Finding Text
Finding No. 2024-001: Preparation of Financial Statements and Schedule of Expenditures of Federal Awards
Federal Program Affected: All
Compliance Requirement: Reporting
Questioned Costs: None.
Condition and Cause: As in prior years, we were requested to draft the audited financial statements and related footnote disclosures as part of our regular audit services. Additionally, we were requested to prepare the Schedule of Expenditures of Federal Awards (SEFA). Auditing standards require auditors to communicate this situation to the City Council as an internal control deficiency. Ultimately, it is management’s responsibility to provide for the preparation of the City’s statements and footnotes, and the responsibility of the auditor to determine the fairness and presentation of those statements. From a practical standpoint, we do both for the City at the same time in connection with our audit. This is not unusual for municipalities of your size.
Criteria and Effect: It is our responsibility to inform the City Council that this deficiency could result in a material misstatement to the financial statements that would not have been prevented or detected by the City’s management.
Repeat Finding from Prior Year: Yes, prior year finding #2023-001.
Recommendation: We have instructed management to review a draft of the auditor prepared financials and SEFA in detail for their accuracy; we have answered any questions they might have and have encouraged research of any accounting guidance in connection with the adequacy and appropriateness of classification and disclosure in the City’s financial statements and SEFA. We are satisfied that the appropriate steps have been taken to provide the City with the completed financial statements and SEFA. It is the responsibility of management and the City Council to make the decision whether to accept the degree of risk associated with this condition because of cost or other considerations.
Response/Corrective Action Plan: See Corrective Action Plan