NCTRCA Audit

NORTH CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
Financial Statements
December 31, 2000
With Independent Auditor's Report
TABLE OF CONTENTS
Independent Auditors Report
Statement of Financial Posrtion ..•...............•...... 1
Statement of Activrties 2
Statement of Cash Flow ..........•..............................................3
Notes to Financial Statements 4-6
CORPORATE OFFICE:
1200 Summit Avenue
Suite 410
Fort Worth, TX 76102
Tel 817-315-1448
}"ax 817·315"1648
E·mail: [email protected]
Certified Public Accountant
Ret,oister Investment Advisor
Securities offered through:
Rushmor Securities Corp.
Member NASD and SIPe
Dallas, Texas
T
The Kev to your success
INDEPENDENT AUDITOR'S REPORT
To the Board of Trustees
of North Central Texas Regional Certification Agency, Inc.
We have audited the accompanying statement of financial position of North Central
Texas Regional Certification Agency, Inc. (a nonprofrt organization) as of
December 31, 2000, and the related statements of activities and cash flow for the
year then ended. These financial statements are the responsibility of the
Organization's management. Our responsibility is to express an opinion 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. 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 financial position of North Central Texas Regional
Certification Agency, Inc. as of December 31, 2000, and the changes in its net
assets for the year then ended in conformity with accounting principles generally
 
Fort Worth, Texas
August 21,2001
NORTH CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
STATEMENT OF FINANCIAL POSITION
December 31, 2000
ASSETS
Cash and cash equivalents
$ 266,806
Investment securities
209,916
Accounts Receivable - Dues
139,550
Other Receivables
150
Property and equipment, net
35,402
TOTAL ASSETS $ 651,824
LIABILITIES
Accounts payable
$ 633
Accrued expenses
24,469
Deferred revenue
388,610
TOTAL LIABILITIES 413,712
NET ASSETS
Unrestricted
238,112
TOTAL NET ASSETS 238,112
TOTAL LIABILITIES AND NET ASSETS $ 651,824
See accompanying notes and accountant's report.
1
NORTH CENTRAL TEXAS REGIONAL CERTlFICATION AGENCY, INC.
STATEMENT OF ACTIVITIES
For the twelve Months Ended December 31, 2000
UNRESTlRICTED NET ASSETS
Unrestricted revenues and gains
Membership
Investment return
other Income
TOTAL UNRESTlRICTEO REVENUES
Expenses
Program services
Certification Program
Total &penes
INCREASE IN UNRESTlRICTED NET ASSETS
NET ASSETS AT 8EGINNING OF YEAR
NET ASSETS AT END OF YEAR
See accompanying notes and accountant's report
S 378,550
14,642
2,693
395,885
3n,B67
3n,B67
18,018
220,094
S 238,112
2
NORTH CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
STATEMENT OF CASH FLOW
For the twelve Months Ended December 31, 2000
Cash Flows trom operating activities
Increase in net assets
$ 18,018
Adjustments to reconcile net assets
to net cash used by operating activities
Depreciation
10,635
Investments
147,382
Accounts Receivable
(139,550)
Other Receivables
(150)
Accounts Payable
633
Accrued Expenses
24,469
Deferred Revenue
97,895
Net Cash provided by Operations
159,332
Cash Flows from investing activities
Used For
Equipment
(5,214)
Net cash used in investing
(5,214)
Net increase (decrease) in cash
154,118
Cash, Beginning of Year
112,688
Cash, End of year
$ 266,806
See accompanying notes and accountant's report
3
NORm CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
NOTE A- NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Activities
The North Central Texas Regional Certification Agency, Inc. (NGmCA) is a nonprofit agency that
certifies finns as disadvantaged minority or woman-owned business enterprise to participate in the
disadvantaged, minority and woman-owned business contracting programs of its member governmental
entities. The certification standards used to evaluate fmns for certification are based on federal
regulations from the U.S. Department of Transportation, specifically 49 CFRPart 23.
The Agency began operations on April 22, 1992 and it has continued to perfonn the certification function
since then. The primary area of geographical coverage for the certification process provided by
NCTRCA includes the counties of Dallas, Tarrant, Denton, Collin, Rockwall, Kaufman, Johnson and
Packer.
The certification is provided free ofcharge to all vendors that apply fOT the certification. The Agency
provides a certified vendor pool to its member entities. It also participates in workshops and conferences
provided by its member entities.
The government entities that are members of the NCTRCA provide annual membership fees to operate
the Agency. The fees paid are based on a scale according to the population served by each entity and
according to the budget they approve for the Agency.
Recognition of Donor Restricted Contributions
Contributions received are recorded as unrestricted, temporarily restricted, or pennanently restricted
support depending on the existence and/or nature of any donor restrictions. When a restriction expires,
that is when a stipulated time restriction ends or when purpose of the restriction is accomplished,
temporarily restricted net assets are reclassified to unrestricted net assets and reported in the Statement of
Activities as net assets released from restrictions. All contributions to date have been unrestricted.
Estimates
The preparation offmancial statements in confonnity with generally accepted principles require
management to make estimates and assumptions that affect certain reported amounts and disclosures. -
Accordingly, actual results could differ from those estimates.
Property and Equipment
The Agency capitalized all property and equipment acquisitions in excess of $1,000. Purchased property
and equipment is capitalized at cost. Donations of property and equipment are recorded as support at
their estimated fair value at the date of donation. Such donations are reported as unrestricted support
unless the donor has restricted the donated asset to a specific purpose. Depreciation is provided
principally on the straight-line method, over the estimated useful lives of the assets, which is generally
from three to five years. Expenditures for maintenance and repairs are charged against operations.
Functional Expenses
Expenses are charged directly to program in general categories based on specific identification.
4
NORTH CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
Income Tax Status
The Organization is a not·for-profit organization exempt from income taxes under Section SOl(cX3) of
the Internal Revenue Code. Therefore, no provision is made in the financial statements for income taxes.
Investments
Investments in marketable securities with readily; detenninable fair values and all investments in debt
securities are valued at their fair values in the statement of financial position. Unrealized gains and losses
are included in the change in net assets. '
Cash and Cash Equivalents
Cash and cash equivalents include all monies in banks and highly liquid investments with maturity dates
of less than three months.
NOTE B- CASH AND CASH EQUIVALENTS
At December 31, 2000, cash and cash equivalents consisted afthe following:
.'
,
Cash
Money Market Account
Total
NOTE C- PROPERTY AND EQUIPMENT
$234,798
32,008
$266·806
At December 31, 2000, the Agency's assets consisted of the following:
Equipment
Less accwnulated depreciation
Total Property & Equipmeot
$70,023
(34,621)
$35,402
Depreciation expense for property & equipment was approximately $10,635.
5
•
NORTII CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31. 2000
NOTE D- INVESTMENTS
At December 31, 2000, the Agencies investments consisted of the following:
Cost
Investment held in trust
Federal Home Loan Mortgage $207,614
Fair
Value
$209,916
Unrealized
Appreciation
(Depreciation)
$2,302
These funds represent board designated amounts set aside in prior years for the purpose of providing an
income stream for annual operations.
Investment return is summarized as follows:
Interest income
Net realized and unrealized gain
Total unrestricted investment income
$3,061
11,58\
$ 14,642
6
NORTH CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
Management Letter of Comment
Year Ended December 31, 2000
TABLE OF CONTENTS
Management Letter of Comment Report
Management Letter of Comment Memo .....•..... . .... , ..............•0.............. 1-4
To the Board of Directors of
North Central Texas Regional Certification AgencY,Inc.
CORPORATE OFFICE:
1200 Summit Avenue
Suite 410
Fort Worth, TX 76102
Tel 817-315·1448
Fax 817·315·1648
E-mail: [email protected]
Certified Public Accountant
Register Investment Advisor
Securities offered through:
Rushmor $eeurities Corp.
