A Report on the Audit of the Permanent School Fund's Fiscal Year 2006 Financial Statements
April 2007
Report Number 07-029
Overall Conclusion
In our audit report dated February 12, 2007, we concluded that the Permanent School Fund's (Fund) basic financial statements for fiscal year 2006 were materially correct and presented in accordance with accounting principles generally accepted in the United States of America.
Auditors identified a reportable condition regarding controls over financial statement note disclosures.
Auditors identified one weakness in controls over financial reporting that we classified as a "reportable condition." However, this issue is not considered to be a material weakness. The General Land Office (Office) did not prepare two financial statement note disclosures for fiscal year 2006 in a manner that was consistent with procedures it used for the fiscal year 2005 financial statements. As a result, the unaudited note disclosures contained significant errors. The routine internal processes the Office uses to review the financial statements did not identify and correct these inconsistencies. Note disclosures are an integral part of the financial statements.
The inconsistencies resulted from (1) improper application of an accounting pronouncement requiring disclosure of future income from certain leases of surface real estate and (2) the inadvertent departure from the Office's documented method to estimate the fair value of its mineral properties. Auditors recommended, and the Office accepted, audit adjustments to correct the two note disclosures. This issue and management's response, which indicates management agreed with our recommendation, are presented in detail in Chapter 1 of the attachment to this report and in our Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards.
Auditors identified other opportunities to strengthen financial reporting or operational controls.
The major internal controls that we reviewed for the purpose of forming our opinion on the financial statements were generally operating effectively. However, the attachment to this report presents other issues related to financial reporting or operational controls at the Office, as well as management's responses to those issues. The Office agreed with our recommendations.
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