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Audit: Animal Shelter erroneously paid sales tax on credit card transactions

Zach Vance • Jan 13, 2019 at 12:30 AM

Although the animal shelter is designated a 501(c)3 not-for-profit corporation and is exempt from paying sales tax, the Washington County-Johnson City Animal Control Center paid sales tax several times on credit card transactions, the 2018 fiscal year audit found.

The contracted audit by accounting firm Blackburn, Childers & Steagall PLC was released in December and cited five deficiencies in the Animal Control Center’s internal accounting controls, four of which were found in previous years but not corrected.

The only new finding was related to credit card disbursements and deemed a “significant deficiency,” which is less severe in accounting lingo than a “material weakness,” but important enough to merit attention.

“During the audit, multiple credit card transactions were noted that did not have adequate supporting documentation available for review. In addition, several instances of sales tax being paid was noted,” the audit report stated.

The effect of the finding, according to auditors, is the “appropriateness” of some credit card transactions could not be verified, not to mention the sales tax being inadvertently paid.

The exact amount of sales tax paid by the animal shelter was not disclosed, but in response, management said credit card transactions will be monitored monthly to ensure all supporting documentation is kept.

The other four findings carried over from previous years include two “material weaknesses” and two significant deficiencies.

•  Originally found by auditors in 2017, the 2018 fiscal review once again found multiple pledges made during the campaign to build the new animal shelter have not been paid or are not actively being paid by donors.

The audit recommends the Board of Directors review the pledges and determine whether the pledges are collectible and write off those deemed uncollectible. Director Tammy Davis also said she would meet with the director of development to determine the status of those uncollected pledges.

•  The second material weakness cited in the report was originally found in 2015 and it relates to “materially misstated” financial statements.

According to auditors, the Animal Control Center overstated its assets by $22,751 and its total liabilities by $27,938. Total revenues were understated by $79,330 and the total expenses were understated by $148,969. Those errors resulted in the shelter’s net position being overstated $69,638. This finding has carried over from the 2015 audit.

“The Board of Directors is helping oversee the financial statements, and we will take the steps to ensure the financial statements are materially correct,” the Animal Control Center’s corrective action plan stated.

•  The auditors also found a “significant deficiency” with the animal control center’s journal because entries were not being reviewed or supported with documentation. This finding, originally cited in 2016, makes it difficult to readily determine the purpose of each journal entry, the report stated. In response, management said “the director will be made aware of any journal entries each month.”

•  The final finding, carried over from 2016, is related to cash receipts not being used in sequential order because the shelter uses multiple receipt books, something management claims will not be fixed in the foreseeable future.

“To correct this will take moving away from manual receipts and to a computerized receipt system. At the time, there are no capital funds available for this investment in technology, and we are unsure as to when this will be corrected,” the corrective action plan stated.

As far as the actual content of the audit, the Animal Control Center’s total net position decreased $21,028 during the 2018 fiscal year. During the year, expenses were $21,028 more than the $1,363,565 generated revenue.

While the Center’s total revenues did increase by about 26 percent, the total cost of all program increased about 30 percent due to increases in depreciation and salaries related to the new animal shelter facility and increase in employees.

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