Member NASD and SIPe
Dallas. Texas
The Kn 10 'Your success
In planning and performing our audit of the fmancial statements of North Central
Texas Regional Certification Agency, Inc. ("NCTRCA") for the year ended
December 31, 2000, we considered its internal control in order to detennine our
auditing procedures for the purpose of expressing an opinion on the fmancial
statements and not to provide assurance on internal control. However, we noted
certain matters involving the internal control and its operation that we consider to be
reportable conditions under standards established by the American Institute of
Certified Public Accountants. Reportable conditions involve matters coming to our
attention relating to significant deficiencies in the design or operation on the internal
control that, in our judgment, could adversely affect the organization's ability to
record. process., summarize, and report financial data consistent with the assertions of
management in the financial statements_
Our consideration of internal control was for the limited purpose described in the
preceding paragraph and would not necessarily disclose all matters that might be
reportable conditions. In addition, because of inherent limitations in internal control,
misstatements due to error or fraud may occur and not be detected by such controls.
During our audit, we also became aware of several matters that are opportunities for
strengthening internal controls and operating efficiency.
The memorandum that accompanies this letter sununarizes our comments and '
suggestions concerning the reportable conditions and other matters.
This report is intended solely for the information and use of the Board of DirectQrs,
and management and is not intended to be and should not be used by anyone other
that these specified parties.
We will review the status of these comments during our next audit engagement. We
have already discussed many of these comments and suggestions with various
Agency personnel. and we will be glad to discuss these comments in further detail at
you convenience, to perform any additional study of these matters, or to assist you in
implementing the recommendations.
  LI'A If- / P c
/::g;:';:xas
August 2!, 200!
NORTH CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
December 31, 2000
REPORTABLE CONDmONS
Deposit Cash Receipts on a Timely Basis
Cash receipts are not being deposited on a timely basis. The revenue log showed membership dues that
were received by the agency between December 15.2000 and January 2, 2001 but were not deposited
until January 9, 2001. Another deposit made on December 13,2000 for membership dues was received
by the agency between November 26. 2000 and December 11, 2000. This indicates that there is, at times,
as much as a lapse of three weeks between the time the funds are received and the time funds are
deposited into the bank. As a result, not only is there risk of loss from burglary, misplacement, or
misappropriation, but the cash is not available for expenditures or investment. We recommend that
deposits be made on a daily basis both to improve cash flow and to reduce the risk of loss. If it is
inconvenient for an Agency employee to make daily trips to the bank, use of a lockbox system might be
considered, whereby payments are sent to a post office box and collected by the bank each day.
Reconcile Bank Accounts on a Timely Basis
The agency did not prepare bank reconciliatons during the year. Timely preparation ofcomplete and
accurate bank reconciliations is a key to maintaining adequate control over both cash receipts and
disbursements. Not reconciling accounts on a monthly basis means that errors or other problems might
not be recognized on a timely basis. Also, it is generally easier and less time-consuming to reconcile
accounts while transactions are fresh in mind. We recommend that all bank accounts, which include the
checking and money market accounts. be reconciled each month and they also be reviewed for accuracy
and completeness on a timely basis. Someone other than the person that prepares the deposits or writes
the checks should perform the reconciliation. This will reduce the risk that misappropriation ofcash
assets could be concealed.
Shift from Spreadsheets to an Integrated Business Software System
At present, the Agency is very dependent on Excel spreadsheets to compile and maintain accounting
information. Such a system does not permit the preparation of accurate and reliable fmancial statements.
The importance ofa good accounting system cannot be overemphasized. Without adequate financial
records, management is basing its decision on incomplete andlor inaccurate information during the year,
and excessive time is spent at year-end in preparing and auditing the financial statements. We believe that
the Agency needs to significantly reduce the use of external (Excel) spreadsheets and shift toward an
integrated business software system. An integrated system would eliminate redundant processing and
improve the Agency's access to information. An integrated system would mean that Invoices would only
be keyed into a system once. Analysis and other reviews could be performed online by the appropriate
levels of management based on real-time data entry. Additionally, integrated systems would allow
security features to ensure that only authorized personnel would be allowed to enter. modify, or change
data. Other approved users would have the ability to look up data but not to originate or change it. We
would be pleased to assist the Agency in selecting an appropriate system.
Update Leased Employees Agreement
During our audit we noted that Ms. Sheena Suber was paid for 90 days of maternity leave which was not
included as a reimbursable benefit in All Temps' employee leasing agreement or employee manuaL The
Agency retained the services of All Temps to staff its office. An agreement was signed in 1996 and has
not been reviewed by the Agency and All Temps in the ensuing years. Since the Agency is still with the
leading company and changes might have occurred in the last five years, we recommend that the
agreement be reviewed periodically to protect against possible misunderstanding about the terms and
benefits that apply during the extended period and that the employee manual provided by All Temps be
made current to agree with the Agency's approved benefits.
NORTH CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
December 31, 2000
Create a Travel and Entertainment Expense Policy aDd Properly Approve Reimbunement
Expenses
We noted that the Agency's existing reimbursement procedures place the Executive Director in the
position of approving and signing his reimbursements. We also noted that rates reimbursed for meals and
incidental expenses appeared to be higher than those set by the IRS guidelines. Internal control over
reimbw-sements is most effective when there is a clear separation of duties between the person receiving
·the reimbursement, the person approving the reimbursement for payment, and the person signing the
disbursement check. We recommend that:
• Reimbursement reports be approved and signed by an officer of the Board,
• A travel and entertainment expense policy be developed, and
• Such policy be structure to meet IRS guidelines.
Review the hvestment Policy
During our audit we reviewed the investment policy and found that the fonowing procedures were not
perfonned as required by the investment policy:
• The agency's investment policy requires the investment committee to meet at least quarterly
during the year. It appears that the investment committee did not meet during the year.
• The agency's investment policy requires written procedures for the operation of the investment
program. It appears that there is no written procedures exist to operate the investment program.
• The agency's investment policy requires quarterly invesnnent reports and a comprehensive
annual report on the invesbnent program by the Treasurer, however no reports were issued during
the year.
• The agency did not have documentation showing proper approval of investment sales and
purchases. The investment policy states that purchases and sales should be documented on the
Agency's investment transaction forms and approved by the Treasurer or Assistant Treasurer.
We recommend that the Agency review its investment policy to determine whether the current policy
should be maintained and the best way to implement the policy requirements.
Diversify the Investment Portfolio
The agency's investment policy requires adequate portfolio diversification. It appears that 100% ofthe
funds were invested in securities of the Federal Home Loan Mortgage and a money market account. The
Agency should diversify their portfolio to comply with the investment policy.
MANAGEMENT COMMENTS
Reduce Large Balances in Checking Acconnt and Eliminate Uninsured Cash Balances
Since cash is frequently received well in advance of current requirements, the Agency occasionally has a
large balance in the checking account for extended periods oftime. For instance, we noted that the
checking account had a balance of over $300,000 from April through June 2000. Since individual
accounts are currently FDIC insured for a maximum of $100,000, we recommend that the Agency not
keep a balance greater than that amount in accounts at anyone financial institution. Furthermore, with
strong budget control over expected cash needs and adequate cash projections, such dormant funds could
be deposited in higher-yielding accounts or used to purchase short-term government securities or
certificates ofdeposit. For example, we estimate that S2,5 I 0 could have been earned if$200,000 had been
invested in a certificate of deposit during the period of April through June 2000 at a 5% average interest
rate.
2
NORTH CENTRAL TEXAS REGIONAL CERTmCATION AGENCY, INC.
December 31, 2000
Cancel Documents Supporting Disbunemeuts
We noted that paid invoices were not cancelled after payment was made. Papers and documents
supporting disbursements should be cancelled (stamped "Paid"') in such a manner as to render them
ineffective as a support for further payment at the time the checks are signed rather than when the checks
are prepared. The signed checks should then be fOlWarded for mailing to someone other than persons
preparing the checks or approving invoices for payment.
