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 the Fall River Line Pier, Inc. (FRLP) for the period July 1, 2020 through June 30, 2023.

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 a list of our audit objectives, indicating each question we intended our audit to answer; the conclusion we reached regarding each objective; and, if applicable, where each objective is discussed in the audit findings.

Objective	Conclusion
Did FRLP’s board of directors establish policies and procedures related to FRLP’s financial activities, including conflicts of interest, travel, donations, and accounts receivable?	No; see Finding 1
Did FRLP make appropriate nonpayroll expenditures that were in line with its mission?	Partially; see Finding 3
Did FRLP attempt collection for all delinquent accounts?	Yes
Did FRLP board members disclose and review transactions that might result in conflicts of interest?	No; see Findings 1 and 2

To accomplish our audit objectives, we gained an understanding of the aspects of FRLP’s internal control environment relevant to our objectives by conducting observations and interviews with FRLP’s management and members of the consulting firm. In addition, to obtain sufficient, appropriate evidence to address our audit objectives, we performed the procedures described below.

Response to Prior Audit Report Findings Regarding Policies and Procedures

To determine whether FRLP implemented corrective actions in response to our prior audit report (2019-0504-3A), we took the following actions. We interviewed FRLP and members of the consulting firm about whether updates were made to policies and procedures. We requested the meeting minutes from all six board meetings held during the audit period. We reviewed the five meeting minutes that were made available for any evidence of board discussions and/or approvals related to financial policies and procedures, including conflicts of interest, travel, donations, and accounts receivable.

We also noted that neither FRLP nor the member of the consulting firm could locate the meeting minutes for the meeting held on January 4, 2021. See Finding 2 for more information.

Nonpayroll Expenditures

To determine whether FRLP properly administered its nonpayroll expenditures, we took the following actions. We targeted all 10 nonpayroll reimbursements⁷ (totaling $2,098) that were made to employees and board members from the population of 597 expenditures during the audit period. Additionally, we selected a random, nonstatistical sample of 50 vendor payments, totaling $273,801, from the remaining 587 nonpayroll expenditures. We reviewed supporting documents for all 60 sampled nonpayroll expenditures (invoices, receipts, and bank statements) to determine whether the information was accurately recorded in QuickBooks and whether the nature of the expenditures aligned with FRLP’s mission of operating a state pier.

We found that all 10 nonpayroll reimbursements were supported, were recorded accurately in QuickBooks, and were consistent with FRLP’s mission. We found that all 50 vendor payments were supported and consistent with FRLP’s mission; however, these payments were not always recorded accurately in QuickBooks.

See Finding 3 for more information regarding vendor payments recorded inaccurately in QuickBooks.

Delinquent Accounts

To determine whether FRLP pursued collection of delinquent accounts, we took the following actions. We inquired with the consulting firm to gain an understanding of FRLP’s collection policies. We reviewed physical accounts receivable files for all five tenants with outstanding balances older than 90 days. We looked for evidence of collection activity, such as stamped invoices, correspondence regarding overdue accounts, and documentation of legal action. We found that FRLP did collect on the five delinquent accounts, as evidenced by the invoices we reviewed and the zero balance due as of June 30, 2023.

Conflict of Interest

To determine whether FRLP did business with companies in which board members had financial or personal interests, we took the following actions. We obtained lists of the 18 FRLP board members covering the audit period. We identified five companies paid by FRLP during the audit period in which board members had financial interests. This work included the following actions:

• We searched for these board members’ names in the Secretary of Commonwealth’s corporate database. We identified 89 businesses associated with board members (either through ownership or serving on a business’s board). We compared the list of 89 businesses against FRLP’s vendor list. We identified two matches where an FRLP board member served as a director or president of a related party⁸ that did business with FRLP during the audit period.
• We performed searches using Google, LinkedIn, and company websites associated with board members. We found that FRLP made payments to one company owned by relatives of an FRLP board member. Additionally, this board member also worked for this company.
• We reviewed FRLP insurance policies. We identified two carriers for which two board members worked as insurance agents. FRLP made payments to both companies.

