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An Audit Report on the Engelman Irrigation District

December 2016

Summary Analysis

The Engelman Irrigation District (District) has not implemented sufficient controls to ensure that it can meet its financial obligations. A decrease in water sales revenue, coupled with no change in water sales rates since the District’s fiscal year 2012 and the discontinuation of the District’s maintenance tax as of that fiscal year, have increased the risk that the District may not be able to meet its financial obligations.

As of May 31, 2016, the District had a total of $477,783 available for operational and capital expenditures and a potential liability from a legal judgment that could total $2,499,6832. The District had not made any financial arrangements to address that potential liability. In addition, the District’s expenditures exceeded total revenue for fiscal years 2014 through 2016.

The District also did not comply with certain requirements of Texas Water Code, Chapters 49 and 58; Title 30, Texas Administrative Code, Chapter 293; the Commission on Environmental Quality’s Water District Financial Management Guide; and the District’s policies. For example, it did not (1) determine what percentage of the District’s maintenance and operating expenses should be covered by its various rates, (2) develop written policies and procedures in most key business areas, (3) approve budgets in a timely manner, and (4) sufficiently bond its board members. Auditors communicated other, less significant issues separately in writing to District management.

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