We believe that controls over cash disbursements could be improved by perfonning the following
procedures when paying bills:
• Cancel invoices by indicating the date paid, check number, etc. on the invoice.
• Have the person signing the check initial the invoice to indicate review of the invoice.
• File paid invoices in a manner that makes them easily accessible.
These procedures will help prevent unauthorized payment of invoices or invoices from being paid twice.
Develop an Accounting Procedures Manual
We noted that the Agency does not have an accounting procedures manual. There may be an assumption
that because the Agency's accounting is relatively simple that there is no need for a manual. However,
written procedures, instructions, and assignments of duties will prevent or reduce misunderstandings,
errors, inefficient or wasted effort duplicated or omitted procedures, and other situations that can result in
inaccurate or untimely accounting records. A well devised accounting manual can also help to ensure that
all similar transactions are treated consistently, that accounting principles used are proper, and that
records are produced in the form desired by management. A good accounting manual should aid in the
training of new employees and possibly allow for delegation to other employees of some accounting
functions management performs.
It will take some time and effort for management to develop a manual; however, we believe this time will
be more than offset by time saved later in training and supervising personnel. Also, in the process of the
comprehensive review of existing accounting procedures for the purpose ofdeveloping the manual,
management might discover procedures that can be eliminated or improved to make the system more
efficient and effective. Should management desire; we would be pleased to develop an accounting
manual as a separate engagement.
Hire a Full-time or Assistant Bookkeeper
At present, the Executive Director maintains the Agency's financial records. It appears that additional
bookkeeping time may be needed to perform all the necessary bookkeeping functions. We recommend
that an effort be made to hire an assistant bookkeeper. This, in conjunction with the accounting
procedures manual, should help produce the consistent and accurate accounting system desired.
Establisb a Fixed Asset Capitalization Policy and a Policy for Recording Donated Assets
We noted that the Agency does not have a set policy for capitalization affixed assets and consequently
the treatment of property additions and repairs and maintenance is not consistent. Also. donated property
in previous years was recorded and depreciated inconsistently. The items require the same amount of
record keeping by the Agency regardless of the size of the transaction. We recommend that management
establish a policy whereby all property purchases over $1,000 and having a useful life ofone year or more
are capitalized. Also, we recommend that management establish a policy to record donated assets at their
fair market value at the time of donation. Purchases costing less than the established amount or having a
useful life of less than one year should be expensed, since the cost of maintaining depreciation records for
such items would exceed the benefits. The Agency should also document the capitalization and donated
3
NORTH CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
December 31, 2000
property policies and communicate them to those who code property invoices to ensure the policy is
consistently followed.
Documeut Related-party Transactions
During our audit, we noted that there is no procedures to report and document related party transactions.
Related-party transactions are often scrutinized quite closely by the IRS and may be disallowed if the
amounts and the business purpose are not clearly identifiable. Additionally, related party transactions if
not properly reported could put the Agency in media relations problems that could cause negative
exposure for the Agency members. We recommend that management require a yearly-related party
questionnaire from all its member City Councils.
4
To the Board of Directors of
North Central Texas Regional Certification Agency, Inc.
CORPORATE ornCE:
1200 Summit Avmue
Suite 410
Fon Wonh, TX 76102
Te1817-31.5-1448
Fax 817-31.5-1648
E-mail: [email protected]
Certified Public •.o\ttountant
Regimr InvesUllent Advisor
Securities ofJered through:
Rushmor Securities Corp.
Member NASD and SIPC
DaIla5, Tcxa5
17u KeY l() your sucass
In planning and performing our audit of the financial statements ofNorth Central
Texas Regional Certification Agency, Inc. ("NCTRCAj for the year ended
December 31. 2000, we considered its internal control in order to determine our
auditing procedures for the purpose of expressing an opinion on the financial
statements and not to provide assurance on internal control. However, we noted
certain matters involving the internal control and its operation that we consider to be
reportable conditions under standards established by the American Institute of
Certified Public Accountants. Reportable conditions involve matters coming to our
attention relating to significant deficiencies in the design or operation on the internal
control that, in our judgment, could adversely affect the organization's ability to
record, process. summarize, and report financial data consistenl with the assertions of
management in the financial statements.
Our consideration of internal control was for the limited purpose described in the
preceding paragraph and would not necessarily disclose all matters that might be
reportable conditions. In addition, because of inherent limitations in internal control,
misstatements due to error or fraud may occur and not be detected by such controls.
During our audit, we also became aware of several matters that are opportunities for
strengthening internal controls and operating efficiency.
The memorandum that accompanies this letter summarizes our comments and
suggestions concerning the reportable conditions and other matters.
This report is intended solely for the infonnation and use of the Board of Directors,
and managemenl and is not intended to be and sbould not be used by anyone other
that these specified parties.
We will review the status of these comments during our next audit engagement We
have already discussed many of these conunents and suggestions with various
Agency personnel, and we will be glad to discuss these comments in further detail at
you convenience. to perform any additional study of these matters, or to assist you in
implementing the recommendations.
  P c
F:'Z:';:xas
August 21, 2001
NORTH CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
December 31, 2000
REPORTABLE CONDmONS
Deposit Cash Receipts on a Timely Basis
Cash receipts are not being deposited on a timely basis. The revenue log showed membership dues that
were received by the agency between December 15, 2000 and January 2, 2001 but were not deposited
until January 9,2001. Another deposit made on December 13, 2000 for membership dues was received
by the agency between November 26, 2000 and December 11,2000. This indicates that there is, at times,
as much as a lapse of three weeks between the time the funds are received and the time funds are
deposited into the bank. As a result, not only is there risk of loss from burglary, misplacement, or
misappropriation, but the cash is not available for expenditures or investment. We recommend that
deposits be made on a daily basis both to improve cash flow and to reduce the risk of loss. If it is
inconvenient for an Agency employee to make daily trips to the bank, use of a lockbox system might be
considered, whereby payments are sent to a post office box and collected by the bank each day.
Reconcile Bank Accounts on a Timely Basis
The agency did not prepare bank reconciliatons during the year. Timely preparation of complete and
accurate bank reconciliations is a key to maintaining adequate control over both cash receipts and
disbursements. Not reconciling accounts on a monthly basis means that errors or other problems might
not be recognized on a timely basis. Also, it is generally easier and less time-consuming to reconcile
accounts while transactions are fresh in mind. We recommend that all bank accounts, which include the
checking and money market accounts, be reconciled each month and they also be reviewed for accuracy
and completeness on a timely basis. Someone other than the person that prepares the deposits or writes
the checks should perfonn the reconciliation. This will reduce the risk that misappropriation ofcash
assets could be concealed.
Shift from Spreadsheets to au Integrated Business Software System
At present, the Agency is very dependent on Excel spreadsheets to compile and maintain accounting
information. Such a system does not permit the preparation of accurate and reliable fmancial statements.
The importance of a good accounting system cannot be overemphasized. Without adequate financial
records, management is basing its decision on incomplete and/or inaccurate infonnation during the year,
and excessive time is spent at year-end in preparing and auditing the financial statements. We believe that
the Agency needs to significantly reduce the use of external (Excel) spreadsheets and shift toward an
integrated business software system. An integrated system would eliminate redundant processing and
improve the Agency's access to information. An integrated system would mean that Invoices would only
be keyed into a system once. Analysis and other reviews could be performed online by the appropriate
levels of management based on real-time data entry. Additionally, integrated systems would allow
security features to ensure that only authorized personnel would be allowed to enter, modify, or change
data. Other approved users would have the ability to look up data but not to originate or change it. We
would be pleased to assist the Agency in selecting an appropriate system.
Update Leased Employees Agreement
During our audit we noted that Ms. Sheena Suber was paid for 90 days of maternity leave which was not
included as a reimbursable benefit in All Temps' employee leasing agreement or employee manual. The
Agency retained the services of All Temps to staff its office. An agreement was signed in 1996 and has
not been reviewed by the Agency and All Temps in the ensuing years. Since the Agency is still with the
leading company and changes might have occurred in the last five years, we recommend that the  
agreement be reviewed periodically to protect against possible misunderstanding about the terms and r
benefits that apply during the extended period and that the employee manual provided by All Temp,s.  
made current to agree with the Agency's approved benefits.  
