Audit of the Fall River Line Pier, Inc. Objectives, Scope, and Methodology

An overview of the purpose and process of auditing the Fall River Line Pier, Inc.

Overview

In accordance with Section 12 of Chapter 11 of the Massachusetts General Laws, the Office of the State Auditor has conducted a performance audit of certain activities of Fall River Line Pier, Inc. (FRLP) for the period January 1, 2016 through December 31, 2018.

We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Below is our audit objective, indicating the question we intended our audit to answer, the conclusion we reached regarding the objective, and where the objective is discussed in the audit findings.

Objective

Conclusion

Did FRLP administer its financial activities related to non-payroll expenditures and accounts receivable in accordance with its Independent Accountants’ Compilation Report for calendar years 2017 and 2018, The [Massachusetts] Attorney General’s Guide for Board Members of a Charitable Organization, Section 6C of Chapter 180 of the General Laws, Massachusetts State Piers: A Business and Operations Assessment Report, and Chapter 665 of the Acts of 1945?

No; see Findings 1a, 1b, and 1c

 

To achieve our objective, we gained an understanding of the internal control environment we determined to be relevant to our audit objective by reviewing original source documents, performing observations, and conducting interviews with FRLP’s management and the president of its board of directors.

In addition, we performed the following procedures to obtain sufficient, appropriate audit evidence to address our audit objective.

Administration of Non-Payroll Expenditures and Accounts Receivable

• To determine whether FRLP properly administered its non-payroll expenditures, we selected a nonstatistical, judgmental sample of 92 (totaling $141,499) out of a total of 773 non-payroll expenditures paid by FRLP during the audit period. We extracted information about these non-payroll expenditures from FRLP’s electronic accounting system, QuickBooks. We also reviewed original source documents, such as invoices and check payments, for the non-payroll expenditures to determine whether they were accurately recorded in the accounting system, were related to FRLP’s mission, and did not create a conflict of interest due to a related-party transaction¹ with any members of FRLP’s board of directors.
• To determine whether FRLP properly administered its accounts receivable, we selected a nonstatistical, judgmental sample of 198 out a total of 663 accounts receivable transactions recorded by FRLP during the audit period. We also reviewed original source documents, such as invoices, check payments, and deposit slips, for these accounts receivable to determine whether they were accurately recorded in the accounting system and paid within 90 days of the invoice dates. Further, we reviewed all board minutes from the audit period to determine whether FRLP’s board of directors took action to collect any outstanding accounts receivable during each calendar year of our audit period.

Because we used nonstatistical sampling for testing of both non-payroll expenditures and accounts receivable, we did not project the results of either type of test to the total population.

Data Reliability

We determined the reliability of the data obtained from QuickBooks by interviewing members of FRLP’s management who were knowledgeable about the data, reviewed prior audit reports, reviewed QuickBooks documentation, and tested selected information-system controls.

Further, to determine the completeness and accuracy of the data, we randomly selected 30 QuickBooks non-payroll expenditures and determined whether the information from QuickBooks matched the original invoices. Next, we randomly selected a sample of 30 original invoices from FRLP’s files and traced the information on the invoices to the data in QuickBooks. We then selected a random sample of 30 original source documents from FRLP’s accounts receivable, which included each of the three calendar years of the audit period, and traced those sampled documents to QuickBooks.

Additionally, we performed validity and integrity tests on the data for FRLP’s non-payroll expenditures and accounts receivable, including (1) testing for missing records or missing values in key data elements, (2) scanning for duplicate entries, (3) verifying fields to detect any data validity errors, and (4) testing for values outside a designated range. Based on these procedures, we determined that the QuickBooks data were sufficiently reliable for the purposes of our audit.

1.     The instructions for Form PC, issued by the Massachusetts Office of the Attorney General, which not-for-profit organizations use to file financial data, defines a related party as “an officer, director, or trustee (or an individual having powers or responsibilities similar to those of officers, directors, or trustees) of [an] organization.” A related-party transaction is a transaction between parties who had an association before the transaction.

Date published:	June 11, 2020