An Audit Report on the Kinney County Groundwater Conservation District
January 2006
Report Number 06-021
Overall Conclusion
Significant deficiencies in the Kinney County Groundwater Conservation District's (District) financial operations prevent the District from ensuring that it (1) has timely, complete, and accurate financial information for decision making; (2) is able to meet its financial obligations; or (3) protects against violations, abuse, and fraud. In addition, the District's Board has not demonstrated the financial oversight of the District that is required by Texas Water Code, Section 36.057(a). The lack of proper financial oversight by the Board has contributed to the weaknesses in the District's accounting procedures and controls.
A lack of accounting procedures, controls, and oversight significantly increases the potential for errors, theft, and fraud to occur. Auditors did not identify fraud during testing of the District's revenue and disbursements. However, we cannot provide assurance that fraud has not occurred. The District should act immediately to address serious financial issues and implement a long-term financial remediation plan.
The District complied with 26 (70 percent) of the 37 statutory requirements tested; however, it did not comply with 12 (46 percent) of the 26 District rules tested. The most significant examples of noncompliance were in the areas of well permitting; Board oversight and delegation of authority to the District's general manager; disbursement of District funds; and acceptance of grants, gratuities, advances, or loans. For example:
- In the area of well permitting, the District scheduled three applicants for permit hearings prior to determining whether the applications were administratively complete. According to Texas Water Code, Section 36.114, and District Rule 9.01, these applicants should not have been scheduled for hearings until the District determined that their applications were administratively complete.
- In the areas of Board oversight, delegation of authority, and disbursement of funds, the District's general manager signs District checks and executes contracts on behalf of the District. However, the District was unable to provide a Board resolution authorizing the general manager to carry out these duties as required by Texas Water Code, Sections 36.057(f) and 36.151(b).
Compliance with statute and District rules in these areas is critical to the District's achieving its objectives to conserve, preserve, and protect groundwater and prevent waste.
The District achieved a majority of the objectives in its groundwater management plan and, therefore, it is operational. However, the District neither prepared nor submitted an annual report for 2004 to its Board as required by its groundwater management plan, which was adopted by the District's Board and approved by the Water Development Board.
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