NORTH CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
December 31, 2000
Create a Travel and Entertainment Expense Policy and Properly Approve Reimbursement
Expenses
We noted that the Agency's existing reimbursement procedures place the Executive Director in the
position of approving and signing his reimbursements. We also noted that rates reimbursed for meals and
incidental expenses appeared to be higher than those set by the IRS guidelines. Internal control over
reimbursements is most effective when there is a clear separation ofduties between the person receiving
the reimbursement, the person approving the reimbursement for payment, and the person signing the
disbursement check. We recommend that:
• Reimbursement reports be approved and signed by an officer of the Board,
• A travel and entertainment expense policy be developed. and
• Such policy be structure to meet IRS guidelines.
Review the bvestment Policy
During our audit we reviewed the investment policy and found that the following procedures were not
performed as required by the investment policy:
• The agency's investment policy requires the investment committee to meet at least quarterly
during the year. It appears that the investment committee did not meet during the year.
• The agency's investment policy requires written procedures for the operation of the investment
program. It appears that there is no written procedures exist to operate the investment program.
• The agency's investment policy requires quarterly investment reports and a comprehensive
annual report on the investment program by the Treasurer, however no reports were issued during
the year.
• The agency did not have documentation showing proper approval of investment sales and
purchases. The investment policy states that purchases and sales should be documented on the
Agency's investment transaction fonus and approved by the Treasurer or Assistant Treasurer.
We recommend that the Agency review its investment policy to determine whether the current policy
should be maintained and the best way to implement the policy requirements.
Diversify the Investment Portfolio
The agency's investment policy requires adequate portfolio diversification. It appears that 100% of the
funds were invested in securities of the Federal Home Loan Mortgage and a money market account. The
Agency should diversify their portfolio to comply with the investment policy.
MANAGEMENT COMMENTS
Reduce Large Balances in Checking Account and Eliminate Vuinsured Cash Balances
Since cash is frequently received well in advance ofcurrent requirements, the Agency occasionally has a
large balance in the checking account for extended periods of time. For instance, we noted that the
checking account had a balance ofover $300,000 from April through June 2000. Since individual
accounts are currently FDIC insured for a maximum of $100,000, we recommend that the Agency not
keep a balance greater than that amount in accounts at anyone financial institution. Furthermore, with
strong budget control over expected cash needs and adequate cash projections, such dormant funds could
be deposited in higher-yielding accounts or used to purchase short-term government securities or
certificates of deposit. For example, we estimate that $2,510 could have been earned if $200,000 had been
invested in a certificate of deposit during the period of April through June 2000 at a 5% average interest
rate.
2
NORTH CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
December 31, 2000
Cancel Documents Supporting Disbursements
We Doted that paid invoices were not cancelled after payment was made. Papers and documents
supporting disbUTSements should be cancelled (stamped "Paid") in such a manner as to render them
ineffective as a support for further payment at the time the checks are signed rather than when the checks
are prepared. The signed checks should then be forwarded for mailing to someone other than persons
preparing the checks or approving invoices for payment.
We believe that controls over cash disbursements could be improved by performing the following
procedures when paying bills:
• Cancel invoices by indicating the dare paid, check number, etc. on the invoice.
• Have the person signing the check initial the invoice to indicate review of the invoice.
• File paid invoices in a manner that makes them easily accessible.
These procedures will help prevent unauthorized payment of invoices or invoices from being paid twice.
Develop an Accounting Procedures Manual
We noted that the Agency does not have an accounting procedures manual. There may be an assumption
that because the Agency's accounting is relatively simple that there is no need for a manual. However,
written procedures. instructions. and assigrunents of duties will prevent or reduce misunderstandings.
errors. inefficient or wasted effort duplicated or omitted procedures, and other situations that can result in
inaccurate or untimely accounting records. A well devised accounting manual can also help to ensure that
all similar transactions are treated consistently, that accounting principles used are proper, and that
records are produced in the form desired by management. A good accounting manual should aid in the
training of new employees and possibly allow for delegation to other employees of some accounting
functions management performs.
It will take some time and effort for management to develop a manual; however, we believe this time will
be more than offset by time saved later in training and supervising personnel. Also. in the process of the
comprehensive review of existing accounting procedures for the purpose ofdeveloping the manual,
management might discover procedures that can be eliminated or improved to make the system more
efficient and effective. Should management desire; we would be pleased to develop an accounting
manual as a separate engagement.
Hire a Full-time or Assistant Bookkeeper
At present, the Executive Director maintains the Agency's financial records. It appears that additional
bookkeeping time may be needed to perform all the necessary bookkeeping functions. We recommend
that an effort be made to hire an assistant bookkeeper. This. in conjunction with the accounting
procedures manual, should help produce the consistent and accurate accounting system desired.
Establisb a Fixed Asset Capitalization Policy and a Policy for Recording Donated Assets
We noted that the Agency does not have a set policy for capitalization of fixed assets and consequently
the treatment of property additions and repairs and maintenance is not consistent. Also, donated property
in previous years was recorded and depreciated inconsistently. The items require the same amount of
record keeping by the Agency regardless of the size of the transaction. We recommend that management
establish a policy whereby all property purchases over $1.000 and having a useful life of one year or more
are capitalized. Also. we recommend that management establish a policy to record donated assets at their
fair market value at the time of donation. Purchases costing less than the established amount or having a
useful life of less than one year should be expensed. since the cost of maintaining depreciation records for
such items would exceed the benefits. The Agency should also document the capitalization and donated
3
NORTH CENTRAL TEXAS REGIONAL CERTIFlCATION AGENCY, INC.
December 31, 2000
property policies and communicate them to those who code property invoices to ensure the policy is
consistently followed.
DocumeDt Related-party Transactions
During our audit, we noted that there is no procedures to report and document related party transactions.
Related-party transactions are often scrutinized quite closely by the IRS and may be disallowed ifthe
amounts and the business purpose are not c1eacly identifiable. Additionally. related party transactions if
not properly reported could put the Agency in media relations problems that could cause negative
exposure for the Agency members. We recommend that management require a yearly-related party
questionnaire from all its member City Councils.
