Notes to SEFA
2025-001. Material Audit Adjustments Condition: The audit firm proposed, and the District posted to its general ledger journal entries to correct certain year-end account balances and reclass transactions to their correct accounts. Criteria: The District should have controls in place to adjust year-end balances to the correct amounts and ensure transactions are recorded appropriately. Cause: Limited resources of the District. Effect: The potential exists that a material misstatement could exist in the financial statements and not be prevented or detected by the District’s internal controls. Recommendation: The District should continue to evaluate their internal processes to determine if additional internal control procedures should be implemented to unsure that accounts are adjusted to their appropriate year-end balances in accordance with GAAP.
2025-002. Auditor Prepared Financial Statements and Related Footnotes Condition: The District does have an internal control in place for the review of the drafted financial statements, however, the District does not have an internal control system designed to provide for the preparation of the related notes being audited. Based on the degree of complexity and level of detail needed to prepare the financial statement disclosures in accordance with accounting principles generally accepted in the United States of America (GAAP), the District has requested the auditors prepare them. Criteria: The preparation of the financial statements and the related notes are the responsibility of management. Cause: The District has informed us they do not have the expertise to prepare the annual financial statement disclosures, although the District has reviewed and approved the annual financial statements as prepared by the audit firm. Effect: This could result in a material omission of a disclosure that would not be prevented, or detected and corrected as a result of the District’s current internal control. Recommendation: The District should continue to request assistance to draft the financial statements and related notes and thoroughly review these financial statements after they have been prepared so the District can take responsibility for them.
2025-003. Limited Segregation of Duties Condition: There is an absence of appropriate segregation of duties consistent with appropriate control objectives due to a limited number of employees. Criteria: There are four general categories of duties: authorization, custody, record keeping, and reconciliation. No one person should have control over more than two of these four responsibilities. Cause: The District has assigned duties to staff based on a cost-benefit relationship to the District and the practicality of the level of staffing the District maintains. Effect: The lack of adequate segregation of duties could adversely affect the District’s ability to initiate, record, process and report financial data consistent with the assertions of management in the financial statements. Recommendation: The District should continue to monitor and evaluate the job responsibilities assigned to staff to determine whether there is an unacceptable risk.