Audit 289978

Finding #2022-001 – Segregation of Duties Condition: The available office staff precludes a proper segregation of duties in the control areas reviewed. Criteria: Segregation of duties is an aspect of internal control intended to prevent or decrease opportunities of intentional and unintentional errors and fraud. Duties and responsibilities are properly segregated if no single individual either has control over all phases of a transaction or can both make and conceal an error, whether such error is intentional or unintentional. Cause: Limited number of personnel. Effect: Errors or intentional fraud could occur and not be detected timely by other employees in the normal course of their responsibilities because of the lack of segregation of duties. Recommendation: We recommend that the Village consider the benefits of implementing additional policies and procedures to address key controls related to its significant transaction cycles as noted. Response: We agree with the finding but do not believe it is cost-effective to increase the office staff in an attempt to bring about a more effective segregation of duties.

Finding #2022-002 – Material Adjustments Condition: Johnson Block and Company, Inc. proposed adjusting journal entries during the audit process. We deem these entries to be material in relation to the financial statements. Since the Village did not make these adjustments in its accounting system prior to the audit, a material weakness exists in the Village’s internal controls. Criteria: Material adjusting journal entries not prepared by the Village before the audit are considered an internal control weakness. Cause: The Village does not have policies and procedures in place to ensure that all transactions are properly recorded on the general ledger prior to the audit. Effect: This means that the proper recording and reporting of financial information may not occur within a timely manner. Recommendation: Policies and procedures should be implemented to ensure account balances are properly recorded in a timely manner. Response: The Village will work to establish policies and procedures to reduce the number of adjusting journal entries proposed by the auditor.

Finding #2022-003 – Preparation of Financial Statements and schedules of Federal and State Awards Condition: Village staff does not prepare the financial statements and accompanying notes and schedules of federal and state awards. The Village has designated individuals responsible for reviewing and accepting the financial statements and schedules of federal and state awards. Effect: Because Village staff relies on the auditor to assist with the preparation of the financial statements and the schedules of federal and state awards, the Village’s system of internal control may not prevent, detect, or correct misstatements in the financial statements and the schedule of federal and state awards. Cause: The Village does not prepare the financial statements nor the schedules of federal and state awards and related notes. Criteria: Internal controls over preparation of the financial statements, including footnote disclosures, and the schedule of federal and state awards, should be in place to provide reasonable assurance that a misstatements would be prevented or detected. Recommendation: The auditor will work with the Village to make personnel more knowledgeable about its responsibility for the financial statements and schedules of federal and state awards. Response: The auditors prepare the financial statements, but we review them and accept the statements prior to them being issued. We prepare financial reports that are reviewed by management on a monthly basis. Any concerns or questions are addressed throughout the year.

Finding #2022-001 – Segregation of Duties Condition: The available office staff precludes a proper segregation of duties in the control areas reviewed. Criteria: Segregation of duties is an aspect of internal control intended to prevent or decrease opportunities of intentional and unintentional errors and fraud. Duties and responsibilities are properly segregated if no single individual either has control over all phases of a transaction or can both make and conceal an error, whether such error is intentional or unintentional. Cause: Limited number of personnel. Effect: Errors or intentional fraud could occur and not be detected timely by other employees in the normal course of their responsibilities because of the lack of segregation of duties. Recommendation: We recommend that the Village consider the benefits of implementing additional policies and procedures to address key controls related to its significant transaction cycles as noted. Response: We agree with the finding but do not believe it is cost-effective to increase the office staff in an attempt to bring about a more effective segregation of duties.

Finding #2022-002 – Material Adjustments Condition: Johnson Block and Company, Inc. proposed adjusting journal entries during the audit process. We deem these entries to be material in relation to the financial statements. Since the Village did not make these adjustments in its accounting system prior to the audit, a material weakness exists in the Village’s internal controls. Criteria: Material adjusting journal entries not prepared by the Village before the audit are considered an internal control weakness. Cause: The Village does not have policies and procedures in place to ensure that all transactions are properly recorded on the general ledger prior to the audit. Effect: This means that the proper recording and reporting of financial information may not occur within a timely manner. Recommendation: Policies and procedures should be implemented to ensure account balances are properly recorded in a timely manner. Response: The Village will work to establish policies and procedures to reduce the number of adjusting journal entries proposed by the auditor.

Finding #2022-003 – Preparation of Financial Statements and schedules of Federal and State Awards Condition: Village staff does not prepare the financial statements and accompanying notes and schedules of federal and state awards. The Village has designated individuals responsible for reviewing and accepting the financial statements and schedules of federal and state awards. Effect: Because Village staff relies on the auditor to assist with the preparation of the financial statements and the schedules of federal and state awards, the Village’s system of internal control may not prevent, detect, or correct misstatements in the financial statements and the schedule of federal and state awards. Cause: The Village does not prepare the financial statements nor the schedules of federal and state awards and related notes. Criteria: Internal controls over preparation of the financial statements, including footnote disclosures, and the schedule of federal and state awards, should be in place to provide reasonable assurance that a misstatements would be prevented or detected. Recommendation: The auditor will work with the Village to make personnel more knowledgeable about its responsibility for the financial statements and schedules of federal and state awards. Response: The auditors prepare the financial statements, but we review them and accept the statements prior to them being issued. We prepare financial reports that are reviewed by management on a monthly basis. Any concerns or questions are addressed throughout the year.