. This approach applies all GASB pronouncements and FASB statements and interpretations. Accounting Principles Board (APB) opinions, and Accounting Research Bulletins (ARBs) issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. Changes to FASB statements and interpretations, ABP opinions and ARBs issued after November 30, 1989, would not apply unless adopted by GASB.

The following is a summary of certain significant accounting policies

Financial Reporting Entity

The accompanying financial statements include the various departments, activities, and organizational units that are within the control and authority of the Mayor and Town Council of the Town of Welsh, Louisiana. The decision to include a potential component unit in the reporting entity was made by applying the criteria set forth in Statement No. 14 of the Govemmental Accounting Standards Board. This statement defines the reporting entity as the primary govemment and

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those component units for which the primary govemment is financially accountable. Financial accountability is defined as appointment of a voting majority of the component unit's board, and either a) the cibility to impose will by the primary govemment, or b) the possibility that the component unit will provide a financial benefit to or in5)Ose a financial burden on the primary govemment.

B. Change in Accounting Principles

The Town of Welsh, Louisiana adopted the provisions of GASB Statement 34, Bas ic F i n a n c i a l S ta tements - and Management's Discuss ion and Ana lys i s - f o r S t a t e and Local Governments (Statement 34) and GASB Statement 33, Accounting and Financial Reporting for Nonexchange Transactions (Statement 33) for the year ended May 31, 2006. Statement 34 establishes financial reporting standards for all state and local govemments and related entities. Statement 34 primarily relates to presentation and disclosure requirements. This had an impact on capital assets, the presentation of net assets and the inclusion of management's discussion and analysis. Concurrent with the implementation of Statement 34, the following additional standards have been adopted. GASB Statement 37, Bas ic F i n a n c i a l S ta tements -and Management's Discuss ion and A n a l y s i s - f o r S t a t e and Local Governments: Omnibus. This Statement amends Statement 34 to either (1) clarify certain provisions or (2) modify other provisions that the GASB believes may have unintended consequences in some circumstances. GASB Statement 38, Ce r t a in F i n a n c i a l Sta tement Note D i s c l o s u r e s . This Statement modifies, establishes and rescinds certain financial statement disclosure requirements.

For the year ended May 31, 2007, the Town adopted GASB Statement 40 Deposit and Investment Risk Disclosures.

C. Basis of Presentation

GOVERNMENT-WIDE FINANCIAL STATEMENTS

The government-wide finamcial statements (i.e., the Statement of Net Assets and the Statement of Activities) report information on all of the activities of the primary govemment.

The Statement of Net Assets and the Statement of Activities report financial information for the Town as a whole so that individual funds are not displayed. However, the Statement of Activities reports the expense of a given function offset by program revenues directly connected with the functional program. A function is an assembly of similar activities and may include portions of a fund or summarize more than one fund to capture the expenses and program revenues associated

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with a distinct functional activity. Program revenues include: (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given program and (2) operating or capital grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Taxes and other revenue sources not properly included with program revenues are reported as general revenues.

FUND FINT^CIAL STATEMENTS

The Town segregates transactions related to certain functions or activities in separate funds in order to aid financial management and to demonstrate legal conpliance. Separate statements are presented for govemmental and proprietary activities. These statements present each major fund as a separate column on the fund financial statements; all non-major funds are aggregated and presented in a single column.

Govemmental funds are those funds through which most govemmental functions typically are financed. The measurement focus of govemmental funds is on the sources, uses and balance of current financial resources. The various funds are grouped, in the financial statements in this report, into three broad fund categories as follows:

GOVERNMENTAL FUNDS

General Fund - The General Fund is the general operating fund of the Town. It is used to account for all financial resources except those required to be accounted for in another fund.

Special Revenue Fvinds - Special Revenue Funds are used to account for the proceeds of specific revenue sources (other than special assessments, expendable trusts, or major capital projects) that are legally restricted to expenditures for specified purposes.

Capital Projects Funds - These funds account for all financial resources segregated for the acquisition or construction of major general govemment capital projects.

Debt Service Funds - Debt Service Funds are used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest and related costs.

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PROPRIETARY FUNDS

Enterprise Funds - Enterprise Funds are used to account for operations (a) that are financed and operated in a manner similar to private business enterprises - where the intent of the goveming body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided periodic determination of revenues eamed, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accounteibility, or other purposes.

D. Measurement Focus and Basis of Accounting

Measurement focus refers to which transactions are recorded within various financial statements. Basis of accounting refers to when revenues and expenditures (or expenses) are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement made, regardless of the measurement focus applied.

The govemment-wide statements are prepared using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when eamed and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Therefore, govemmental fund financial statements include reconciliations with brief explanations to better identify the relationship between the govemment-wide statements and the statements for govemment funds. The primary effect of intemal activity (between or within funds) has been eliminated from the govemment-wide financial statements.

In the fund financial statements, govemmental funds are accounted for using a financial resources measurement focus whereby only current assets and current liabilities generally are included on the balance sheet and increases or decreases in net current assets are presented in the operating statements. These funds utilize the modified accrual basis of accounting. Revenues are recognized when they become both measurable and available to finance expenditures of the current period. Certain revenues such as sales tax, property tax, and charges for services are assessed and collected in such a manner that they can be accrued appropriately. Expenditures are recognized in the accounting period in which the liability is incurred, if measurable, except for principal and interest on general long-term debt which are recognized when due. Also, expenditures for accrued compensated absences are not recognized until they are payable from current available financial resources.

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The proprietary fund, also in the fund financial statements, is accounted for and reported using a flow of economic resources measurement focus. This means that all assets and liabilities associated with the operation of these funds are included on the balance sheet and fund equity consists of contributed capital and retained eamings. The operating statements for the proprietary fund present increases or decreases in net total assets.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

E. Budgets and Budgetary Accounting

The Town follows these procedures in establishing the budgetary data reflected in the financial statements:

1. Prior to May 15, the Town Clerk submits to the Mayor and Town Council a proposed operating budget for the fiscal year commencing the following June 1. The operating budget includes proposed expenditures and the means of financing them.

