Finding Text
2024-01 Material Weakness in Internal Control over financial Reporting – Material Adjusting journal entries
Criteria: Under professional standards, a material weakness exists when material misstatements are not identified through an entity’s system of controls.
Condition: During the audit, there were several material adjusting journal entries proposed to management to issue an unmodified opinion.
Cause: Procedures are in place for the review of the ledger on a regular basis and for monthly and annual reporting but due to the increased activity from grant funding that is outside the Village’s normal operations and the compressed time to review end of year financial reports, there were material adjustments proposed to management to issue an unmodified opinion.
Effect: There is more than a remote chance that material misstatements could occur without detection.
Context: The Village had several federally funded projects during 2024. The State of Vermont was still finalizing funding when the audit fieldwork started. The funding structure was complex and included a loan component and forgiveness component. The Village does not normally receive a significant amount of grant funds, so they were not familiar with the reporting effects. Audit fieldwork started January 7th. The timing of field work allowed limited time to review the increased activity and research the reporting differences.
Recommendation: Management has discussed the reporting differences and is now familiar with the proper accounting for these transactions. Management should consider if changes are needed in the year-end review of the annual report.
Views of Responsible
Officials and Planned
Corrective Actions: The Village feels that this is an isolated instances due to the increased funding during the year. Management has reviewed the accounting requirements and is confident that they can correct these deficiencies during the year.