Erie Land Bank auditors issue clean opinion but flag segregation-of-duties weakness

Independent auditors gave the Erie Land Bank an unmodified (clean) opinion on its 2024 financial statements during the board’s July 21 meeting, but raised internal-control and presentation recommendations the board discussed at length.

The audit firm’s engagement principal, Dustin Star, and manager Jen Croft presented summary figures showing about $243,000 in total assets at Dec. 31, 2024, including roughly $115,000 in cash, $85,000 in accounts receivable and about $43,000 in properties held for sale. The land bank reported total liabilities near $101,000 and unrestricted net position of $141,224. The 2024 statement of revenues and expenses showed operating revenues of about $516,000, operating expenses that produced an approximately $11,000 operating loss, and net change in position of $3,158 after $14,000 in nonoperating revenues, the auditors said. The cash decrease for the year was about $27,000.

Star and Croft told the board auditors found no disagreements with management and no significant audit adjustments. The management letter did identify a significant deficiency in internal controls related to segregation of duties — a common finding for small-staff entities — and recommended that the board review unopened bank statements and have an independent review of bank reconciliations.

Board members pressed the auditors and staff on presentation detail. Several members said the line item labeled “maintenance” (about $232,000) in the audit appears to include demolition, rehabilitation and other property work and should be broken out into subcategories such as demolition, utilities, lawn care and repairs to give the board and the public clearer information. The auditors said they could break out those subcategories for next year’s presentation if management provides guidance on the desired classification.

Board members also questioned a $28,194 “office supplies” total that appeared high. Croft said the auditors had not yet examined the underlying trial-balance detail in the meeting but noted that some payments recorded there were reimbursements to the Redevelopment Authority for items that included binders, computer equipment and software subscriptions; auditors agreed to provide more granular detail if requested.

The management letter also described that certain year-end journal entries and accruals required posting, and it noted there was no formal review or approval of journal entries. Auditors said the draft policies provided by management should address several of those items and recommended additional written procedures and a credit-card policy to strengthen internal controls and continuity if staffing changes.

Board members discussed whether demolition costs should be classified as operating cash flows or as capital/stocking costs related to preparing properties for sale; auditors said classification can be discussed further with management. The board did not take a formal vote on the audit presentation during the meeting; the auditors said the report had been issued in April and was being presented for questions and comment.