2. Public hearings are conducted at Town Hall to obtain comments from the public.

3. Prior to May 31, the budget is legally enacted through passage of an ordinance.

Amendments to the budget are approved by the Town Council by a formal adoption of an ordinance.

5. Formal budgetary integration is employed as a management control device during the year for the General and Special Revenue and Debt Service Funds. The capital budget ordinances which encompass the Capital Project Funds present cumulative as opposed to ainnual budget amounts and thus budget and actual comparisons are not reported in the accompanying financial report for these funds.

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6. Any revisions that alter total expenditures of any fund must be approved by the Councilmen. Expenditures cannot legally exceed appropriations on a fund level.

7. The Town does not utilize encumbrance accounting.

8. Budget appropriations lapse at year end.

Cash, Cash Equivalents and Investments

Cash and cash equivalents include amounts in demand deposits and certificates of deposit. The Town considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Certificates of deposit are stated at cost.

Louisiana State Statutes, as stipulated in R.S. 39:1271, authorize the Town to invest in United States bonds, treasury notes, or certificates, or time certificates of deposit of state banks organized under the laws of Louisiana and national banks having the principal office in the State of Louisiana. In addition, local govemments in Louisisma are authorized to invest in the Louisiana Asset Management Pool, Inc. (LAMP), a nonprofit corporation formed by an initiative of the State Treasurer and organized under the laws of the State of Louisiana, which operates a local govemment investment pool. Investments eire stated at cost.

G. Estimated Uncollectibles and Contractual Allowances

Uncollectible amounts due from customers' utility receivables, hospital and extended care receivables are recognized as bad debts and contractual allowances expense through the establishment of an allowance account at the time information becomes available, which would indicate the uncollectibility of the particular receivable.

Interfund Activity

Interfund activity is reported as either loans, reimbursements or transfers. Loans are reported as interfund receivables and payables as appropriate and are subject to elimination upon consolidation. Reimbursements are when one fund incurs a cost, charges the appropriate benefiting fund and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers between governmental or proprietary funds are netted as part of the reconciliation to the govemment-wide financial statements.

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Capital Assets and Depreciation

The accounting and reporting treatment applied to capital assets associated with a fund are determined by their measurement focus. General capital assets are recorded as expenditures in the govemmental funds and capitalized. The valuation basis for general capital assets are historical cost, or where historical cost is not available, estimated historical cost based on replacement cost. The minimum capitalization threshold is any individual item with a total cost greater thaji $1,500.

Depreciation of capital assets is computed and recorded by the straight-line method. Estimated useful lives of the various classes of depreciable capital assets are as follows:

Plant 10 to 33 years Machinery and equipment 5 to 10 years Furniture and fixtures 5 to 10 years

Accumulated Unpaid Sick Pay

Accumulated unpaid sick pay was not considered material at May 31, 2009 and is not reflected in these financial statements.

K, Property Taxes

Property taxes levied in any one year are recognized as revenues of that year.

L. Inventories

Inventories held by the Enterprise Funds ,are priced at the lower of cost (first-in, first-out) or market.

M. Revenue Recognition - Property Taxes

Property taxes are levied on June l, billed on November 1, and payable by December 31.

Property tax revenues are recognized when they become available. Available includes those property tax receivables expected to be collected within sixty days after year end.

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The total millage of 7.6 for the year ended May 31, 2009 was composed of the following:

Description Millage Tax Revenue

General property tax 7.6 $ 81,3 97

N. Compensated Absences

The Town accrued a liability for compensated absences which meet the following criteria:

1. The Town's obligation relating to employees' rights to receive compensation for future absences is attributable to employees' services already rendered.

2. The obligation relates to rights that vest or accumulate.

3. Payment of the compensation is probable.

4. The amount can be reasonably estimated.

In accordance with the above criteria the Town has accrued a liability for vacation pay that has been eamed but not taken by Town employees. For govemmental funds the liability for compensated absences is in the general fiind since it is ajiticipated that the lieibility will be liquidated with expendable available financial resources. The liability for compensated absences is recorded in proprietary fund types as an accrued liability in accordance with FASB Statement 43.

0. Interest Expense

Interest expense that relates to the cost of acquiring or constructing fixed assets in the Enterprise Funds is capitalized. Interest expense incurred in connection with construction of capital assets has been reduced by interest eamed on the investment of funds borrowed for construction in accordance with Financial Accounting Standards Board (FASB) Statement No. 62 - Capitalization of Interest Cost in Situations Involving Certain Tax Exempt Borrowings and Certain Gifts and Grants.

Note 2. Cash, cash Equivalents and Investments

Custodial credit risk - deposits. Custodial credit risk is the risk that in the event of a bank failure, the govemment's deposits may not be returned to it.

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In acpordance with a fiscal agency agreement that is approved by the Board of Aldermen, the Town of Welsh maintains demand and time deposits through local depository banks that are members of the Federal Reserve System.

Deposits in excess of federally insured amounts are required by Louisiana state statute to be protected by collateral of equal market value. Authorized collateral includes general obligations of the U.S. govemment, obligations issued or guaranteed by an agency established by the U.S. govemment, general obligation bonds of any state of the U.S., or of any Louisiana parish, municipality, or school district.

The Town's bcink demand and time deposits at year end of $1,221,132 (bank balcinces) were entirely covered by federal depository insurance or by pledge of securities owned by the financial institution in the Town's name.

Investments held at May 31, 2009, consist of $1,413,720 in the Louisiana T^set Management Pool, Inc. (LAMP), a local govemment investment pool (see Summary of Significant Accounting Policies). LiAMP is administered by LAMP Inc., a non-profit corporation organized under the laws of the State of Louisiana, which was formed by an initiative of the State Treasurer in 1993. The corporation is govemed by a board of directors comprising the State Treasurer, representatives from various organizations of local govemment, the Govemment Finance Officers Association of Louisiana, and the Society of Louisiana CPA's. Only local govemments having contracted to participate in LAMP have, aji investment interest in its pool of assets. The primary objective of LAMP is to provide a safe environment for the placement of public funds in short-term high-quality investments. The LAMP portfolio includes only securities and other obligations in which local govemments in Louisiana are authorized to invest., Accordingly, LAMP investments are restricted to securities issued, guaranteed, or backed by the U.S. Treasury, the U.S. Government, or one of its agencies, enterprises, or instrumentalities, a.3 well as repurchase agreements collateralized by those securities. The dollar weighted average portfolio maturity of LAMP assets is restricted to not more than 90 days, and consists of no securities with a maturity in excess of 397 days. LAMP is designed to be highly liquid to give its participants immediate access to their account balances.

