Post by Deleted on Oct 25, 2015 3:08:47 GMT
From: Regina Wunsch
Date: Sat, Oct 24, 2015 at 7:45 PM
Dear Members of the Board,
A few days after attending the October board meeting I contacted Daniel requesting a current copy of the GLA QuickBooks, because I was concerned about the data after seeing the financial reports issued for that meeting. This request was not anything unusual, since I have checked the books for the GLA on a monthly basis since Walter and I paid Robert Storey, CPA, CVA to bring the data into compliance with standard accounting practice. In order to accomplish this Robert Storey had to create the “new” QuickBooks, the current version in use since October 2013. I took on the review work so this effort and expenditure would not be wasted. While putting together the necessary information for Robert Storey, I discovered that although Nathan Minnick offered bookkeeping and payroll as part of his management service, he had no actual training in or actual knowledge of standard accounting practice and payroll set up and basic payroll procedure. Janice of course was a volunteer with a similar handicap.
I have just gone through all of the accounts payable entries in the GLA QuickBooks from July through October 14 of this year. The accounts receivable still need to be done.
Unfortunately, there are major problems.
The purpose of accounting software, besides generation of financial reports, is to have financial information easily accessible—at one’s fingertips so to speak.-and eliminate the necessity of having to go through paper files to find payable and receivable information. Due to the manner in which accounts payable information is being entered, the GLA QuickBooks do not fulfill this purpose and furthermore due not provide accurate information for all accounts.
I am sharing my findings with all of you in the hope that it will help you understand why the books need to be done by a professional trained in accounting and corporate bookkeeping. That hiring a professional accounting service is a necessity, not a luxury. Trying to train well intentioned volunteers or hiring bookkeepers who have no background in standard accounting practice, professional business accounting and payroll is not a viable solution and will not save money. On the contrary. Paying a qualified person to do a monthly review of all entries, on top of paying for the services of an unqualified bookkeeper will cost more than contracting out the bookkeeping to qualified professional accounting service. If the monthly reviews were not done, the only recourse landowners would have to ensure the books are correct and contain all of the necessary information would be to request a full audit every year by a CPA certified to do audits. This means that the GLA would have to produce supporting records for every QB entry for the time period audited. This is very expensive. Furthermore the GLA would also have to pay the CPA for making all necessary corrections. As I stated in a previous email the GLA is a registered corporation and therefore required to keep its books according to standard accounting practice.
I hope that after reading my findings you will agree that trying to train well intentioned volunteers or hired bookkeepers who have no training and experience in standard accounting practice and corporate bookkeeping is not an acceptable choice for the GLA bookkeeping. It is not possible to write up procedures that cover every eventuality. It is also not cost effective, as monthly reviews by a professional will be required to assure accuracy and compliance with standard accounting practice.
I have done these reviews for almost two years now. Based on my experience in doing this on a volunteer basis for the GLA, I am not willing to continue with this practice, because I believe it is not in the GLA’s best interest. I believe the GLA needs a solution to bookkeeping that assures quality and consistency and is independent of the makeup of the board, the financial committee and employee roster. I believe contracting the bookkeeping out to a qualified professional accounting service is not only affordable, but also meets these criteria and therefore is the solution that best serves the landowners.
Since the money the board is managing belongs to the landowners, I am forwarding this email to the Glastonbury Landowners Group with the same intent—to try to show landowners that spending money on a professional accounting service is not only a necessity, but a good use of assessment money and in their best interest. We cannot care for our roads and make responsible financial decisions without correct and complete financial data.
Please see the list of my findings below. All of these problems will need to be rectified under supervision to ensure not only that everything is correct, but also that everything is entered in a consistent manner.
Sincerely,
Regina Wunsch SG 71 & 72
GLA Accounts Payable 7/1/2015 – 10/14/2015
1. Most of the invoices have no reference numbers entered. This includes invoices from Karleen, Park Electric, Bank of the Rockies, various contractors, Key insurance etc. It is standard practice to enter to enter invoice numbers as they are the identifiers used when searching for particular invoices. It also prevents duplicate entries.
2. Most of the invoices do not contain any information regarding what the payment was for. For example:
a) Reimbursements are not listed as such
b) No description of what was paid for other than the account entry. A few examples:
mileage—but no information for which errands
office supplies—no mention of what was purchased or for which job
Paul Rantello 1035A summary account—no description of work done
Alanah Griffith—2017 Legal Advice—no description of what was being billed for
Mountain West Holding $2,350 under 1035z Other—no description of what the invoice was for
c) there is a deposit entered directly into the checkbook from Office Depot with no information other than the office supply account. No credit memo, no reference number, no description.
