Finding Text
Material Weakness - Internal Control - Accounting Corrections
Criteria
According to Government Auditing Standards and Title 2 U.S. Code of Federal Regulations Part 200,
Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform
Guidance) a deficiency in internal control over compliance exists when the design or operation of a control
over compliance does not allow management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal
program on a timely basis. A material weakness in internal control over compliance is a deficiency, or
combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility
that material noncompliance with a type of compliance requirement of a federal program will not be prevented
or detected and corrected, on a timely basis.
Condition
The auditor calculated, and LSWCD approved recording two material adjustments to the financial statements
in order for the audited financial statements to be materially correct.
Context
LSWCD has a good bookkeeper, however, the accounting is not maintained by fund as two separate,
self-balancing sets of accounts, resulting in a material adjustment to separate and balance the
accounts by fund. A second material entry was made to grants receivable. Minor entries were made to other
accrual accounts such as prepaid insurance, accrued payroll liabilities, capital assets additions and
depreciation.
Cause
As noted under context, lack of knowledge of U.S. GAAP accrual accounting was the cause of the accrual
accounting omissions that were corrected during the audit.
Effect
Initial accounting records provided for the audit included receivables and revenues understated by $364,780,
with total assets understated by $424,761. Liabilities were understated by $14,867. The change in net assets
was originally reported as a net loss of $226,407. Audited net income was actually $170,889, a difference of
$397,295.
Questioned Costs
None.
Recommendation
Provide further training for the Finance Manager in governmental, and accrual accounting.
Views of Responsible Officials and Planned Corrective Actions
We agree with this finding. LSWCD has a good Financial Manager familiar with operations of soil and water
conservation districts. LSWCD will provide online and other training for the Financial Manager to gain
knowledge of governmental accounting, federal single audit requirements, and U.S. GAAP in an effort to provide
accurate financial statements, reduce audit costs, and avoid errors in and omissions of year-end accruals