Interest rate risk. The Town does not have a formal investment p o l i c y that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.

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Credit risk. State law limits investments to United States bonds, treasury notes, or certificates, or time certificates of deposit of state banks organized under the laws of Louisiana and national banks having a principal office in the State of Louisiana. Local govemments in Louisiana are authorized to invest in LAMP. The Town has no investment policy that would further limit its investment choices. As of December 31, 2009, the Town's investment in LAMP was rated AAAm by Standard & Poor's.

Concentration of credit risk. The Town places no limit on the amount the Town may invest in any one issuer. All of the Town's investments are in LAMP.

As of May 31 , 2009, t he Town had the fol lowing inves tments and m a t u r i t i e s

Investment Maturi t ies (in Years) Investment Type Fair Value Less Than 1

Cer t i f i ca te of deposit

LAMP

Total

$ 380,606 $ 380,606 $ 1,413,720 1,413,720 _

S 1.794.326 S 1.794.326 |̂

1-5 6-10 More Than 10

Note 3. Individual Fund Transactions

Individual fund interfund receivables and payables are as follows:

Receivables Payables

General Fund Sales Tax Fund Local Govemment Assistance Enterprise Fund Federal Revenue Sharing Special Revenue - Sales Tax 1996 Debt Service - Sales Tax 1996 Drug seizure

$ 1,733,778 $ 295,352 75,626 5,059

1,783,147 190

66,366 199,834

^ 1,974

$ 2,080.663 $ 2.080,663

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Operating transfers:

General fund: Sales tax Utility

Transfers Transfers In Out

$ 371,000 $ 299,000 670,000

Debt service sales tax 1996: Special revenue sales tax 1996

Special revenue sales tax 1996: Debt service sales' tax 1996

189,192

189,192

Sales tax: General fund 371,000

Utility: General fund 299,000

Grand totals $ 859.192 $ 859.192

Note 4. Dedication of Proceeds and Flow of Funds - 2.0% Sales and Use Tax

Proceeds of a 1% sales and use tax levied hy the Town of Welsh, Louisiana (2009 collections $377,455; 2008 $361,175) are dedicated to the following purposes:

1. Used for any legal purpose as approved by Mayor and Board of Aldermen. Proceeds of a l% sales and use tax levied by the Town of Welsh, Louisiana approved by voters October, 1993 to expire June, 2019 (2009 collections $377,455; 2008 $361,175) are dedicated to the following purposes:

A. 100% of collections to be used for police and fire department stations ajid equipment, sidewalks, bridges, recreational facilities, drains and drainage facilities, improving and/or maintaining streets and public buildings, and purchasing and acquiring equipment and furnishing public works.

Proceeds of a 1% sales and use tax levied by the Town of Welsh, Louisiana (2009 collections $377,455; 2008 $361,175) are dedicated to the following purposes:

l.Used for any legal purpose as approved by Mayor and Board of Aldermen. Proceeds of a 1% sales and use tax levied by the Town of Welsh, Louisiana approved by voters February, 1996 to expire June, 2011 (2009 collections $377,455; 2008 $361,175) are dedicated to the following purposes:

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Note 5.

Note 6.

A. 100% of c o l l e c t i o n s to be used fo r c o n s t r u c t i n g , r e s u r f a c i n g and ma in t a in ing p u b l i c s t r e e t s , a l l e y s and i n c l u d i n g d r a i n a g e , and a c q u i r i n g equipment t h e r e f o r e funded i n t o bonds .

R e s t r i c t e d A s s e t s

Asse t s were r e s t r i c t e d for t h e

Pub l i c u t i l i t y : Customer d e p o s i t

fo l lowing pu rposes a s of May 31 ,

$ Sewer and wa te r system c o n s t r u c t i o n i n p r o g r e s s Revenue bond s i n k i n g fund. Revenue bond r e s e r v e fund, Revenue bond s i n k i n g fund. Revenue bond r e s e r v e fund.

1988 s e r i e s 1988 s e r i e s 1994 s e r i e s 1994 s e r i e s

Water s i n k i n g and c o n s t r u c t i o n fund, 2003 s e r i e s __

To ta l - a l l p r o p r i e t a r y fund t y p e s ^

General fund: Emergency cash r e s e r v e

Changes i n C a p i t a l A s s e t s

C a p i t a l a s s e t a c t i v i t y fo r t he

Govemmental a c t i v i t i e s : C a p i t a l a s s e t s no t be ing

d e p r e c i a t e d : Land C o n s t r u c t i o n i n p r o g r e s s

T o t a l c a p i t a l a s s e t s no t be ing d e p r e c i a t e d

C a p i t a l a s s e t s be ing d e p r e c i a t e d : B u i l d i n g s F u r n i t u r e and ecfuipment v e h i c l e s

T o t a l c a p i t a l a s s e t s b e i n g d e p r e c i a t e d

L

y e a r ended May 31 , 2009, was as

Beginning of Year A d d i t i o n s D e l e t i o n s

S 67,599 $ ~ $ 182,059

67,599 182,059

2,030,016 670,503 18,350 - .

