Audit 367808

Finding 2024-004 – Material Weakness in Internal Control over Compliance - Preparation of Financial Statements and Year-End Adjustments Summary: This finding relates to the same internal control deficiency described in Finding 2024-001 in the Financial Statement Findings section. The Township did not prepare their financial statements which affects compliance with both major program requirements for all applicable compliance requirements. Detailed Description: See Finding 2024-001 in the Financial Statement Findings section for a detailed description of the condition, criteria, cause, effect, and recommendation. Questioned Costs: None identified. Repeat Finding: This is a repeat of finding 2024-001. Finding 2024-001 – Preparation of Financial Statements and Year-End Adjustments Criteria: Per the COSO framework, management is responsible for establishing and maintaining effective internal controls over financial reporting. This includes ensuring that the Township prepares reliable financial statements in conformity with generally accepted accounting principles (GAAP). Reliance on external auditors or third parties for basic preparation responsibilities compromises management’s accountability. Internal control is a process which, in addition to capturing and properly recording transactions, safeguarding the Township’s assets, and assuring compliance with laws and regulations, leads to the preparation of financial statements in accordance with GAAP. Condition and Context: The organization did not prepare annual financial statements in accordance with GAAP for the year ended December 31, 2024. As a result, the auditor was required to prepare the financial statements as part of the audit engagement. As auditors, we are required to report on whether the Township is able to prepare financial statements in accordance with GAAP. • The preparation of financial statements in accordance with GAAP requires internal controls over both 1) recording, processing, and summarizing accounting data, and 2) the presentation of the Township’s financial statements, disclosures, supplementary information, schedule of federal financial assistance in conformity with GAAP. • The Township’s internal control system does not include a process for preparing the annual financial statements and related disclosures in accordance with GAAP. • The Township’s ability to prepare financial statements in accordance with GAAP is based, in part, on its reliance on its external auditors, who cannot by definition be considered part of the Township’s internal controls. • Although auditors prepare the financial statements, management thoroughly reviews them and accepts responsibility for their completeness and accuracy. • The Township has designated individuals responsible for reviewing and accepting responsibility for the financial statements and related notes. • Because the Township relies on the auditor to provide the necessary understanding of current accounting and disclosure principles in the preparation of the financial statements, a material weakness exists in the Township’s internal controls. Cause: The Township has a small staff, and while the finance staff is well-versed in GAAP and government accounting standards, and has the resources, ability and capability to prepare the financial statements, it is more cost beneficial and efficient for the Township to have the auditors prepare them. Effect: This deficiency could result in the possibility of undetected errors and irregularities. Additionally, the completeness of the financial statement disclosures and accuracy of the overall financial presentation could be impacted as outside auditors do not have the same understanding of the Township as internal Township staff.Recommendations: We recommend that the organization develop the internal capacity to prepare its own GAAP-compliant financial statements. This may include hiring or training qualified accounting personnel or contracting with an external accountant independent of the auditor. Understanding that these may not be cost effective solutions, the Township should carefully review the financial statements and the notes to the financial statements using grouping code reports, the trial balance and a disclosure checklist, to ensure that the financial statements are accurately prepared. Cross-Reference: See also Finding 2024-004 in the Federal Awards Finding section, as this deficiency also affects compliance with federal program requirements. Views of Responsible Officials and Planned Corrective Action: The Township understands the importance of designing and maintaining proper internal controls over financial reporting. Management and the Board of Commissioners will continue to designate competent staff to oversee and review the financial reports and approve them before issuance, while exploring hiring additional accounting staff in the future. See Township’s Corrective Action Plan on page 119 for further details.

Finding 2024-004 – Material Weakness in Internal Control over Compliance - Preparation of Financial Statements and Year-End Adjustments Summary: This finding relates to the same internal control deficiency described in Finding 2024-001 in the Financial Statement Findings section. The Township did not prepare their financial statements which affects compliance with both major program requirements for all applicable compliance requirements. Detailed Description: See Finding 2024-001 in the Financial Statement Findings section for a detailed description of the condition, criteria, cause, effect, and recommendation. Questioned Costs: None identified. Repeat Finding: This is a repeat of finding 2024-001. Finding 2024-001 – Preparation of Financial Statements and Year-End Adjustments Criteria: Per the COSO framework, management is responsible for establishing and maintaining effective internal controls over financial reporting. This includes ensuring that the Township prepares reliable financial statements in conformity with generally accepted accounting principles (GAAP). Reliance on external auditors or third parties for basic preparation responsibilities compromises management’s accountability. Internal control is a process which, in addition to capturing and properly recording transactions, safeguarding the Township’s assets, and assuring compliance with laws and regulations, leads to the preparation of financial statements in accordance with GAAP. Condition and Context: The organization did not prepare annual financial statements in accordance with GAAP for the year ended December 31, 2024. As a result, the auditor was required to prepare the financial statements as part of the audit engagement. As auditors, we are required to report on whether the Township is able to prepare financial statements in accordance with GAAP. • The preparation of financial statements in accordance with GAAP requires internal controls over both 1) recording, processing, and summarizing accounting data, and 2) the presentation of the Township’s financial statements, disclosures, supplementary information, schedule of federal financial assistance in conformity with GAAP. • The Township’s internal control system does not include a process for preparing the annual financial statements and related disclosures in accordance with GAAP. • The Township’s ability to prepare financial statements in accordance with GAAP is based, in part, on its reliance on its external auditors, who cannot by definition be considered part of the Township’s internal controls. • Although auditors prepare the financial statements, management thoroughly reviews them and accepts responsibility for their completeness and accuracy. • The Township has designated individuals responsible for reviewing and accepting responsibility for the financial statements and related notes. • Because the Township relies on the auditor to provide the necessary understanding of current accounting and disclosure principles in the preparation of the financial statements, a material weakness exists in the Township’s internal controls. Cause: The Township has a small staff, and while the finance staff is well-versed in GAAP and government accounting standards, and has the resources, ability and capability to prepare the financial statements, it is more cost beneficial and efficient for the Township to have the auditors prepare them. Effect: This deficiency could result in the possibility of undetected errors and irregularities. Additionally, the completeness of the financial statement disclosures and accuracy of the overall financial presentation could be impacted as outside auditors do not have the same understanding of the Township as internal Township staff.Recommendations: We recommend that the organization develop the internal capacity to prepare its own GAAP-compliant financial statements. This may include hiring or training qualified accounting personnel or contracting with an external accountant independent of the auditor. Understanding that these may not be cost effective solutions, the Township should carefully review the financial statements and the notes to the financial statements using grouping code reports, the trial balance and a disclosure checklist, to ensure that the financial statements are accurately prepared. Cross-Reference: See also Finding 2024-004 in the Federal Awards Finding section, as this deficiency also affects compliance with federal program requirements. Views of Responsible Officials and Planned Corrective Action: The Township understands the importance of designing and maintaining proper internal controls over financial reporting. Management and the Board of Commissioners will continue to designate competent staff to oversee and review the financial reports and approve them before issuance, while exploring hiring additional accounting staff in the future. See Township’s Corrective Action Plan on page 119 for further details.