1999 09 13 Audit Report Andrew Hoholt

Hoholt Financial Consulting Pty Ltd

PO Box U128

University of New England, Armidale, NSW 2351

Phone/Fax: (02) 6772 9937   Mobile 0411 548 699

Email: hoholt@mpx.com.au

The Chairperson

Mrangalli Aboriginal Corporation

4 Amethyst Street

TINGHA NSW 2369

Dear Vincent

MANAGEMENT LETTER – ANNUAL AUDIT 1998/99

I wish to advise of the completion of the annual audit and financial statements of Mrangalli Aboriginal Corporation for the year ended 30 June 1999.

The financial statements have been compiled in order to comply with the reporting requirements of the Registrar of Aboriginal Corporations and ATSIC. as requested.

A number of issues arose during the conduct of this years audit which are worthy of note, and require some follow-up action:

1. During the course of die audit, it was noted that an amount of $93,997 due to Mrangalli Aboriginal Corporation (MAC) and paid to it by the NSW Department of Housing, and Avern Mclntyre & Co, had not been banked into Mrangalli Aboriginal Corporation bank accounts. Subsequent inquiry revealed that this amount had in fact been banked to Mrangalli Housing Aboriginal Corporation’s (MHAC) bank account. This amount has been booked in die financial statements as an amount receivable from Mrangalli Housing Aboriginal Corporation. This situation arose due to Ute fact that Department of Housing contracts were signed and sealed in die name of Mrangalli Aboriginal Corporation. DOH works orders were similarly issued to Mrangalli Aboriginal Corporation. Staff working on the jobs were paid by the CDEP, and materials purchased for these jobs were largely paid for by the CDEP. I refer to my verbal advice earlier in the financial year, which stated that the DOH contracts had to be signed and sealed in the name of Mrangalli Housing AC, and the DOH works orders issued and materials paid for in this name, for there to be a legal right to receive payments for work done in the Mrangalli Housing Corporation. It is recommended that die amount owed be repaid to MAC as soon as possible, and that all further work be contracted in die name of Mrangalli Housing AC, if this organisation is to be your separately incorporated entity for business activities, as required by Clause 9 of ATSIC’s funding conditions (CDEP) for the 99/2000 year.
2. Whilst the corporation maintains an assets register for assets greater than $ 1.000 in value, it was noted that the assets register maintained does not agree to the balances for Land & Buildings, and Plant & Equipment in the Balance Sheet. Accordingly, no opinion was expressed in my audit report as to the accuracy of die figures for Land & Buildings and Plant and Equipment, as shown on the Balance Sheet. It is recommended that during this financial year, costs or estimated valuations be allocated to items carried on the Corporation’s asset register, so di\\that a revaluation of assets can be undertaken in next year’s accounts to bring your assets register in line with the financial statements MAC may wish to purchase MYOB Asset Manager computer software for your asset management requirements.
3. It was noted that expenditure other than for CDEP Wages was made from the CDEP Wages grant during the financial year. This expenditure was not in accordance with Grant Conditions. The amount incorrectly expended from this account was reimbursed to the CDEP Wages account prior to the end of the financial year. This of course related to the use of the CDEP Wages bank account to purchase the Toyota Starlet. This apparently was done in error. Attention needs to be paid to the use of bank accounts to ensure this does not happen again.One instance was noted of a Mrangalli Aboriginal Corporation asset being disposed of, with the proceeds of that disposal having been banked to Mrangalli Housing Aboriginal Corporation. This amount was repaid by Mrangalli Housing Aboriginal Corporation to Mrangalli Aboriginal Corporation prior to the end of the financial year. This matter refers to the sale of the MAC Bus. Proceeds from any asset sales for assets sold which belong to MAC, must be banked to MAC.
4. Mrangalli Aboriginal Corporation’s administration vehicle – a Toyota Camry wagon was disposed of during the financial year. Ad I recall, this vehicle was “Traded” on the Toyota Starlet, which was owned by MHAC. Mrangalli Aboriginal Corporation has never received compensation for the disposal of this asset. The consideration amount on disposal of this asset could not be ascertained at audit date. In light of the comments made at point 4 above, it is recommended that an appropriate market value be obtained in writing from a motor vehicle dealer for the Toyota Camry wagon at the date of disposal, and that this amount be repaid by Mrangalli Housing Aboriginal Corporation to Mrangalli Aboriginal Corporation.
5. The Corporation failed to hold it’s Annual General Meeting by the due date of 30 September 1998. The AGM was duly held on 16^th October 1998. For your information. I understand that holding your AGM on time may have been difficult given the problems with your last years accounts, but the due date per the Corporation’s rules is 30 September each year.
6. On the 25^th January 1999, a payment for $ 1,522 was made to Boral Concrete. The Cash Payments book narration (housing account) indicates that this purchase was for a property on Copes Creek Road which is owned by Vincent Jcrrard. The documentation supporting this payment indicates that the purchase was supposed to be COD for Vincent Jerrard. I was unable to ascertain from the documentation the actual address on Copes Creek Road to which the material was delivered. I note that no invoice was raised on Vincent’s Debtors account for this amount. If this expenditure is not in fact CDEP related, I recommend that an invoice be raised against the appropriate debtors account(s) to recover these monies.
7. Audit review showed that on 12 October 1998, MAC invoiced Warriors Sporting Club for $6,840. being for die materials & welding of 200 Log Lifters, which were sold to Warriors (invoice 1531). On 15 October, MAC re-purchased these Log Lifters from Warriors for $20,000, being the purchase of goods for re-sale (Cheque 589936 – Generated Income Account). Whilst I appreciate the social benefits which accrue to a community the size of Tingha from the promotion of sporting activities. I must question the commercial reality of this transaction. 1 refer you to ATSIC Grant Conditions, which specify that CDEP Generated Income is to be used for CDEP related purposes. In my opinion, whilst all supporting documentation is on file for these transactions, they represent a breach of funding conditions.
8. During the financial year, a number of instances were noted of loans of funds to staff of the CDEP for personal purposes. Once again, these transactions fall outside those which are allowable under funding conditions, and they expose the corporation to the possibility of financial loss, should the employee concerned terminate employment with the CDEP. It is recommended that no such transactions be permitted in future.

In summary , it appears that there needs to be clear lines drawn between the operations of Mrangalli Aboriginal Corporation, and any other Corporations or individuals which may be affiliated with the CDEP, as it is clear that these lines have been blurred during the 1998/99 financial year. Generally, the processing of transactions during the year were accurate, and the records kept to support the Corporation’s transactions were adequate. Congratulations to the office staff for their efforts during the year. and for the assistance given me during the audit. A recommendation in relation to record keeping:

i) I suggest the use of a cheque requisition voucher covering every cheque payment, with the voucher showing all details of the payment, and the signatures of the persons signing the cheque as evidence of authorisation. A check should also be done prior to payment of an account that goods/services have actually been received, and the voucher should be initialed accordingly.

I also wish to thank the Corporation for the engaging me as auditor this financial year. I trust you have found my service to be accurate and timely, and I hope that I can continue to provide this service to Mrangalli for future financial years.

If you have any questions in relation to this management letter, or your financial statements, please contact me.

Yours Sincerely

Andrew Hoholt, CPA
Hoholt Financial Consulting Pty Ltd
13 September 1999