1,183,116 102,412 9,200

3 ,883,635 120,762 9,200

i m p r o v i n g , s i d e w a l k s . and t o b e

2 0 0 9 :

4 7 , 8 4 0 7 1 , 7 9 6

1 2 4 , 4 6 6 1 9 7 , 2 0 6

5 1 , 2 4 6 6 4 , 2 8 4 5 2 , 8 7 6

6 0 9 , 2 1 4

1 . 0 0 0 . 0 0 0

f o l l o w s :

End of

Year

$ 67,599 182,059

249,658

2,030,016 688,853

1,276,328

3,995,197

(cont inued on nex t page)

4 0

Less accumulated depreciation for;

Buildings

Fumiture and equipment

Vehicles

Total accumulated

depreciation

Government activities capital

assets, net

Beginning

of Year

1,018,456 358,182 660,758

2 ,037,396

^ T.971.838

A d d i t i o n s

i „

42,824

52,181 109,740

204,745

98.076

D e l e t i o n s

~ 3,680

3,6B0

? S.fiSO

End of

Year

1,061,280

410,363 766,818

2 ,238,461

i M m ^ M

Business-type activities:

Capital assets not being

depreciated:

Land S 128,205 $_

Capital assets being depreciated:

Plant and equipment-sewer 6,022,849

Plant and equipment-water 2,106,526

Plant and equipment-electric 2,480,430

Total capital assets

being depreciated 10.609,805

13,347

6,983

34,532

54,862

6,036,196

2,113,509

2,514,962

10,664,667

Less accumulated depreciation for:

Plant and equipment-sewer 1,713,044

Plant and equipment-water 1,238,012

Plant and equipment-electric 1,495,099

Total accumulated

depreciation 4,446,155

115,072

43,194

47,710

205,976

1,828,116

1,281,206

1,542,809

4,652,131

Business-type activities capital

assets, net ? ^ - ? ? ^ s 5 ^

Depreciation expense was charged to govemmental activities as follows:

General g o v e m m e n t

Public safety

Highway and streets

Sanitation

Culture and recreation

31,862

116,788

20,804

29,070

6,221

Total depreciation S 204.745

Note 7. Bond Issue Cost

Bond issue costs are being amortized on the straight-line method over the

life of the bonds. The following is a summary of net bond issue cost at

May 31, 2009:

Cost

Less accumulated amortization

$ 79,655

77,899

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Note e. Long-Term Debt

The fol lowing i s a summary of bonds payable of t he Town fo r t h e yea r ended May 31 , 2009:

Balance Balance 5-31-03 Additions Reductions 5-31-09

Business-type a c t i v i t i e s : Revenue bonds S 1.566.000

Govemmental a c t i v i t i e s : Revenue bonds $ 446.974 5 38.893 S (155,589) S 330.278

Bonds paycible are comprised of the following:

Enterprise fund debt: Refunding bonds-Series 2004, maturing serially

and become due November 1 of each year iintil final retirement November 1, 2014, interest rate ranging from 2.45% to 4.60% $ 431,000

DEQ loan dated October 25, 1996 in the original amount of $1,500,000, 1.95% Interest plus .5% fee maturing September 1, 2017 payable annually in amortization payments 770,000

$225,000 of Certificate of Indebtedness, Series 2003, maturing November 1, 2013, net interest rate of 4.04%, interest payable semi-annually with principal payments made annually 121,000

Total enterprise fund debt S 1,322^000

General obligation debt: $1,500,000 Public Improvement Sales Tax Bonds

Series ST-1996 maturing May 1, 2011, principal paysLble annually, interest payable semi-annually until final retirement, interest rate 8.00% through May 1, 2001 and increases annually from 4.9% at May 1, 2003 to 5.5% at maturity $ 185,000

Capital lease obligation as described in Note 9 145,278

Total long-term debt 5 330.278

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The annual requirements to amortize all bonded debts outstanding as of May 31, 2009 follow:

Enterprise Fund Bonds:

Year Ending May 31,

2010 2011 2012 2013 2014

2015-2019

FMHA Water Revenue Bonds Principal

$ 65,000 68,000 70,000 74,000 77,000 77,000

• Interest

$ 1 6 . 3 3 0 $ 13,951 11,328 8,427

5,217 1,771

Total

81,330

81,951 81,328 82,427 82,217 78,771

Year Ending May 31,

2010 2011 2012 2013 2014

2015-2019

Principal

$ 75,000 $ 75,000 80,000 80/000 85,000 375,000

$ 770,000 i

DEQ Loan Interest

21,609 $ 19,396 17,110 14,750 12,316 22,641

5 10^7.822 ^

Total

96,609 94,396 97,110 94,750 97,316 397,641

877,822

Year Ending May 31,

2010 2011 2012 2013 2014

Certificate of Indebtedness-Series 2003

Principal

$ 22,000 24,000 24,000 25,000 26,000

Interest

$ 5,065 4,081

3,000 1,855

630

Total

$ 27,065 28,081 27,000 26,855 26,630

p 121.000 14.631 5 135.631

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General Long-Term Debt

Year Ending May 31,

2010 2011 2012 2013 2014

Public Improvement Bonds-ST-1996 Principal Interest Total

89,000 96,000

7,178 $ 3,840

Note 9. Capital Lease

The present value of capital leases are

Capital Leases General Long-Term Debt (1)

96,178 99,840

S 185.000 $ 11,018 $ 196,018

2010 Less amount representing interest

(0.684% to 0.768%)

Present value of future minimum lease payments

162,022

16,744

145,278

(1) These leases, primarily payable from the General Fund, are reported as an expenditure and other financing source in. the year of acquisition.

Note 10. Deficit Fund Balance or Retained Eamings

As of May 31, 2009, there were deficits of $(745) in the Paving Certificate Capital Project Fund. There was also a deficit of ${190) in the Federal Revenue Sharing Fund.

Note 11. Litigation

The Town has had various claims and lawsuits lodged against it. All are within the normal course of business and have been evaluated by the Town's attomey and management. It is the opinion of legal counsel that these claims are adequately covered by insurance.