4
2002 SUGGESTED BUDGET
OCTOBER 18, 2000
Final Draft
ACCT. # ACCOUNT TITLE 1997 ACTUAL 1998 ACTUAL 1999 ACTUAL 2000 ACTUAL 2001 PROJ 2002 BUDGET
100 Seleries Per-stln,.,£1   $171.616.67 $133,622.16 $180,015.82 $171,600.00 $231,015.00 $261.137.00
SUB-TOTAL $171.616.67 $133,822.16 $180.015.82 $171,600.00 $231,015.00 $261.137.00
200 Supplies $1,603.13 $3,089.21 $7,081.82 $5,900.00 $4,410.00 $5,000.00
210 Postage $5,481.10 $6,769.77 $7,757.84 $8,100.00 $7,025.00 $7,500.00
SUB-TOTAL $7,084.23 $9,858.98 $14,839.66 $14,000.00 $11,435.00 $12,500.00
301 Printing/Copies $138.00 $150.00 $0.00 $0.00 $0.00 $0.00
300 Copy Machine Lease &Maint. $6,655.68 $5,260.00 $6,218.12 $7.550.00 $12,771.00 $15,192.00
310 Telephones, Long Distance $11.717.51 $10,739.71 $14,091.85 $14,000.00 $12,663.00 $12,000.00
302 Fax Services $828.93 $419.00 $0.00 $0.00 $0.00 $0.00
320 Office Space/Utilities $29,679.27 $30,265.55 $33,740.93 $31.500.00 $36,184.00 $37,200.00
330 Bank Service Charge $0.00 $25.12 $53.07 $31.00 $31.00 $50.00
340 Automobile Expense @ $.32/ml $678.15 $2.145.56 $7,150.10 $9,500.00 $12,300.00 $9,000.00
341 Professional Develop. Training $0.00 $0.00 $0.00 $298.00 $0.00 $0.00
350 Professional Serve. (Programming) $4,704.00 $9.151.50 $14,566.25 $4,100.00 $3,500.00 $2,000.00
360 Prof. Serve. (Emp. Leasing Fees) $50,733.99 $54,894.00 $51.372.78 $51,100.00 $0.00 $0.00
361 Prof. Serve. (Emp. Leasing Hlth.) $8,692.02 $12,900.00 $8.300.00 $14,800.00 $0.00 $0.00
370 Professional Serve. (Legal, etc.) $21,137.81 $12.000.00 $19,063.52 $12,000.00 $35,000.00 $12.000.00
371 Professional Serve. (Audit) $0.00 $0.00 $0.00 $0.00 $5,000.00 $5,000.00
380 Insurance (WC/GUEtc.) $916.00 $812.00 $812.00 $812.00 $642.00 $900.00
381 Insurance (Errors/Omissions) $3,000.00 $3,000.00 $3,000.00 $3.000.00 $3.200.00 $3,200.00
SUB-TOTAL $138,881.36 $141.762.44 $158,368.62 $148,691.00 $121.291.00 $96,542.00
TOTAL OPERATING $317,582.26 $285,443.58 $353.224.10 $334,291.00 $363.741.00 $370,179.00
400 Equipment $4.861.27 $1.045.00 $4.117.48 $0.00 $0.00 $0.00
410 Furniture $0.00 $0.00 $0.00 $1,134.00 $0.00 $0.00
TOTAL CAPITAL $4,861.27 $1,045.00 $4,117.48 . $1,134.00 $0.00 $0.00
TOTAL EXPENDITURES $322,443.53 $286,488.58 $357,341.58 $335,425.00 $363,741.00 $370,179.00
NORTH CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
Management Letter of Comment
Year Ended December 31, 2000
TABLE OF CONTENTS
Management letter of Comment Report
Management Letter of Comment Memo ... ......•.•.... 1-4
0'
 
& Associate'"
To the Board of Directors of
North Central Texas Regional Certification Agency, Inc.
CORPORATE OFFICE:
1200 Summit Avenue
Suite 410
Fort Worth, TX 76102
Tel 817-315-1448
Fax 817-315-1648
E-mail: [email protected]
Certified Public Accountant
Register Investment Advisor
Securities offered through:
Rushmor Securities Corp.
Member NASD and SIPe
Dallas, Texas
1
In planning and perfonning our audit of the financial statements of North Central
Texas Regional Certification Agency, Inc. (''NCTRCA'') for the year ended
December 31, 2000, we considered its internal control in order to determine our
auditing procedures for the purpose of expressing an opinion on the financial
statements and not to provide assurance on internal control. However, we noted
certain matters involving the internal control and its operation that we consider to be
reportable conditions under standards established by the American Institute of
Certified Public Accountants. Reportable conditions involve matters coming to our
attention relating to significant deficiencies in the design or operation on the internal
control that, in our judgment, could adversely affect the organization's ability to
record, process, summarize, and report financial data consistent with the assertions of
management in the financial statements.
Our consideration of internal control was for the limited purpose described in the
preceding paragraph and would not necessarily disclose all matters that might be
reportable conditions. In addition, because of inherent limitations in internal control,
misstatements due to error or fraud may occur and not be detected by such controls.
During our audit, we also became aware of several matters that are opportunities for
strengthening internal controls and operating efficiency.
The memorandum that accompanies this letter summarizes our comments and
suggestions concerning the reportable conditions and other matters.
This report is intended solely for the information and use of the Board of Directors,
and management and is not intended to be and should not be used by anyone other
that these specified parties.
We will review the status of these comments during our next audit engagement. We
have already discussed many of these comments and suggestions with various
Agency personnel, and we will be glad to discuss these comments in further detail at
you convenience, to perform any additional study of these maners, or to assist you in
implementing the recommendations.
Fort Worth, Texas
August 21, 2001
Certified Public Accouutauts
CORPRATEomCE:
1100 Summit AvelUle Suite 41'
Fort Worda. TX 76102:
Td. 817--315-1448
Fax 817-315-1648
marUou@mmsq»Jtet
NORTH CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
Management Letter of Comment
Year Ended December 31, 2000
The Key to a successfiJ team.
TABLE OF CONTENTS
Management Letter of Comment Report
Management Letter of Comment Memo ... . . . .. 1-4
NORTH CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, [NC.
December 31, 2000
REPORTABLE CONDITIONS
Deposit Cash Receipts on a Timely Basis
Cash receipts are not being deposited on a timely basis. The revenue log showed membership dues that
were received by the agency between December 15, 2000 and January 2, 2001 but were not deposited
until January 9, 2001. Another deposit made on December 13,2000 for membership dues was received
by the agency between November 26,2000 and December 11,2000. This indicates that there is, at times,
as much as a lapse of three weeks between the time the funds are received and the time funds are
deposited into the banl.... As a result, not only is there risk of loss from burglary, misplacement, or
misappropriation, but the cash is not available for expenditures or investment. We recommend that
deposits be made on a daily basis both to improve cash flow and to reduce the risk of loss. If it is
inconvenient for an Agency employee to make daily trips to the bank, use of a lockbox system might be
considered, whereby payments are sent to a post office box and collected by the bank each day.
Reconcile Bank Accounts on a Timely Basis
The agency did not prepare bank reconciliatons during the year. Timely preparation of complete and
accurate bank reconciliations is a key to maintaining adequate control over both cash receipts and
disbursements. Not reconciling accounts on a monthly basis means that errors or other problems might
not be recognized on a timely basis. Also, it is generally easier and less time-consuming to reconcile
accounts while transactions are fresh in mind. We recommend that all bank accounts, which include the
checking and money market accounts, be reconciled each month and they also be reviewed for accuracy
and completeness on a timely basis. Someone other than the person that prepares the deposits or writes
the checks should perfonn the reconciliation. This will reduce the risk that misappropriation of cash
assets could be concealed.
Shift from Spreadsheets to an Integrated Business Software System
At present, the Agency is very dependent on Excel spreadsheets to compile and maintain accounting
infonnation. Such a system does not pennit the preparation of accurate and reliable financial statements.
The importance of a good accounting system cannot be overemphasized. Without adequate fmancial
records, management is basing its decision on incomplete and/or inaccurate infonnation during the year,
and excessive time is spent at year-end in preparing and auditing the financial statements. We believe that
the Agency needs to significantly reduce the use of external (Excel) spreadsheets and shift toward an
integrated business software system. An integrated system would eliminate redundant processing and
improve the Agency's access to infonnation. An integrated system would mean that Invoices would only
be keyed into a system once. Analysis and other reviews could be petfonned online by the appropriate
levels of management based on reaJ-time data entry. Additionally, integrated systems would allow
security features to ensure that only authorized personnel would be allowed to enter, modify, or change
data. Other approved users would have the ability to look up data but not to originate or change it. We
would be pleased to assist the Agency in selecting an appropriate system.
Update Leased Employees Agreement
During our audit we noted that Ms. Sheena Suber was paid for 90 days ofmatemity leave which was not
included as a reimbursable benefit in All Temps' employee leasing agreement or employee manual. The
Agency retained the services of All Temps to staff its office. An agreement was signed in 1996 and has
not been reviewed by the Agency and All Temps in the ensuing years. Since the Agency is still with the
leading company and changes might have occurred in the last five years, we recommend that the
agreement be reviewed periodically to protect against possible misunderstanding about the tenns and
benefits that apply during the extended period and that the employee manual provided by All Temps be
made current to agree with the Agency's approved benefits.
