State of Ohio audit of the MSD

The most recent Cincinnati Enquirer article concerning the Metropolitan Sewer District (MSD) focuses on $100,000 that the MSD paid in police salary but there is a bigger issue. The MSD has millions of dollars in ledger errors...apparently nobody in the MSD, city council, or county council knows what is actually being spent at the MSD. The special audit by the State of Ohio found this most distressing and calls out the lack of internal controls as a concern.

Page 56 of the Audit:

Financial Statements - Statement of Net Position:  

 There was no total line for Deferred Outflows.  The two line items in this category should have totaled to $42.4 million   

 Deferred outflows were reported below Net Position as the last item on the statements instead of after Total Assets  

 The total Net Pension Liability at December 31, 2015 of $266.9 million was reported as Net Pension Obligation and compared to the 2014 GASB 27 Net Pension Obligation  

 The Net Pension Liability at December 31, 2015 was reported as a lump sum of $266.9 million instead of identifying separate amounts for the Ohio Public Employee Retirement System (OPERS) of $1.8 million and the Cincinnati Retirement System CRS of $265.1 million  

Cash Flow Statements: 

 Income from operations was reported as $50.6 million, but should have agreed with the operating statement amount of $107.4 million.

 The Cash and Cash Equivalents amount was reported as $152.7 million, which did not the Statement of Net Position or Notes to the financial statements amount of $160.2 million.

 The reconciliation section contained errors in various numbers and items noted as reconciling items: certain reconciling items in listed in this section were not supported by related ledger and worksheets prepared by the District.     

Notes to the Financial Statements:  

 Capital Asset depreciation columns not consistent with prior year disclosure: amount were presented in the wrong columns, positive numbers were presented as negative numbers, and vice versa.     

 OPERS information was missing from the restatement note  

 Various numbers throughout the notes did not agree to other areas of the report, the notes contained information that was no longer relevant, and the notes did not include all required pension disclosures. For example, long term debt that no longer applied was included in the tables with a zero balance, and descriptions for these debt issues continued to be disclosed; 2013 fund balance restatement information continued to be disclosed; and the other post-employment benefit disclosure was not included in the pension section.  

The District has posted material audit adjustments to the financial statements and made significant corrections to the notes to the financial statements where appropriate.  

Lack of internal controls over accounting and financial reporting increases the risk that errors, omissions, theft or fraud could occur and not be detected in a timely manner.