To determine whether FRLP board members properly disclosed these five instances of financial interest, we took the following actions:

• We requested copies of Annual Disclosure Statement Forms for evidence that board members disclosed these relationships.
• We reviewed board meeting minutes for evidence that board members discussed these transactions before they were processed. We looked for evidence that the board determined that the transactions were in the best interests of FRLP by reviewing the majority vote.
• We reviewed expenditure data in QuickBooks to calculate the amount of money paid to these companies during the audit period.

See Finding 1 for more information regarding these transactions.

We used nonstatistical sampling methods for testing and therefore did not project the results of our testing to any populations.

Data Reliability Assessment

QuickBooks

To determine the reliability of the data obtained from QuickBooks, we interviewed members of the consulting firm who were knowledgeable about the data and inquired about transaction types within the data. We also reviewed the System and Organization Control 2 reports⁹ that covered the period May 1, 2022 to April 30, 2023. We determined whether the System and Organization Control 2 reports described testing certain information system general controls (access controls, security management, configuration management, contingency planning, and segregation of duties).

Transaction Data

To determine the reliability of QuickBooks transaction data, we ensured that transaction dates were within the audit period and checked for missing data in key fields. We checked for duplicate check numbers, invoice numbers, and employee names.

Further, we traced the information (name, amount, and check number) from 50 randomly selected QuickBooks transactions to source documentation (invoices, deposit slips, bank statements, and payroll reports). Additionally, we traced a randomly selected sample of 20 transactions from FRLP’s files (invoices, payroll reports, and receivables) to the data in QuickBooks and determined whether the name, amount, and check number agreed to the source documentation. In addition, while conducting our data reliability assessment work for the above objectives, we noted an issue with the accuracy of check numbers in QuickBooks. See Finding 3 for more information.

To determine the reliability of invoice data, we selected 20 random tenant invoices from QuickBooks and traced the information to the 2019 FRLP Domestic Rate Sheet, determining whether FRLP charged the correct rate and billed the correct invoice amount. Further, we traced vendor names, check numbers, and amounts from 20 physical invoices maintained in FRLP’s account receivables files to the QuickBooks data.

Employee List

To determine the reliability of the employee list provided by FRLP’s consulting firm, we traced all 19 FRLP employees active during the audit period from the QuickBooks data to copies of their corresponding Forms W-2. We checked for duplicate employee records within the data. We also verified hire and termination dates with FRLP’s consulting firm.

FRLP Tenant List

To determine the reliability of the tenant list, we interviewed FRLP employees who were knowledgeable about the data. We compared the total count of tenant names provided against the customer list within QuickBooks. We selected a random sample of five companies from the tenant list and checked that FRLP maintained physical accounts receivable files for each. We also randomly selected five companies from the accounts receivable files and ensured that each company was included in the tenant list and QuickBooks data.

Aging Reports

To determine the reliability of the aging report data, we traced the information (tenant name, report date, and account balance) for all records to invoices and check payments in QuickBooks.

We compared the invoice date against the aging report date to calculate the number of days the balance due was delinquent. We determined whether all delinquent records had balances that were over 90 days old.

Board Members

To determine the reliability of the list of board members, we traced all member names to source documents (Annual Report filed with the Secretary of the Commonwealth, 990-PF Return of Private Foundation, and FRLP board meeting minutes).

Based on the results of the data reliability assessment procedures described above, we determined that the information we obtained was sufficiently reliable for the purposes of our audit.

7.    Nonpayroll reimbursements included postage; golf cart gasoline; pier supplies; security badges; office supplies; Transportation Worker Identification credentials; Facility Security Officer training; and related travel expenses such as food, hotel, and airfare.

8.    The [Massachusetts] Attorney General’s Guide for Board Members of Charitable Organizations, which nonprofit 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 that had an association before the transaction.

9.    A System and Organization Control report is a report, issued by an independent contractor, on controls about a service organization’s systems relevant to security, availability, processing integrity, confidentiality, or privacy.

Date published:	April 16, 2025