First, the report is not a CPA audit report.
The Pensacola Humane Society referred to the report produced by Saltmarsh, Cleveland & Gund as an audit on its website: “This Report was voluntarily requested by PHS as PHS was under no obligation to perform this type of financial audit.”
However, it is an “Independent Accountant’s Report on Applying Agreed Upon Procedures.”
PHS’ law firm, Cole, Scott & Kissane, points out that it’s not a traditional full accounting audit because it focuses on specific areas of accounting that PHS wanted Saltmarsh to review.
In its cover letter, Saltmarsh writes the purpose of the report was “to review certain accounting records and transactions and overall financial reporting of the Society for appropriateness.” The CPA firm states the report is intended only for the information of the use of the Board of Directors and management.
In other words, the PHS board told Saltmarsh what to review, and this report may not be the forensic audit that former staff and volunteers had wanted.
Unlike traditional audit reports, the Saltmarsh report doesn’t include balance sheets or income and loss statements for 2021 and 2022. There are no footnotes to provide more detailed information that would be found in a traditional audit.
An outsider reading this PHS report only gets a vague view of PHS finances and must rely on the CPA firm’s judgments without supporting documentation.
What does the report say?
Cash: Bank statements were reconciled monthly. The former executive director – unnamed but assumed to be Jan Castillo – and/or board treasurer signed all the checks. No overdrafts occurred thanks to two advances from a $100,000 line-of-credit for $20K and $50K.
The report doesn’t say when advances were made but does state the line-of-credit was to cover “temporary cash shortfall.” When were those cash shortfall? There are no footnotes on the specifics about the line-of-credit, which would have been included in a traditional audit.
Cash Disbursements & Credit Card Testing: Former executive director may have violated board policies by splitting checks to avoid $5,000 threshold. However, all disbursements tested were properly supported and represented valid business expenses.
Investments: PHS has $1,098,555 in investments, only $6,569 is in cash & cash alternatives.
Payroll: Saltmarsh questions bonus payments made to the former director of development. However, there are no minutes or documentation showing the board ever approved the incentive plan. PHS doesn’t post its board minutes or the name of its board members on its website.
Donations: Saltmarsh found numerous small donations, total $49,422, that were not tracked as Net Assets with Donor Restrictions. The total of properly tracked restrictions was $105,718, and the CPA firm says PHS has sufficient assets available to satisfy donor requirements. However, the report doesn’t state if the checking account has the cash or if are the assets locked up in the investment accounts.
Financial Reporting: Board treasurer reviewed monthly financial information with the board.