NORTH CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
December 31, 2000
Cancel Documents Supporting Disbursements
We noted that paid invoices were not cancelled after payment was made. Papers and documents
supporting disbursements should be cancelled (stamped "Paid") in such a manner as to render them
ineffective as a support for further payment at the time the checks are signed rather than when the checks
are prepared. The signed checks should then be forwarded for mailing to someone other than persons
preparing the checks or approving invoices for payment.
We believe that controls over cash disbursements could be improved by performing the following
procedures when paying bills:
• Cancel invoices by indicating the date paid, check number, etc. on the invoice.
• Have the person signing the check initial the invoice to indicate review of the invoice.
• File paid invoices in a manner that makes them easily accessible.
These procedures will help prevent unauthorized payment of invoices or invoices from being paid twice.
Develop an Accounting Procedures Manual
We noted that the Agency does not have an accounting procedures manual. There may be an assumption
that because the Agency's accounting is relatively simple that there is no need for a manuaL However,
written procedures, instructions, and assignments of duties will prevent or reduce misunderstandings,
errors, inefficient or wasted effort duplicated or omitted procedures, and other situations that can result in
inaccurate or untimely accounting records. A well devised accounting manual can also help to ensure that
all similar transactions are treated consistently, that accounting principles used are proper, and that
records are produced in the fonn desired by management. A good accounting manual should aid in the
training of new employees and possibly allow for delegation to other employees of some accounting
functions management performs.
It will take some time and effort for management to develop a manual; however, we believe this time will
be more than offset by time' saved later in training and supervising personnel. Also, in the process oftbe
comprehensive review of existing accounting procedures for the purpose of developing the manual,
management might discover procedures that can be eliminated or improved to make the system more
efficient and effective. Should management desire; we would be pleased to develop an accounting
manual as a separate engagement.
Hire a Full-time or Assistant Bookkeeper
At present, the Executive Director maintains the Agency's rmancial records. It appears that additional
bookkeeping time may be needed to perform all the necessary bookkeeping functions. We recommend
that an effort be made to hire an assistant bookkeeper. This, in conjunction with the accounting
procedures manual, should help produce the consistent and accurate accounting system desired.
Establish a Fixed Asset Capitalization Policy and a Policy for Recording Donated Assets
We noted that the Agency does not have a set policy for capitalization of fixed assets and consequently
the treatment of property additions and repairs and maintenance is not consistent. Also, donated property
in previous years was recorded and depreciated inconsistently. The items require the same amount of
record keeping by the Agency regardless of the size of the transaction. We recommend that management
establish a policy whereby all property purchases over $1,000 and having a useful life of one year or more
are capitalized. Also, we recommend that management establish a policy to record donated assets at their
fair market value at the time of donation. Purchases costing less than the established amount or having a
useful life of less than one year should be expensed, since the cost of maintaining depreciation records for
such items would exceed the benefits. The Agency should also document the capitalization and donated
3
NORTH CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
December 31, 2000
property policies and communicate them to those who code property invoices to ensure the policy is
consistently followed.
Document Related-party Transactions
During our audit, we noted that there is no procedures to report and document related party transactions.
Related·parry transactions are often scrutinized quite closely by the IRS and may be disallowed if the
amounts and the business purpose are not clearly identifiable. Additionally, related party transactions if
not properly reported could put the Agency in media relations problems that could cause negative
exposure for the Agency members. We recommend that management require a yearly-related party
questiormaire from all its member City Councils.
4
Certified Pob6c Ac:ooootants
CORPRATE OFFICE:
1200 SGmIIlit AYeDIIe Suite411l
FertWorth, TX76102
Td-117..JJ5-t448
Fax 817-315-1&48
mariIolI@m1llKpLDd
NORTH CENTRAL TEXAS REGIONAL CERTIFICAnON AGENCY, INC.
Financial Statements
December 31, 2000
With Independent Auditor's Report
The Key to a successful team..
CORPORATE OFFICE:
1200 Summit Avenue
Suite 410
Fort Worth, TX 76102
Tel 817·315-1448
Fax 817-315-1648
E-mail: [email protected]
Certified Public Accountant
Register Investmenl Advisor
Securities offered lhrough:
Rushmor Securities Corp.
Member NASD and SIPC
Dallas, Texas
j
INDEPENDENT AUDITOR'S REPORT
To the Board of Trustees
of North Central Texas Regional Certification Agency, Inc.
We have audited the accompanying statement of financial position of North Central
Texas Regional Certification Agency, Inc. (a nonprofit organization) as of
December 31, 2000, and the related statements of activities and cash flow for the
year then ended. These financial statements are the responsibility of the
Organization's management. Our responsibility is to express an opinion 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. 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 financial position of North Central Texas Regional
Certification Agency, Inc. as of December 31, 2000, and the changes in its net
assets for the year then ended in conformity with accounting principles generally
accepted in the Unites States of America.
Fort Worth, Texas
August 21, 2001
TABLE OF CONTENTS
Independent Audttor's Report
Statement of Financial Position ... ... ........... .•. ...... ... ...... .... ... _.. 1
Statement of Activities ... . .. 2
Statement of Cash Flow ...............••......•••......••.......................3
Notes to Financial Statements 4-6
NORTH CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
STATEMENT OF FINANCIAL POSITION
December 31, 2000
ASSETS
Cash and cash equivalents $ 266,806
Investment securities 209,916
Accounts Receivable - Dues 139,550
Other Receivables 150
Property and equipment, net 35,402
TOTAL ASSETS $ 651,824
LIABILITIES
Accounts payable $ 633
Accrued expenses 24,469
Deferred revenue 388,610
TOTAL LIABILITIES 413,712
NET ASSETS
Unrestricted 23B,112
TOTAL NET ASSETS 23B,112
TOTAL LIABILITIES AND NET ASSETS $ 651,824
See accompanying notes and accountant's report.
1
NORTH CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
STATEMENT OF ACTIVITIES
For the twelve Months Ended December 31, 2000
UNRESTRICTED NET ASSETS
Unrestricted revenues and gains
Membership
Investment return
Other Income
TOTAL UNRESTRICTED REVENUES
Expenses
Program services
Certification Program
Total Expenes
INCREASE IN UNRESTRICTED NET ASSETS
NET ASSETS AT BEGINNING OF YEAR
NET ASSETS AT END OF YEAR
See accompanying notes and accountant's report.
$ 378,550
14,642
2,693
395,885
377,867
377,867
18,018
220,094
$ 238,112
2
NORTH CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
STATEMENT OF CASH FLOW
For the twelve Months Ended December 31, 2000
Cash Flows from operating activities
Increase in net assets $ 18,018
Adjustments to reconcile net assets
to net cash used by operating activities
Depreciation 10,635
Investments 147,382
Accounts Receivable (139,550)
Other Receivables (150)
Accounts Payable 633
Accrued Expenses 24,469
Deferred Revenue 97,895
Net Cash provided by Operations 159,332
Cash Flows from investing activities
Used For
Equipment (5,214)
Net cash used in investing (5,214)
Net increase (decrease) in cash 154,118
Cash, Beginning of Year 112,688
Cash, End of year $ 266,806
See accompanying notes and accountant's report.. 3
NORTH CENTRAL TEXAS REGIONAL CERTIFICAnON AGENCY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
NOTE A - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Activities
The North Central Texas Regional Cenification Agency, Inc. (NCTRCA) is a nonprofit agency that
certifies firms as disadvantaged minority or woman-owned business enterprise to participate in the
disadvantaged, minority and woman-owned business contracting programs of its member governmental
entities. The certification standards used to evaluate firms for certification are based on federal
regulations from the U.S. Department of Transportation, specifically 49 CFR Part 23.
The Agency began operations on April 22, 1992 and it has continued to perfonn the certification function
since then. The primary area of geographical coverage for the certification process provided by
NCTRCA includes the counties of Dallas, Tarrant, Denton, Collin, Rockwall, Kaufman, Johnson and
Parker.