Without this information added, the database becomes useless for looking up information for past costs and doing cost comparisons, cost analyses or even giving out information regarding current expenses. One has to resort to the paper invoices and files to find this information or rely on the memory of the person who entered the data. This makes any kind of financial analysis tedious and time consuming.
3. There has been a -$19.06 discrepancy in Accounts Payable since August. This is due to two overpayments.
The first: Key Insurance. The invoice was for $5,472.16. The check was made out for $5,472.17. Overpayment of $0.01.
The second is due to what appears to be a duplicate payment of $19.05 to Karleen for internet in August. I assume these are reimbursements.
Karleen’s vendor transaction window shows invoices for $19.05 and six payments of $19.05 made to her, one for each month beginning in April. Only three invoices have an invoice number entered. The invoice number for the August invoice dated 8/30/15 is 6. The invoice was paid with check #2122. The prior invoice, the one for July, is numbered 4. There is no invoice number entry for the September invoice. This corresponds with the Admin/Overhead “Internet” account in the General Ledger. But the vendor account balance for Karleen shows a balance of - $19.05, meaning the GLA overpaid Karleen by that amount. There is no such credit in the vendor transaction window under Bills, Payments or Checks.
The Accounts Payable account report and the check register show an additional check, #2111, entered into the checkbook on August 2 made out to Karleen for $19.05. This check has no invoice associated with it, was created in the check register and was paid directly out of accounts payable, instead of an expense account. Therefore it does not appear in the P&L and the vendor account window as being paid to her. It does appear in the Vendor Quick Report. Besides having no expense account information, there is no memo on the check describing what this payment is for. From the amount it can be assumed that it is a duplicate internet reimbursement for July. Or it was supposed to be the payment for August which was then paid again with check#2122 on August 30, because the August 2 payment did not show up under the Admin/Overhead Internet account or in the vendor transaction window for Karleen.
4. Maverick Realty has not been paid for the storage unit in Emigrant since June.
5. The July 15 loan payment installment is not broken down into principal and interest. Therefore the current road loan principal balance on the Balance Sheet and the Interest Expense balance on the P&L are incorrect.
6. There is an invoice dated 9/20/15 for mileage from Karleen with no invoice number and description. But the payment, check#2128, for that invoice is dated 9/14/2015. As it is not customary to pay for services before an invoice is received, it must be assumed that either the date of the invoice or the date of the check is entered wrong.
If for some reason a payment needs to be made before an invoice is received, one makes an advance payment to the vendor under the appropriate expense account and then credits that payment to the invoice after the latter has been received and entered.
7. There is a potential Petty Cash account balance problem. The Petty Cash balance according to the YTD Balance Sheet is $115.21. The last payments out of Petty Cash were made on 4/15/15 according to the ledger.
On 8/30/15 there is an invoice from Karleen for $105.18 that gives ”Petty Cash” as the reference (invoice) number. It appears to be a reimbursement for postage, office supplies and printing/copies (no description or job reference entered regarding the purchases). This was paid with check#2124 made payable to Karleen with a memo entry saying” for Petty Cash”.
Petty Cash payments are made in cash out of the actual Petty Cash money on hand. Payments out of Petty Cash are accounted for by ledger entries.
If something is paid for by check, then it is a reimbursement coming out of the checking account; it cannot be a Petty Cash payment. If one has paid in cash, there is no need to issue a check too. That would constitute a double payment.
As it stands, this invoice and check make no sense. If Karleen received cash, there should be no invoice and check, but a ledger entries for the expenses paid in the Petty Cash account. If she received a reimbursement check for cash loaned to the GLA there should be no reference to Petty Cash on the invoice and the check, because no funds from the Petty Cash fund were used. (No withdrawal since April in the Petty Cash account report). It should be clearly stated on the invoice and check that this a reimbursement and also on the invoice what the reimbursement was for.
8. The Construction Bonds Held Liability account balances for July and August do not match the Construction Bond Reserve Cash balances. An invoice was issued, but the received funds were not transferred into the corresponding reserve cash account as required by law.
9. The costs for DropBox and QB are not consistently entered. Most of the entries are in the 2066 summary account, instead of under their actual individual accounts. This greatly distorts the cost of both of these software items in the P&L and Budget Variance Report.
10. The costs for the July 6 Adkins invoice, entered 8/29/15 are not prorated properly or are missing an entry in both the NG and SG gravel/grading accounts. One would need a copy of the invoice to see what the problem is. NG has an unallocated amount of $200 and SG an unallocated amount of $250. There is a second unallocated amount of $225 in the NG gravel/grading account for unspecified work invoiced by Paul on 8/5/15. Again, one would need a copy of the invoice to allocate it properly, because there is nothing in the memo section stating what this payment was for.
