================================================================================ Individually identifiable subscriber account information is obscured in online reports. Full reports on file in the permanent records of the Cooperative are available for inspection on request by Members. ================================================================================ OBJECTIVES OF THE 1998 AUDIT - To verify Member Journal balances. - To compare payments received to bank deposits. - To verify all disbursements. - To evaluate GIAC record-keeping procedures. SUMMARY REPORT Timeliness of the Report Per GIAC Bylaws, the Audit Committee is charged with producing this report "within 90 days of the close of operations for the fiscal year" for inclusion with the Annual Report of the Board of Directors to the Annual Membership Meeting. However, nonfeasance by the original Audit Committee and the subsequent resignation of its chair (the Vice-President) resulted in the appointment by the Board in May 1999, of a replacement ad hoc Audit Committee charged with producing the required report. Findings of the Committee GIAC's checkbook-related records were found to be in good order; however, numerous transaction and account balance errors were identified in the Member Journals. In addition, conduct of the audit was made unnecessarily difficult by the condition and incompleteness of the materials presented to the Committee for examination. This report therefore addresses and emphasizes the need for changes to GIAC policies regarding financial record keeping and reporting procedures. A major goal of the recommended changes is to facilitate subsequent handling and understanding of the financial records by GIAC principals, tax preparers and future Audit Committees. DETAIL REPORT Member Journals Detailed examination of one hundred seven (107) Member Journals and comparison with GIAC Webmaster records revealed a relatively large number (78) of transaction errors and omissions resulting (if uncorrected) in a net loss to the Cooperative of $224.00. [Some errors were in favor of the Cooperative (i.e., against the Membership), but most were against the Cooperative.] The largest number of errors resulted from the misapplication of GIAC policy with regard to the assessment of VIP activity fees. An adjustment is recommended in the Proposals section below to achieve an equitable application of fees to all Members. Other Journal corrections should be made, if possible, in collaboration with each Member affected. [Some affected Members have resigned and are long gone.] Payments and Deposits Total 1998 bank deposits were reconciled within $14.00 of total Member payments (the difference possibly being attributable to an unrecorded Member payment or error by the Audit Committee). [Due to the lack of itemized breakdowns for each deposit, this analysis essentially required the reconstruction of all deposit records.] [Special comment: The notable absence of an interest-earning account (ordered by the Board in July 1997) to house GIAC reserve funds has resulted in an estimated net loss to GIAC of at least $500.00.] Disbursements Each check written in 1998 was validated as to proper payee and purpose. [However, incomplete details (i.e., supporting documentation) were provided regarding the makeup of most payments (e.g., the monthly ISP service payment calculation).] Record-keeping Procedures The financial records presented for review were found to be disorganized, inconsistent and incomplete, with many errors and omissions becoming evident under close scrutiny. This was no surprise, considering the frequency of account balances disputed by Members during recent months (after receiving service suspension warnings). In particular, far too much time was required by the Committee to decipher and verify the records. There is much room in this area for improvement. PROPOSALS Procedure Proposals A number of needed procedural and record-keeping changes were identified and will be incorporated into the upcoming Treasurer and Accounts Manager orientations. In addition, steps should be taken by the Audit Committee to contact all affected Members (and ex-Members) for the purpose of applying the identified corrections to individual accounts. Policy Proposals [Considerations and details regarding these proposals will be immediately forthcoming via e-mail proposals to the Directors.] - Member accounts should be adjusted to account for improper and inequitable application of the VIP activity fee since August 1998. - All disbursements to Members should be reviewed for compliance with GIAC policy (perhaps by the Audit Committee) before refund payments are authorized. - Payments to GIAC principals who normally authorize payments should be reviewed by a second party (again, perhaps the Audit Committee). Respectfully submitted, Neil McLeod 1998 Ad Hoc Audit Committee July 1, 1999 [CLOSE WINDOW TO GO BACK]