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Note 12. Landfill Joint Venture

The Town is a participant in a joint venture referred to as the Jefferson Davis Parish Sanitary Landfill Commission. This entity was chartered on February 17, 1984. The Commission's purpose is the esteiblishment of a long-term plant for the disposal of solid wastes in Jefferson Davis Parish. According to the charter, each participant in the Commission is responsible for a pro rata share of any operating deficits. Likewise, any distributions of surpluses are also shared on a pro rata basis. Each participant's pro rata share is based on the number of households within each participant's unit to the total number of households within all participating units. These proportions were determined using the 1980 U.S. Census as follows:

Locality Number of Households Percentages

Jennings Welsh Lake Arthur Parish (excluding Jennings, Welsh,

Lake Arthur and Elton)

4,161 .421196 1,167 .118129 1,212 .122684

3,339 .337991

9.879 1.000000

The Commission consists of six conmissioners as follows: two residents of Jennings, one resident of Welsh, one resident of Lake Arthur, and two residents of Jefferson Davis Parish living outside the city limits of Jennings, Welsh, Lake Arthur and Elton. The Commission members are to be appointed by the governing body of their place of residence.

The Commission has the power and authority to employ personnel, adopt its own budget and enter into agreements necessary for the operation of the landfill. In certain instances, some agreements must be consented to by all six members of the Commission.

Condensed financial information for the Jefferson Davis Parish Sanitary Landfill as of December 31, 2008 (the latest available audited financial statements) was as follows;

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Total

Welsh (11.8129%)

Total assets Total liabilities Total net assets Total liabilities and net asseti Total revenues Total expenditures Net increase in net assets

$ 5,642,276 14,905

5,627,371 5,642,276 1,322,156 1,210,025

112,131

666,516 1,761

664,756 665,516 156,185 142,939 13,246

As of December 31, 2008, the Commission had no long-term debt outstanding

The Landfill Commission as owner of a sanitary landfill is subject to recent Environmental Protection Agency (EPA) regulations that require monitoring the landfill site for 30 years following closure of the site in addition to other closure requirements. These regulations also mandate that landfill owners provide financial assurances that they will have the resources available to satisfy the post closure standards. These guarantees can be third-party trusts, surety bonds, letters of credit, insurance, or state sponsored plans. According to the Commission's contract with the site operator, "...the contractor shall be responsible for closure in accordance with the permit..". Additionally, "...the contractor's post-closure care, maintenance and monitoring responsibility shall be three (3) years, or as required by law...". In the event the operator is for whatever reason unwilling or unable to fulfill this requirement, the responsibility for closure and post closure monitoring will revert back to the Commission.

Additionally, because of the industry the Commission participates in, certain potential liabilities are always present. These include, but are not limited to, environmental cleanup costs and EPA penalties for violation of its regulations. The EPA is empowered by law (through the Superfund legislation) to seek recovery from anyone who ever owned or operated a particular contaminated site, or anyone who ever generated or transpor£ed hazardous materials to a site (these parties are commonly referred to as potentially responsible parties, or PRPs). Potentially, the liability can extend to subsequent owners or to the parent company of a PRP.

While there are no asserted or unasserted potential costs or penalties at the date of this report that the Commission is aware of, the potential is present.

46

Note 13. Pension Plem

Municipal Employee's Retirement System:

Plan description:

The Town of Welsh contributes to the Municipal Employees' Retirement System of Louisiana, a cost-sharing • multiple-employer plan administered by the Municipal Employee's Retirement System, State of Louisiana. The Municipal Employees' Retirement System of Louisiana was established by Act 356 of the 1954 regular session of the Legislature of the State of Louisiana to provide retirement benefits to employees of all incorporated villages, towns and cities within the State, which did not have their own retirement systems and which elected to become members of the System. The System is administered by a Board of Trustees corr̂ osed of nine members, six of whom shall be active and contributing members of the System with at least ten years creditcible service, elected by the members of the System; one of whom shall be the president of the Louisiana Municipal Association who shall serve as an ex-officio member during his tenure; one of whom shall be the Chairman of the Senate Retirement Committee; one of whom shall be the Chairmcui of the House Retirement Committee of the Legislature of Louisiana. Act #569 of the year 1968 established by the Legislature of the State of Louisiana provides an optional method for municipalities to cancel Social Security and come under supplementary benefits in the Municipal Employees' Retirement System, effective on and after June 30, 1970. Effective October 1, 1978, under Act #788, the "regular plan" and the "supplemental plan" were replaced, and are now known as Plan "A" and Plan "B". Plan "A" combines the original plan and the supplemental plan for those municipalities participating in both plsms, while Plsm "B" participates in only the original plan. The Town of Welsh is a member of plan "B" of the retirement system. Historical trend information for this plan is included in the separately issued report for the Municipal Employee's Retirement System for the period ended June 30, 2008.

Funding policy:

Plan members are required to contribute 5.00% of their ajinual covered salary and the Town of Welsh is required to contribute at a statutorily determined rate. The current rate is 6.75% of annual covered payroll. The contribution requirements of plan members and the Town of Welsh are established and may be amended by the Board of Trustees. The Town of Welsh's contributions to the Municipal Employees' Retirement System of Louisiana for the years ending May 31, 2009, 2008 and 2007 were $40,802, $40,638, and $46,929, respectively, equal to the required contributions for each year.

47

Municipal Police Employees Retirement System:

Plan description:

The Town of Welsh contributes to the Municipal Police Employees' Retirement System, a cost-sharing multiple employer plan administered by the Municipal and State Police Employees* Retirement System of Louisiana. The Municipal Police Employees' Retirement System was established as of July 1, 1973, by Act 189 of 1973 and amended by RS 33:2371 of the 1986 session to become Municipal and State Police Retirement System of Louisiana. The system is a state retirement system which was created to provide retirement benefits for full time municipal police officers in Louisiana, and state police officers hired after January 1, 1987. The system is administered by a Board of Trustees of the Retirement Committee of the House of Representatives and the Chairman of the Senate Finance Committee, or their designees, to serve as voting ex-officio members of the board. Historical trend information for this plan is included in the separately issued report for the Municipal Employees' Retirement System for the period ended June 30, 200 8.

Funding policy:

Plan members are required to contribute 7.5% of their annual covered salary and the Town of Welsh is required to contribute at a statutorily determined rate. The current rate is 9.5% of annual covered payroll. The contribution requirements of plan members and the Town of Welsh are established and may be amended by the Board of Trustees. The Town of Welsh's contributions to the Municipal Police Employees' Retirement System for the years ending May 31, 2009, 2008, and 2007 were $11,527, $17,865, and $22,389, respectively, equal to the required contributions for each year.