The cenification is provided free of charge to all vendors that apply for the certification. The Agency
provides a certified vendor pool to its member entities. It also participates in workshops and conferences
provided by its member entities.
The government entities that are members of the NCTRCA provide annual membership fees to operate
the Agency. The fees paid are based on a scale according to the population served by each entity and
according to the budget they approve for the Agency.
Recognition ofOonor Restricted Contributions
Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted
support depending on the existence and/or nature of any donor restrictions. When a restriction expires,
that is when a stipulated time restriction ends or when purpose of the restriction is accomplished.
temporarily restricted net assets are reclassified to unrestricted net assets and reported in the Statement of
Activities as net assets released from restrictions. All contributions to date have been unrestricted.
Estimates
The preparation offmancial statements in conformity with generally accepted principles require
management to make estimates and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
PropertY and Equipment
The Agency capitalized all property and equipment acquisitions in excess ofSI,OOO. Purchased property
and equipment is capitalized at cost. Donations of property and equipment are recorded as support at
their estimated fair value at the date of donation. Such donations are reported as unrestricted support
unless the donor has remicted the donated asset to a specific purpose. Depreciation is provided
principally on the straight-line method, over the estimated useful lives of the assets, which is generally
from three to five years. Expenditures for maintenance and repairs are charged against operations.
Functional Expenses
Expenses are cbarged directly to program in general categories based on specific identification.
4
NORTH CENTRAL TEXAS REGIONAL CERTIFICATION AGENCY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
Income Tax Status
The Organization is a     organization exempt from income taxes under Section 501(c)(3) of
the Internal Revenue Code. Therefore, no provision is made in the financial statements for income taxes.
Investments
Investments in marketable securities with readily determinable fair values and all investments in debt
securities are valued at their fair values in the statement of financial position. Unrealized gains and losses
are included in the change in net assets.
Cash and Cash Eguivalents
Cash and cash equivalents include all monies in banks and highly liquid investments with maturity dates
of less than three months.
NOTE B- CASH AND CASH EQUIVALENTS
At December 31, 2000, cash and cash equivalents consisted of the following;
Cash
Money Market Account
Total
NOTE C- PROPERTY AND EQUIPMENT
$234,798
32,008
$2.0.6,800
At December 31, 2000, the Agency's assets consisted of the following:
Equipment
Less accumulated depreciation
Total Property & Equipment
$70,023
(34,621)
$35,402
Depreciation expense for property & equipment was approximately $10,635.
5
NORTH CENTRAL TEXAS REGIONAL CERTlFlCAnON AGENCY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
NOTE D - INVESTMENTS
At December 31, 2000, the Agencies investments consisted of the following:
Investment held in trust
Federal Home Loan Mortgage
Cost
$207,614
Fair
Value
$209,916
Unrealized
Appreciation
(Depreciation)
$2,302
These funds represent board designated amounts set aside in prior years for the purpose of providing an
income stream for annual operations.
Investment return is summarized as follows:
Interest income
Net realized and unrealized gain
Total unrestricted investment income
$3,061
11,581
$ 14,642
6
CITY OF ARLINGTON
CITY OF DALLAS
CITY OF DESOTO
CITY OF FORT WORTH
CITY OF GARLAND
CITY OF MESQUITE
CITY OF PLANO
CITY OF RICHARDSON
DART
DALLAS COUNTY
DCCCD
DFWAIRPORT
FORT WORTH HOUSING
FORT WORTH PUBLIC SCHOOLS
TCMHMR
THE "T"
THE ARENA GROUP
TOTAL
2002 PROJECTED INCOME
MEMBERSHIP RECEIPTS = $340,620
Date Received
$28,600.00
$28,600.00
$2,860.00
$28,600.00
$17,160.00
$17,160.00
$17,160.00
$11,440.00
$28,600.00
$28,600.00
$28,600.00
$28,600.00
$5,720.00
$28,600.00
$5,720.00
$28,600.00
$6,000.00
$340,620.00
NCTRCA
North Central Texas Regional Certification Agency
16, October 2001
To: NCTRCA Board
From: John Kelly
Subject: NCTRCA Management Response To Year 2000 Audit Comments
The auditor Marylou Martinez Stevens, CPA & Associates, PC has provided the Agency
with their comments to the financial audit that was performed for the calendar year 2000.
Their response was provided in two forms - Reportable Condttions and Management
Comments. This document the Agency response to the audtt comments provided to the
Board.
REPORTABLE CONDITIONS
1. Deposit Cash Receipts on a Timely Basis
Cash receipts are not being deposited on a timely basis. The revenue log showed
membership dues that were received by the agency between December 15, 2000 and
January 2, 2001 but was not depostted until January 9, 2001. Another deposit made on
December 13, 2000 for membership dues was received by the agency between November
26, 2000 and December 11, 2000. This indicates that there is, at times, as much as a lapse
of three weeks between the time the funds are received and the time funds are deposited
into the bank. As a resun, not only is there risk of loss from burglary, misplacement, or
misappropriation, but the cash is not available for expenditures or investment. We
recommend that deposits be made on a daily basis both to improve cash flow and to reduce
the risk of loss. If tt is inconvenient for an Agency employee to make daily trips to the bank,
use of a lockbox system might be considered whereby payments are sent to a post office
box and collected by the bank each day.
Agency Comments: Deposits are normally made within two days of receipt. Checks are
retained in a locked drawer until deposit is made. These two incidents occurred during the
holidays. We will be more attuned to checks being received during the holiday period. I
disagree that there is an increase risk of loss because we did not depostt within two days.
Since we have a known income stream burglary, misplacement, or misappropriation is at a
minimum.
2. Reconcile Bank Accounts on a Timely Basis
The agency did not prepare bank any reconciliation during the year. Timely preparation of
complete and accurate bank reconciliation's is a key to maintaining adequate control over
both cash receipts and disbursements. Not reconciling accounts on a monthly basis means
that errors or other problems might not be recognized on a timely basis. Also, tt is generally
easier and less time-consuming to reconcile accounts while transactions are fresh in mind.
We recommend that all bank accounts. which include the checking and money market
Centerpoint Two. 616 Six Flags Drive. Suite 128. Arlington, TX 76011. Metro (81ll 640,0606. Fax (8171 640-6315
accounts, be reconciled each month and they also be reviewed for accuracy and
completeness on a timely basis. Someone other than the person that prepares the deposits
or writes the checks should perfonm the reconciliation. This will reduce the risk that
misappropriation of cash assets could be concealed.
Agency Comments: The Agency does .- ~   i l e its checks monthly. No it does not have a
fonmal report that is typed written, but the report that the Board receives monthly has the
checks that were written and their amounts as background for that report. That report also
contains the amount of money remaining in the bank as well as in the budget. The next
suggestion will resolve any further comments on this issue.
I take exception to the comment that I or anyone of you who sign checks would be prone to
increasing" the risk (that) of misappropriation of cash assets".
3. Shift from Spreadsheets to an Integrated Business Software System
At present, the Agency is very dependent on Excel spreadsheets to compile and maintain
accounting information. Such a system does not permit the preparation of accurate and reliable
financial statements. The importance of a good accounting system cannot be overemphasized.
Without adequate financial records, management is basing its decision on incomplete and/or
inaccurate information during the year, and excessive time is spent at year-end in preparing and
auditing the financial statements. We believe that the Agency needs to significantly reduce the use
of external (Excel) spreadsheets and shift toward an integrated business software system. An
integrated system would eliminate redundant processing and improve the Agency's access to
information. An integrated system would mean that Invoices would only be keyed into a system
once. Analysis and other reviews could be performed online by the appropriate levels of
management based on real-time data entry. Additionally, integrated systems would allow security
features to ensure that only authorized personnel would be allowed to enter, modify, or change data.
Other approved users would have the ability to look up data but not to originate or change it. We
would be pleased to assist the Agency in selecting an appropriate system.
Agency Comments: The Agency agrees. As of 1, January 2001, if the Agency retain.s its
role it will be utiliZing Quicken to write and maintain it financial books. Computerized checks
will be order to facilitate this transfer of functions.
