Audit 375358

Criteria: It is the responsibility of the accounting staff to perform the year-end closing procedures and prepare the appropriate year-end closing entries in order to ensure that the year-end financial statements are not materially misstated. In addition, the year-end closing procedures should be supervised and reviewed by City officials that possess an adequate knowledge of the City’s activities during the fiscal year. Condition: This year, as in the past, we assisted the accounting staff with the basic year-end bookkeeping and accounting procedures that are necessary to prepare the books for audit purposes. This also included the preparation of several year-end adjusting entries that were necessary to keep the financial statements from being materially misstated. Cause: Management does not have the expertise necessary to prepare the year-end adjusting entries or other procedures so that the accounting records are ready for financial reporting and audit purposes. Effect: This situation could allow the misstatement of the financial statements. Recommendation: We recommend that the City acquire the expertise necessary to perform the year-end closing procedures so that the annual financial statements can be prepared in accordance with U.S. GAAP. Response: We are aware of this deficiency and believe it is not cost beneficial in our situation to acquire this expertise. We will continue to use our external auditors for this technical assistance. We would expect this situation to be ongoing in future years.

Criteria: The responsibility for the City’s annual financial statements prepared in accordance with U.S. GAAP rests with the management of the City. Management is also responsible for the system of internal accounting controls used to ensure that the financial statements are not materially misstated. Condition: Along with assisting with the year-end closing procedures to the City’s accounting records, we also assisted the City by preparing the annual financial statements (including related notes) of the City prepared in accordance with U.S. GAAP. Cause: Management does not have the expertise necessary to prepare the financial statements in accordance with U.S. generally accepted accounting principles. Effect: This situation could allow the misstatement of the financial statements. Recommendation: We recommend that the City acquire the expertise necessary to prepare the annual financial statements including the related notes in accordance with U.S. GAAP. Response: We are aware of this deficiency and believe it is not cost beneficial in our situation to acquire this expertise. We will continue to use our external auditors for this technical assistance. We would expect this situation to be ongoing in future years.

Criteria: Management is responsible for the internal controls that address the assertions related to financial reporting and compliance requirements related to the City’s federal award programs. Management is responsible for designing and implementing a system of internal controls which include written policies and procedures for how various accounting transaction reporting will be performed and documented for federal award programs. Condition: Although the City appears to have a system of internal controls for federal award programs in place, the City does not have written policies and procedures that outline how accounting and transaction reporting will be performed and documented for federal award programs. This is a requirement of the Uniform Guidance. Cause: Due to the small size of the City, a complex system of internal controls for federal award programs has not appeared necessary. This has resulted in management not taking the time to document written policies and procedures over federal award programs. Effect: This situation could allow noncompliance with the Uniform Guidance and federal regulations to occur. Perspective: While we consider this finding to be a significant deficiency, we do not perceive it to negatively impact the audit opinions issued. This is a systemic problem caused by a lack of experience within the City related to the Uniform Guidance. The City is actively working to remedy the situation. Recommendation: We recommend that the City implement written policies and procedures over federal award programs. Response: The City acknowledges this situation and agrees that this recommendation would help strengthen internal controls. The Board of Trustees is working to implement written policies and procedures over federal award programs.