Audit 391088

Finding 2025-001: Incomplete Recording of Payroll Transactions in the Accounting System Criteria: The Town should reconcile and record all payroll transactions in the accounting system. Condition: During testing of the payroll bank account reconciliation, we noted that certain payroll liability-clearing entries were not captured in the accounting system. Management performs manual reconciliations; however, because the Town is in the midst of a multi-phase transition to a new accounting platform, the automated interface between payroll processing and the general ledger has not been fully established. As a result, certain payroll activity did not flow completely into the accounting records during the fiscal year. Cause: The Town is in the process of transitioning to a new accounting platform, and the payroll module has not yet been fully configured or deployed. The system’s current configuration does not support automated liability-clearing entries, and the reconciliation process does not include a mechanism to upload or sync manual adjustments to the general ledger. The timing of the software provider’s implementation schedule overlapped with the fiscal year-end close, limiting the Town’s ability to fully establish and document new closing procedures at this stage. These system-related factors resulted in certain payroll transactions not flowing completely into the accounting records. Effect: The general ledger did not reflect all activity in the payroll bank account, resulting in misstated balances for cash, payroll liabilities, and interfund accounts. These variances were subsequently identified and corrected through management’s reconciliation process; however, the absence of full system integration reduces the reliability of financial information used for monitoring and decision-making and increases the risk that misstatements may not be detected or corrected in a timely manner. Auditor’s Recommendation: We recommend that the Town continue its progress toward full configuration and integration of the payroll module within the new accounting system. As part of this process, the Town should obtain appropriate training on the system’s payroll and reconciliation functions to ensure staff are equipped to use the module as intended. Until full integration is achieved, management should continue performing monthly reconciliations and recording necessary manual adjustments to ensure that financial information remains complete and accurate.