Finding 1100923 (2024-001)

Significant Deficiency Repeat Finding
Requirement
P
Questioned Costs
-
Year
2024
Accepted
2025-02-26

AI Summary

  • Core Issue: The Town lacks the necessary experience and training to prepare accurate year-end reconciliations and financial statements, leading to over 30 proposed adjusting journal entries.
  • Impacted Requirements: Internal controls over financial reporting are not established, increasing the risk of material misstatements in accordance with SAS 115.
  • Recommended Follow-Up: Hire qualified accounting personnel to improve financial reporting capabilities and assess the cost-benefit of these changes.

Finding Text

2024 – 1 Year End Audit Entries and Financial Reporting - The audit resulted in over 30 adjusting journal entries proposed to management. Some of these entries were material to the financial statements as a whole and required in order to issue an unmodified opinion. The Town does not have the experience and training needed to – - Prepare all of its year end reconciliations and journal entries and prepare financial statements, complete with notes, in accordance with accounting principles generally accepted in the United States of America. Accordingly, the Town is unable to, and has not established internal controls over the preparation of year-end reconciliations and journal entries and the preparation of the financial statements. - Select and apply accounting principles that are in conformity with accounting principles generally accepted in the United States of America. Accordingly, the Town is unable to, and has not established, internal controls over the selection and application of accounting principles. Criteria - Under SAS 115, an internal control deficiency exists when management does not possess the financial expertise to prepare end reconciliations and prepare financial statements in accordance with generally accepted accounting principles. Cause: Unknown Effect: Because management lacks expertise in financial accounting and reporting, there is more than a remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected under the provisions of SAS 115. Recommendation: To correct these deficiencies, management would need to hire personnel with adequate accounting experience to perform these functions. The Town would need to weigh the costs of these corrections verse the benefit. Management Response: The Town hired a new director of finance with a strong educational background.

Categories

Internal Control / Segregation of Duties Reporting Special Tests & Provisions

Other Findings in this Audit

  • 524481 2024-001
    Significant Deficiency Repeat
  • 524482 2024-002
    Significant Deficiency Repeat
  • 524483 2024-003
    Significant Deficiency Repeat
  • 524484 2024-004
    Significant Deficiency Repeat
  • 1100924 2024-002
    Significant Deficiency Repeat
  • 1100925 2024-003
    Significant Deficiency Repeat
  • 1100926 2024-004
    Significant Deficiency Repeat

Programs in Audit

ALN Program Name Expenditures
21.027 Coronavirus State and Local Fiscal Recovery Funds $1.46M
14.228 Community Development Block Grants/state's Program and Non-Entitlement Grants in Hawaii $315,276
66.468 Drinking Water State Revolving Fund $40,206
20.205 Highway Planning and Construction $18,144
97.036 Disaster Grants - Public Assistance (presidentially Declared Disasters) $12,867
97.047 Bric: Building Resilient Infrastructure and Communities $3,739
45.310 Grants to States $636