48

OTHER SUPPLEMENTARY INFORMATION

• Nonmajor Govemmental Funds

- Combining Balance Sheet - Combining Statement of

Revenues, Expenditures, and Changes in Fund Balances

• Schedule of Compensation to Goveming Board

• Schedule of Number of Utility Customers

• Schedule of Insurance Policies in Force

49


COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS

May 31, 2009

ASSETS

Special Revenue Federal Revenue Sharing

Local Govemment Assistance

Drug Seizure

Cash Due from other funds 5,059

$ 132,746

Total assets

LIABILITIES AND FUND BALANCE

Liabilities: Cash overdraft Due to other funds

Total liabilities 190 190

1,974 1,974

Fund balance: Unreserved (190) 5,059 130,772

Total liabilities and fund balance 5,059 $ 132,746

50

Capital Project

Paving Certificate

Total Non-major

Funds

$ 132,746

' 5,059

745

745

745 2,164 2,909

(745) 134,896

L ^ 5 137.805

51


COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS


Special Revenue Federal Local Revenue Govemment Drug Sharing Assistance Seizure

Revenues: Charges for services Interest

Total revenues

72,034 730

72,764

Expenditures: General govemment 52,304




(190) 5,059

20,460

110,312

(190) S 5.059 S 130.772

52

,Capital Proj ect

Paving Certificate

Total Non-major

Funds

72,034 736

72,770

52,304

6

(751)

20,466

114,430

(745) $ 134,896

53


SCHEDULE OF COMPENSATION PAID TO GOVERNING BOARD Year Ended May 31, 2009

Salary Per

Diem

Mileage Reimbursement Total

Mayor: Carolyn Louviere $ 12,000 $ 3,500 $ 1,226 $ 16,726

Aldermen: Allen Ardoin Becky Hudson Charles Drake Gloria Viney Leona Vanicor Edward Cormier

2,600 2,600 2,600 2,600 1,400 1,100

$ 24,900 ^

200 600 600 400 400 -

5,700 $

116 174 174 -58 -

1,748 i -

2,916 3,374 3,374 3,000 1,858 1,100

32.348

54


PUBLIC UTILITY ENTERPRISE FUND SCHEDULE OF NUMBER OF UTILITY CUSTOMERS

May 31, 2009

Metered Unmetered

Electricity: Industrial 11 Commercial 152 Residential 1,557

Demand 11

Water 1,428

Sewer 1,242

55

St. St. St. St, St. St. St. St. St. St, St, St, St, St. St. St. St. St. St. St. St. St. St. St. St. St. St. St. Nat

TOWN OF WELSH

SCHEDULE

Insurer

Paul Insurance Company Paul Insurance Company Paul Insurance Company Paul Insurance Company Paul Insurance Company Paul Insurance Company Paul Insurance Company Paul Insurance Company Paul Insurance Company Paul Insurance Company Paul Insurance Company Paul Insurance Company Paul Insurance Company Paul Insurance Company Paul Insurance Compciny Paul Insurance Company Paul Insurance Company Paul Insurance Company Paul Insurance Company Paul Insurance Company Paul Insurance Company Paul Insurance. Company Paul Insurance Company Paul Insurance Company Paul Insurance Company Paul Insurance Company Paul Insurance Company Paul Insurance Company

ional Union Fire Insurance National Union Fire Insurance Special Risk Insurance, inc. Special Risk Insurance, Inc. Special Risk Insurance, Inc. Spe cial Risk Insurance, Inc. Risk Management, Inc. Western Surety Western Surety Western Surety Western Surety

OF INSURANCE May 31,

Company Company

56

, LOUISIANA

: POLICIES IN FORCE 2009

Policy Number

GP09313146 GP09313146 GP09313146 GP09313146 GP09313146 GP09313146 GP09313146 GP09313146 GP09313146 GP09313146 GP09313146 GP09313146 GP09313146 GP09313146 GP09313146 GP09313146 GP09313146 GP09313146 GP09313146 GOP9313146 GP09313146 GP09313146 GP09313146 GP09313146 GP09313146 GP09313146 GP09313146 GP09313146 AP3391651-10 VFP2219-5646C-08/00 VFIS-TR-2059141-01/0000 VFIS-TR-2059141-01/0000 VFIS-CM-1055721-01/0000 VF-CU-5054569-01/0000 70-0335-00012664 69912045N 69849838N 15273260N 15273251N

Amount

of Policy

$ 1,000,000 4,224,038

750,000 2,000,000

93,612 3,000,000 1,000,000 1,000,000 1,000,000

50,000 100,000 50,000 25,000 50,000 25,000 10,000 10,000 5,000

1,000,000 500,000 25,000 50,000 50,000 25,000 50,000 50,000 100,000 100,000

1,000,000 75,000

2,000,000 2,000,000 1,000,000 2,000,000

500,000 10,000 10,000 10,000 10,000

Risk Covered

Auto liability Property coverage Equipment breakdown General liability Contractor's equipment hiitployee benefits liability Law enforcement liability Pioblic entity management liability Employment practices liability Govemment crime protection summary Accounts receivable Computer Extra expense Fine arts Fire department service charge Inventory emd appraisals Money and securities (inside limit) Money and securities (outside limit) Newly acquired property (building for 180 days) Newly acquired property (personal property for 180 days) Other people's property Outdoor property Personal belongings Pollution cleanup and removal Property in transit Temporary location Valuable records research Demolition and increased cost of construction Commercial general liability aviation policy Accident and sickness General liability-fire Management liability-fire Auto liability - each accident - fire Commercial umbrella policy declarations Worker's condensation Public employee blanket bond - Assistant Police Chief Public employee blanket bond - Police Department Public employee blanket bond - Ex-officio notary pioblic employee blanket bond - Ex-officio notary

57

Policy Expiration

Date

10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 10/01/2009 01/01/2010 07/06/2009 10/07/2009 10/07/2009 10/07/2009 10/07/2009 -01/13/2010 05/18/2010 05/18/2010 05/19/2014 05/19/2011


