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PENINSULA AIRPORT COMMISSION
SCHEDULE OF FINDINGS AND RESPONSES
YEAR ENDED JUNE 30, 2025
55
A.
Findings Relating to the Financial Statements Reported in Accordance with Government Auditing
Standards
2025-001 – Significant Deficiency – Segregation of Duties and Financial Reporting Review
Criteria: The Commission’s Finance Department oversees the preparation, processing, and recordation of
thousands of financial transactions that ultimately will be reported externally through its financial statements. The
efficient, effective, and timely preparation of the financial statement depends heavily on finance personnel to
monthly close the Commission’s general ledger, performing appropriate financial analyses and reconciliations of
financial activity, and accumulating the required data for reporting and to ensure Federal Aviation Administration
compliance. To verify the transactions are fairly presented, procedures must be in place and functioning effectively
to ensure the financial and operational information is complete, accurate, and in accordance with U.S. GAAP. Key
to effectively functioning procedures is the segregation of duties throughout the performance of said procedures
to reduce the risk of misstatement due to fraud or error. The basic premise of proper segregation of duties is that
no one employee or individual should have access to both physical assets and the related accounting records or
to all phases of a transaction.
Condition: As of June 30, 2025, the Commission does not have adequate segregation of duties independent
review over initiating, recording, and reconciling transactions involving key financial cycles. Specifically, we noted
the following examples lacking a segregation of duties:
Our review of the general journal entries revealed that manual entries lack timely secondary review and
approval by someone other than the preparer. Journal entry summaries are being reviewed on an annual
basis.
Cause: Turnover in finance related positions without additional hiring and other Commission personnel cross
trained to fill the segregation void.
Effect: Lack of a segregation of duties increases the potential for inaccurate financial reporting and ineffective
finance management.
Recommendation: Although the size of the Commission’s accounting department limits the extent of separation
of duties, we believe certain steps could be taken to separate duties performed by members of the accounting
function. The Commission should review the current level of finance personnel and responsibilities and address
any identified deficiencies in number or knowledge of personnel through additional hiring’s, re-assignment of
responsibilities and cross-training of other Commission personnel to augment the finance control environment.
We recommend the adoption of a policy whereby all journal entries are approved by a designated member of
management of the Commission, separate of the preparer, on at least a monthly basis. All entries should be
initialed, or electronically signed, by the preparer and the individual approving them in order to attribute
responsibility to the appropriate individuals.
Views of Responsible Officials and Planned Corrective Actions: During the initial time period of COVID-19, federal
and state travel and other economic activity restrictions necessitated a severe reduction in staffing. Anticipation
of air travel recovery is being constantly reviewed so staffing plans can be properly structured to achieve the
numbers, task assignments, and knowledge necessary to ensure compliance. The national health emergency
was anticipated to be temporary. The accommodations and responses to it resulting in staffing deficiency which
were expected to be reversed in a pattern consistent with overall air travel recovery. The recovery has proven to
be lopsided and on the lower end of the spectrum with respect to all smaller airports. A key driver in the smaller
airport recovery is the industry wide recognized shortage in pilots. Especially hard hit is the category of regional
commuter jet service designed to feed the central main line airline hub terminals. The Peninsula Airport
Commission is no exception and has been significantly impacted by this macro-economic slowdown condition.
Airline allocation of their reduced available capacity now appears will be a main driver of continuing staffing
decisions. Measures to match operating costs with passenger activity revenue will be required. During the year
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