4. Update Leased Employees Agreement
During our audit we noted that Ms. Sheena Suber was paid for 90 days of maternity leave which was
not induded as a reimbursable benefit in All Temps' employee leasing agreement or employee
manual? The Agency retained the services of AU Temps to staff its office. An agreement was
signed in 1996 and has not been reviewed by the Agency and All Temps in the ensuing years. Since
the Agency is still with the leading company and changes might have occurred in the last frve years,
we recommend that the agreement be reviewed periodically to protect against possible
misunderstanding about the terms and benefits that apply during the extended period and that the
employee manual provided by All Temps be made current to agree with the Agency's approved
benefits.
Agency Comments: The Agency disagrees. The process whereby Mrs. Suber was paid
maternity leave was part of the policy that AilTemps1 utilizes to manage the staff and the
Agency resources. No, it was not in the original printed policy manual because it was not
anticipated that a "family leave" policy would be necessary for the Agency. However, when
it became necessary AiiTemp1 did develop, write and institute a policy to satisfy the
requirements of the Agency. During the u   ~ the Director researched other governmental
entities policies to ensure that the policy utilized by the Agency and AIITemps1 did not
violated the law. The family leave policy is consistent ~ other governmental entities
policies.
5. Create A Travel and Entertainment Expense Policy and Property Approve
Reimbursement Expenses
We noted that the Agency's existing reimbursement procedures place the Executive Director in the
position of approving and sjgning his reimbursements. We also noted that rates reimbursed for
meals and incidental expenses appeared to be higher than those set by the IRS gUidelines. Internal
control over reimbursements is most effective when there ;s a clear separation of duties between the
person receiving the reimbursement, the person approving the reimbursement for payment, and the
person signing the disbursement check.
We recommend that:
(a) Reimbursement reports be approved and signed by an officer of the Board,
(b) Atravel and entertainment expense policy is developed, and such policy is structure to meet IRS
guidelines.
Agency Comments: Concur. The reimbursement policy implemented in calendar year 2001
precludes the Director from signing his own reimbursement check. ti has been the policy of
the Agency to utilize the reimbursement rate utilized by the member entities.
6. Review the Investment Policy
During our audit we reviewed the investment policy and found that the following procedures were not
performed as required by the investment policy:
(a) The agency's investment policy requires the investment committee to meet at least quarterty
during the year. It appears that the investment committee did not meet during the year. The
agency's investment policy requires written procedures for the operation of the investment program.
It appears that there is no written procedures exist to operate the investment program.
(b) The agency's investment policy requires a quarterly investment report and a comprehensive
annual report on the investment program by the Treasurer, however no reports were issued during
the year.
(e) The agency did not have documentation showing proper approval of investment sales and
purchases. The investment policy states that purchases and sales should be documented on the
Agency's investment transaction forms and approved by the Treasurer or Assistant Treasurer.
We recommend that the Agency review its investment policy to determine whether the current policy
should be maintained and the best way to implement the policy requirements.
7. Diversify the Investment Portfolio
The agency's investment policy requires adequate portfolio diversification. It appears that 100% of
the funds were invested in securities of the Federal Home Loan Mortgage and a money market
account. The Agency should diversify their portfolio to comply with the investment policy.
Agency Comments: Modify the policy to include a tier approach to investment.
MANAGEMENT COMMENTS
1. Reduce large Balances in Checking Account and Eliminate Uninsured Cash
Balances
Since cash is frequently received well in advance of current requirements, the Agency occasionally
has a large balance in the checking account for extended periods of time. For instance, we noted
that the checking account had a balance of over $300,000 from April through June 2000. Since
individual accounts are currently FDIC insured for a maximum of $100,000, we recommend that the
Agency not keep a balance greater than that amount in accounts at anyone financial institution.
Furthermore, with strong budget control over expected cash needs and adequate cash projections,
such dormant funds could be deposited in higher-yielding accounts or used to purchase short-term
government securities or certificates of deposit. For example, we estimate that $2,510 could have
been eamed $200,000 had been invested in a certificate of   during the period of April
through June 2000 at a 5% average interest rate.
Agency Comments: Concur the Agency will ensure that deposfts that exceed the
$100,000 level be placed in an investment account.
2. Cancel Documents Supporting Disbursements
We noted that paid invoices were not canceled after payment was made. Papers and documents
supporting disbursements should be canceled (stamped ·Paid") in such a manner as to render them
ineffective as a support for further payment at the time the checks are signed rather than when the
checks are prepared. The signed checks should then be forwarded for mailing to someone other
than persons preparing the checks or approving invoices for payment.
We believe that controls over cash disbursements could be improved by performing the following
procedures when paying bills:
Cancel invoices by indicating the date paid check number, etc. on the invoice.
Have the person signing the check initial the invoice to indicate review of the invoice.
File paid invoices in a manner that makes them easily accessible.
These procedures will help prevent unauthorized payment of invoices or invoices from being paid
twice. .
Agency Comments: Concur, the Agency will procure a stamp to stamp the invoices paid.
3. Develop an Accounting Procedures Manual
We noted that the Agency does not have an accounting procedure manual. There may be an
assumption that because the Agency's accounting is relatively simple that there is no need for a
manual. However, written procedures, instructions, and assignments of duties will prevent or reduce
misunderstandings, errors, inefficient or wasted effort duplicated or omitted procedures, and other
situations that can result in inaccurate or untimely accounting records. A well devised accounting
manual can also help to ensure that all similar transactions are treated consistently, that accounting
principles used are proper, and that records are produced in the form desired by management. A
good accounting manual should aid in the training of new employees and possibly allow for
delegation to other employees of some accounting functions management performs.
It will take some time and effort for management to develop a manual; however, we believe this time
will be more than offset by time saved later in training and supervising personnel. Also, in the
process of the comprehensive review of existing aCcounting procedures for the purpose of
developing the manual, management might discover procedures that can be eliminated or improved
to make the system more efficient and effective. Should management desire; we would be pleased
to develop an accounting manual as a separate engagement.
Agency Comments: The Agency has asked the audijor to provide ij with a copy of the type
of manual she is suggesting for review and possible implementation.
4. Hire a Full-time or Assistant Bookkeeper
At present, the Executive Director maintains the Agency's financial records. It appears that
additional bookkeeping time may be needed to perfonm all the necessary bookkeeping
functions. We recommend that an effort be made to hire an assistant bookkeeper. This, in
conjunction with the accounting procedure manual, should help produce the consistent and
accurate accounting system desired.
Agency Comments: Disagree
5. Establish a Fixed Asset Capitalization Policy and a Policy for Recording Donated
Assets
We noted that the Agency does not have a set policy for capitalization of fixed assets and
consequently the treatment of property additions and repairs and maintenance is not consistent.
Also, donated property in previous years was recorded and depreciated inconsistently. The items
require the same amount of record keeping by the Agency regardless of the size of the transaction.
We recommend that management establish a policy whereby all property purchases over $1 ,000
and having a useful life of one year or more are capitalized. Also, we recommend that management
establish a policy to record donated assets at their fair market value at the time of donation.
Purchases costing less than the established amount or having a useful life Of less than one year
should be expensed, since the cost of maintaining depreciation records for such items would exceed
the benefits. The Agency should also document the capitalization and donated property policies and
communicate them to those who code property invoices to ensure the policy is consistently follOWed.
Agency Comments: Concur. The Agency has no equipment that cost over $1,000.
6. Document Related-party Transactions
During our audit, we noted that there is no procedures to report and document related party
transactions. Related-party transactions are often scrutinized quite closely by the IRS and
may be disallowed if the amounts and the business purpose are not clearty identifiable.
Additionally, related party transactions if not property reported could put the Agency in
media relation's problems that couJd cause negative exposure for the Agency members. We
recommend that management require a yearty-related party questionnaire from all ijs
member Cijy Councils.