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County audit finds errors in financial statements

Corrections will be required for 2009 and 2010 accounting reports

July 03, 2014
OSSIPEE — An auditor conducting a review of Carroll County's financial statements uncovered some accounting errors from 2009 and 2010 that resulted in a current fund balance estimated to be half than what's on the books.

County Commissioners David Sorensen, David Babson and Asha Kenney on June 25 met with Ron Beaulieu of Ron Beaulieu & Company CPAs of Portland, Maine, the company hired to conduct audits of the county's financial statements prepared by a different accounting firm, Mason + Rich CPAs of Concord. Accounting or posting errors such as allocating pre-paid interest of $600,000 on the nursing home building bond to the general fund, and prepaid health and dental insurance allocation of nearly $500,000, need to be corrected before the audit can be completed.

In a memo sent to the commission prior to the meeting, Beaulieu stated that the mistakes caused the general fund balance to be overstated by more than $900,000. While more adjustments or corrections may need to be made, the estimated county fund balance is $1.7 million and not the $4 million reflected.

The auditor suggested that county officials could contact the prior accounting firm and request corrections to the statements, or the county could contract with his firm for non-audit services to correct the 2009 and 2010 financials. Beaulieu said the financial statements must be corrected if the county wants a "clean" auditors report. His firm has been hired to draft the county's 2012 financial statements.

"You contracted out the service to this individual. One would think you want to go back and say corrections need to be made and that there are errors in the statements," he said. In response to Babson's question, Beaulieu said he included two pages of journal entries/corrections to the memo he sent the commission.

One error was uncovered in 2010, the year the county obtained the $23.5 million bond for the new Mountain View Community nursing home. Beaulieu said one of the issues is the $600,000 in interest prepaid by bond holders was applied to the general fund instead of amortized over 20 years, thus overstating the general fund balance. In a related error, that amount – $600,000 – should be listed under the Enterprise Fund for the nursing home, not the county's general fund.

Another error was to list $500,000 in prepaid health and dental insurance on a balance sheet rather than as an insurance expense.

"So what we're saying is these adjustments for all these different reasons, will drop your fund balance by $900,000," said Beaulieu. "There are some very, very material discrepancies in your financial statements. If we were in a time crunch and you had to have this audit tomorrow, I would have to issue an adverse opinion stating these financial statements do not present the financial status of the county as of December 31, 2010."

Sorensen asked if the errors resulted from any "wrongdoings by us here at the county?" Beaulieu replied they were accounting errors and misapplication of accounting principles, but that the county's internal financial controls could be improved.

"I will issue a report on internal controls and will state in that report that you need to reconcile all accounts on either a monthly or annual basis. A reconciliation [of accounts] would have caught this problem and you could have corrected it before I got here. The county is responsible for maintaining its accounting process properly and it needs to double check itself. The reconciliation process allows you to do that."

Commissioners asked Carroll County Finance Manager Kathy Garry to contact Mason + Rich to ask for corrections to the statements they prepared.

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