58

REPORT OF INDEPENDENT AUDITORS

ON INTERNAL CONTROL

AND COMPLIANCE

59


60

MCELROY, QUIRK & BURCH A Profess ional C o r p o r a t i o n • Cert i f ied Publ ic A c c o u n t a n t s • Since 1925

800 K i rby S t r e e t • P . O . B o x 3 0 7 0 • L a k e Char Jcs , LA 7 0 6 0 2 - 3 0 7 0

337 4 3 3 - 1 0 6 3 • Fax 337 4 3 6 - 6 6 1 8 • W e b page : w w w . m q b - c p a . c a m

Call W. Comcaux, CPA C m W. Schram, UI, CPA. CVA Robert M. Gani, CPA, MT MoUic C. Broussard-Duncan, CPA Jason lu Guillory, CPA Greg P. Naquin, CPA, CFP™ Billy D. Fisher, CPA Joe G. Peshoff, II, CPA, CVA

Michael N.McGee, CPA David M. DesOrmeaux, CPA

MP OtnyJ. WcKxii.Jr.. CPA. Inactive Robot F. CaIgil^ CPA, Inactive Wilfitm A. MttiKuso, CPA, Inactive Baiban Hutson Gonzales, CPA, Rclired Jucbon J. McCann, Jr., CPA, Retired Mardn L Chehotsl^, CPA CFE

CFB - CenJSed Fraud P..«nJn.^ AfT - Muttn ofttxtaon CVA - Cotifitd VihuDoo Arulyw CFP - Ccnifkd FoundJ Plmocr

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Honorable Mayor and Board of Alderman

Tovm of Welsh Welsh, Louisiana

We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of Welsh, Louisiana, as of and for the year ended May 31, 2009, which collectively comprise the Town of Welsh, Louisiana's basic financial statements and have issued our report thereon dated November 11, 2009. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Audit S tandards , issued by the Comptroller General of the United States.

Intemal Control Over Financial Reporting

In planning and performing our audit, we considered the Town of Welsh, Louisiana's intemal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town of Welsh, Louisiana's intemal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Town of Welsh, Louisiana's intemal control over financial reporting.

61

Members American Institute of Certified Public Accountants • Society of Louisiana Certified Public Accountants

http://www.mqb-cpa.cam

Our consideration of intemal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in intemal control over financial reporting that might be significant deficiencies or material wea)cnesses. However, as discussed below, we identified certain deficiencies in intemal control over financial reporting that we consider to be significant deficiencies.

A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the Town of Welsh, Louisiana's ability to initiate, authorize, record, process, or report financial data reliably in accordcince with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Town of Welsh, Louisiana's financial statements that is more than inconsequential will not be prevented or detected by the Town of Welsh, Louisiana's intemal control. We consider the deficiencies described in the accompanying schedule of findings and questioned costs to be significant deficiencies in intemal control over financial reporting. Significant deficiencies are described in the accompanying schedule of questioned costs as items 09-1 through 09-7.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Town of Welsh, Louisiana's intemal control.

Our consideration of the intemal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in the intemal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, we believe that all of the items described above are material weaknesses.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Town of Welsh, Louisiana's financial statements are free of material misstatement, we performed testa of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Aud i t i ng S t a n d a r d s .

62

The Town of Welsh, Louisiana is described in the accompanying not audit the Town of Welsh, Louie opinion on it.

This report is intended and other state and federal audit be used by anyone other than the Statute 24:513, this report is di document.

Lake Charles, Louisiana November 11, 2009

response to the findings identified in our audit s(t:hedule of findings and questioned costs. We did icina's response and, accordingly, we express no

solely for the information of the Board, management, igencies and is not intended to be and should not 3e specified parties. Under Louisiana Revised tributed by the Legislative Auditor as a public

63


SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended May 31, 2009

09-1 Sogregation of Duties

Condition: Biecause of the entity's size and the limited number of accounting personnel, it is not feasible to maintain ' a complete segregaition of duties to achieve effective intemal control.

Criteria:

Effect:

Recommendation;

Response

Effective internal control requires adequate segregation of duties among client personnel.

Without proper segregation of duties, errors within the financial records or fraud could go undetected.

To the extent cost effective, duties should be segregated and management should attempt to mitigate this weakness by supervision and review procedures.

We concur with this recommendation. Management has implemented supervision and review procedures to the extent possible.

09-2 Controls over Financial Reporting

Condition: In our judgment, the Town's accounting personnel and those charged with governance, in the course of their assigned duties, lack the capable skills to prepare the financial statements and related footnotes in accordance with generally accepted accounting principles and to detect and correct a material misstatement, if present.

Criteria

Effect

The Auditing Standards Board recently issued guidance to auditors related to entity's inteimal controls over financial reporting. Many small organizations rely on their auditor to generate the annual financial statements including footnotes. SAS No. 112 emphasizes that the auditor cannot be part of your system of internal control over financial reporting.

Material misstatements in financial statements could go undetected.

64



(Continued)

Recommendat ion: In our judgment, due to the lack of resources available to management to correct this' material weakness in financial reporting, we recommend management mitigate this weakness b y having a heightened awareness of all transactions being reported.

Response; We concur with this recommendation. Management has implemented supervision and review procedures to the extent possible.

Finding 09-03 Deficiencies in the Police Department'a Control Environment

Condition:

Criteria

The control environment within the police department appears to be deficient. Through interviews with 11 of the 14 members (remaining 3 were unavailable for medical reasons) of the Department, we were informed repeatedly of an absence of leadership and communication that has resulted in extremely low morale and open distrust toward other members of the department and the Town's management. Staff members also expressed concerns about officer safety due to inadequate safety supplies and inadequate training.

Management's tone is an important element of the intemal control process. Management's ability to communicate consistent operational practices and the importance of ethical behavior are necessary components to a strong control environment.

Effect: Due to the current deficiencies in the control environment within the Police Department, the Department and the Town are at risk for fraud cind abuse. While no specific instances were noted during the audit, the absence of a cohesive management system provides ample opportunity for fraud and/or abuse to occur.

