Description of Finding: There were 42 audit adjustments and closing entries posted during the audit to report the Towns’s financial statements in accordance with Generally Accepted Accounting Principles (GAAP). The large number of adjustments identified during the course of the audit indicates t...
Description of Finding: There were 42 audit adjustments and closing entries posted during the audit to report the Towns’s financial statements in accordance with Generally Accepted Accounting Principles (GAAP). The large number of adjustments identified during the course of the audit indicates that the Town does not have internal controls in place to prevent or detect misstatements on a timely bases. Areas where accounts and transactions were not adequately reconciled and evaluated for proper recording prior to the start of the audit field work and areas that require improvement included in the following:
• Procedures to ensure beginning fund balance/net position roll-forward to prior year audited financial statements.
• Procedures for ensuring revenue received in advance of qualifying expenditures are properly deferred.
• Procedures to ensure retentions payable is properly accrued.
• Procedures for tracking grant expenditures to ensure revenue is accrued to the extent of reimbursable expenditures incurred and evaluation of proper accounting treatment of transactions as earned, unearned, or unavailable revenue.
• Procedures to ensure capital outlay is properly reconciled to capital asset additions.
• Procedures to ensure that building permit fees not earned are properly accounted for as unearned revenue.
• Procedures to ensure all loans issued by the Town are properly recorded in the general ledger.
• Procedures for evaluating when entries should be posted to fund balance and whether fund balance/net position/restrictions and investment in capital assets are properly reflected.
• Procedures to ensure interfund transactions, including due to and from other funds, advances to and from other funds and transfer in and out, excluding those with agency funds, are in balance.
Statement of Concurrence or Nonconcurrence:
There was a large number of audit adjustments as the audit progressed. Some of those are standard within a yearly closing period.
Corrective Action:
Staff turnover contributed to the need for multiple adjustments after the fact. Of the five positions within the department five were vacated within a 12 month period. During and leading up to the closing of the FY 22/23 year, a complete turnover of staff occurred including all senior staff within the Finance Department. There were a number of journal entries that required a depth of historical knowledge to perform properly. Budgeted large transfers and project transfers complicated the process of closing projects and funds.
All positions are currently filled. To reduce the need for as many audit adjustments, a new process was implemented during the FY 23/24. Payroll and invoices are being direct billed to the funds and projects to reduce the need for unnecessary transfers. This step will simplify the structure of funds. This standard accounting practice will enable staff to reconcile, evaluate, and accrue much more timely and accurately.
Name of Contact Person: Aimee Beleu, Finance Director, (530) 872-6291, abeleu@townofparadise.com
Projected Completion Date: 4/1/24