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i <br />r <br />i. <br />CITY OF SAN MARCOS, TEXAS <br />SCHED ULE OF FINDINGS AND QUESTIONED COSTS <br /> (Continued) <br /> YEAR ENDED SEPTEMBER 30, 2008 <br />' Findings Relating to the Financial Statements Which are <br />! Required to be Reported in Accordance With Generally <br />Accepted Government Auditing Standards <br />Item 2008-1: <br />Condition: An amount had been set aside in the Water and Wastewater Fund for <br /> retainage payable in the amount of $429,167. It was discovered that the <br /> City did not owe this liability. This transaction had occurred in a prior <br /> period. <br />Effect: Accounts payable and accrued liabilities were materially overstated at the <br /> end of the fiscal period. In addition, net assets were understated at the end <br /> of the fiscal period. <br />Cause: The City did not have controls in place to ensure that this liability was <br /> properly stated at the end of fiscal year. <br />Recommendation: The City should properly design controls over the recognition of <br /> liabilities so that liabilities are accurately recorded. <br />Management's Response: The transaction listed above relates to a Water Transmission Line that <br /> was being built in conjunction with the Guadalupe-Blanco River <br /> Authority (GBRA). The portion fielded by GBRA of $429,167 was <br /> properly recorded by the City of San Marcos as a liability. Once the <br /> project was initiated, contractor payments should have been charged to <br /> both the City's Capital Improvements Fund and the GBRA liability line- <br /> item. The project was expensed by the Engineering Department through <br /> only the available funds of the Capital Improvements Fund. All retainage <br /> and liability accounts over a $25,000 threshold will be audited at the end <br /> of each fiscal year while a sampling of the remaining accounts will be <br /> done throughout the course of the year <br />Contact Person Responsible <br />for Corrective Action: The Assistant Director of Finance and Accounting Manager will <br /> oversee the review of these accounts and will ensure a review is done <br /> on an ongoing basis. A review of these accounts have already been <br /> initiated and most accounts have been reviewed. <br />Anticipated Completion <br />Date: This task will be ongoing throughout each fiscal year. <br />Findings and Questioned Costs foi- Federal Awards <br />None <br />9