Recommendat ion; To address the above condition we make the following recommendations:

1) Management should consider requesting an operational audit or training assistance for the Police Department to address all areas of operation.

2) Management should strive to improve communication throughout the department through regular staff meetings.

65



(Continued)

3) Management should implement a policy of employee evaluations that may be done on a quarterly, semi-annual or annual basis that could better facilitate open communication and employer feedback. It would provide a written evaluation of individuals' performances.

4) Management should evaluate training needs and commit to training program for officers and dispatchers that is appropriate with the needs of the community.

Response:

5) Management should solicit feedback from its department to determine how to maximize officer safety and implement programs to address these concerns.

Management of the Police Department stated they would implement the cibove recommendations.

Finding 09-4 Inability to Account for Issued Police Tickets

Condition:

Criteria:

Effect

Recommendation

Response:

During the course of our audit we requested a list of all police tickets and their resolution. The Police Department was not able to account for 53 tickets.

All police tickets should be reconciled and accounted for on a regular basis to ensure the proper processing of all noted offenses.

As a result of missing tickets, there is a ppssibility that funds may be misappropriated under the guise of receiving payment of a police ticket.

Upon investigation it was noted that most of the missing tickets were assigned to officers that were no longer employed by the department. We recommend that as part of normal discharge procedures that all tickets assigned to an officer be turned into the Town and reconciled before he is released from employment. We also recommend the Town conduct a periodic reconciliation of all outstanding tickets to identify problems in a timely manner.

Management of the Police Department stated they agree with the recommendations and would implement employee discharge and police ticket reconciliation procedures.

€€


SCHEDULE OF FINDINGS AND QUESTIONED COSTS .Year Ended May 31, 2009

(Continued)

09-6 Inadequate Documentation of Policies and Procedures by Welsh Police D^ârtment

Condition:

Criteria;

Effect

Recommendation:

During our audit we noted that there were no policies and procedures covering the basic operations of the narcotics division. We also noted the Department did not maintain adequate documentation of the hiring process of new employees, There was no adequate evidence of background and reference checks maintained to evidence prudent decision making. We also noted an absence of documented reprimands and commendations. Also, the evidence custodian has been on medical leave for some time and there are no backup procedures in place to ensure the continuity of this position and duties. Additionally, evidence inventory should be inventoried on a periodic basis.

Proper documentation of policies and procedures are instrumental in good training programs. This is especially true during times of transition within an area of a department. Documentation of personnel issues during the hiring phase as well as throughout and employee's employment are necessary to evidence prudent decision making when hiring, promoting, disciplining and terminating employees.

There have been several different officers assigned to the narcotics division with no clear operational description resulting in disagreements and mistrust. Hiring decisions have been questioned as to their propriety. The Department has had difficulty demonstrating that employees should be terminated due to a lack of compelling documentation.

We recommend that the documented policies and procedures currently in place be reviewed and updated to include all operations of the department. Substantial documentation should be reflected in employee files as to their qualifications for the job, their lack of criminal history and their recommendations from credible references. Throughout employment, instances of reprimands and commendations should be documented in the employee files to support personnel decisions based on such instances. Management should esteiblish written procedures related to the evidence room inventory as well as provide a backup plan for the evidence custodian when he is not able to perform his duties.

Response: Management of the Police Department stated they would implement the above recommendations.

67


SCHEDULE. OF FINDINGS AND QUESTIONED COSTS Year Ended May 31, 20 0 9

. (Continued)

09-6 Inadequate Controls over Custody and Usage of Equipment in Welsh Police Department

Condition:

Criteria:

Effect:

Recommendation

Response:

During our audit we noted that no annual physical inventory of equipment had taken place. We also noted that items located were often sitting idle rather than being used by the department. The most notable example being the department's K-9 unit that was being housed at one of the officers' homes while not being used by the Department.

All capital assets should be inventoried on at least an annual basis and any assets purchased for the department should be fully utilized or disposed of as surplus property.

The Department is not making the best use of its resources and items are prone to defalcation due to the absence of an inventory process.

A corr̂ lete inventory of all of the Town's capital assets should be taken annually as required. Any idle equipment should be put to intended use or sold as surplus property.

Management of the Police Department and the Town stated they would implement the above recommendations.

09-7 Lack of Overtime J^provals and Documentation in Welsh Police Department

Condition:

Criteria:

Effect:

We inspected a sample of timecards as part of our audit and noted two activities that should be' remediated. First, the chief of police when reviewing time cards only initials the top of the time card and does not note whether instances of overtime are approved. Secondly, we found a number of items where time was written on the timecard rather than utilizing the department time clock. These instances also had no additional approval or indication of review.

Good intemal controls require supervisors to clearly document approvals of all overtime. Additionally, not utilizing the time clock to record time circumvents one of the Town's primary controls.

Large amounts of overtime are unexplained. Also, time not recorded using the time clock raises the question of propriety of the time.

68



(Continued)

Recommendation: The Town should require individual approval of all overtime. There should also be additional explanations offered for any overtime over a nominal amount. An additional time clock should be purchased, so that all time can be recorded using the time clock.

Response: Management of the Police Department stated they would implement the above recommendations.

69


SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN

ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Year Ended May 31, 2009

08-1 Segregation of Duties

Condition: This finding was a reportable condition relating to the entity's size", and limited number of accounting personnel which made it inôssible to achieve effective intemal accounting control.

Recommendation; To the extent cost effective, duties should be segregated and management should attempt to mitigate this weakness by supervision and review procedures.

Current status: This condition still exists, however, the Town has implemented supervision and review procedures as recommended.

08-2 Controls over Financial Reporting

Condition: The Town's accounting personnel and those charged with governance, .in the course of their assigned duties, lack the capable skills to prepare the financial statements and related footnotes in accordance with generally accepted accounting principles and to detect and correct a material misstatement, if present.

Recommendation: Management should mitigate this weakness by having a heightened awareness of all transactions being reported.

Current status: This condition still exists; however, the Town has implemented recommended procedures.

70