11. The landowner donation income for the spring gravel/grading was not applied to the Adkins July invoice, so the total amount shown on the P/L as being spent by the GLA on SG roads is distorted by $1,455.68 and subsequently also what was spent on individual roads. According to the Donation Report there was a total of $1,375.88 donated by 2 landowners in “High South”, $300 for gravel on Polaris and $1,075.88 for three loads of gravel on Hercules. This brings the amount the GLA paid for Hercules down to $2,535.70 from the listed $3,611.58. $79.80 was donated towards road maintenance in Low South by one landowner, which also reduces the cost for one of the roads done in “Low SG” by that amount.
Furthermore, the amounts shown on the P&L as spent on Polaris and Scorpio should be reversed. Polaris did not get graded in the spring. The donated gravel was just spread over the road. Scorpio was graded. So the costs for Scorpio should be $1,145.58 and the cost for Polaris $333.34 of which the GLA paid only $33.34. One would need the actual invoice to determine, if this was a billing error on the part of the contractor or a data entry error.
12. A new expense account has been improperly added under Admin/Overhead in September: account 2015 “Document & File Organization”. This contains wage payments to Karleen for a new payroll item called “Digitizing Project”.
All payroll items must have a corresponding account in the General Ledger that clearly show that they are wage accounts. Also, since Denise Orr has been doing digitizing work as a contractor all year, but has not submitted an invoice at the time this QB copy was made, there is the very high probability that both wage and contractor costs will end up in the same account. This will further confuse the issue of what was paid through wages and what was contract labor cost. Furthermore, only a person with QB access currently would be able to tell that a GLA employee is also being paid for digitizing work, not just a contractor. This does not satisfy the rules of financial transparency. It also distorts the cost of the services, because wages mean that all overhead including payroll taxes must be added to the wages to get a true idea of the cost of Karleen’s work as compared to the contract work done by Denise.
Also it was decided by the Board to set aside the $2,181.31 left in the Digitizing Fund for all digitizing related work. Therefore there is no money budgeted for this in the 2015 budget and there was no expense account created for the project as it is a one- time project. So all of Karleen’s payments should be paid out of the Digitizing Fund and not out of the general fund and the unnecessary Document and File Organization account needs to be inactivated or deleted, if possible, as soon as this is corrected. The wage payments and payroll taxes would then be accounted for and clearly visible in the Digitizing Fund report along with the contractor costs. Fund reports are part of the financial reporting requirement.
13. Payroll
The wage for Karleen’s Project Review work for pay period 6/14/15-6/27/15 was left off when the hours were entered for that pay period, so Karleen did not receive payment for that work on check #2096, July 6,2015.
Another check was issued on July 9,2015, #2101, for the missed pay, but the pay period for these hours was entered as being 4/6/15-4/19/15. This is improper payroll procedure. The rule is that only one paycheck per pay period may be issued for each employee. Using a former pay period to circumvent this problem is also not acceptable procedure. That amounts to altering prior pay period data after the fact. If hours have been omitted due to employer or employee error, the proper procedure is to issue a wage advance out of the Accounts Payable module under the Wage Advance asset account. A copy of the check is put into the payroll file with a description of what the wage advance is for. A notation is also made on the copy of the previous paycheck regarding the error and details of how the error was remedied. Then the hours are entered in their proper wage category in the following payroll and the wage advance is deducted at the same time.
Since the check has been cashed voiding it is not an option and professional advice has to be sought regarding how to fix the pay period problem.
As mentioned above the set up for the new payroll item, Digitizing Project needs to be corrected to link to the correct account.
14. Refunds and Credits
These items caught my attention when I was reviewing the financials at the October board meeting. Both were corrected right after the meeting.
The construction bond liability account balance did not match the corresponding reserve cash account. Without access to the QB, the assumption when seeing this discrepancy on the Balance Sheet would be that the discrepancy was due to a missed transfer from general savings into the construction bond reserve account.
It turned out the discrepancy was due to incorrect procedure used for issuing a refund. The refund was issued straight out of the summary accounts receivable account instead of the liability account. This means that the payment does not show up anywhere in the financial statements as being refunded other than the checkbook register, the accounts receivable report and the Customer Quick Report. It also means that the liability account register will show this money as still being owed to the landowner by the GLA.
The Adkin’s credit for the sump work not done, but paid for several years ago, was not put into the account that the expense was invoiced under. It is standard practice to credit the account under which an expense occurred, if a refund or credit is given. It does not belong into the summary account as an unallocated expense.
