Finding 1165099 (2025-004)

Material Weakness Repeat Finding
Requirement
ABGHILM
Questioned Costs
-
Year
2025
Accepted
2025-12-17
Audit: 375358
Organization: City of Caseville (MI)

AI Summary

  • Core Issue: The City’s accounting staff lacks the necessary expertise to perform year-end closing procedures, risking financial statement misstatements.
  • Impacted Requirements: Year-end closing procedures must be properly executed and reviewed by knowledgeable officials to comply with U.S. GAAP.
  • Recommended Follow-Up: The City should consider acquiring the needed expertise or continue relying on external auditors for technical assistance.

Finding Text

Criteria: It is the responsibility of the accounting staff to perform the year-end closing procedures and prepare the appropriate year-end closing entries in order to ensure that the year-end financial statements are not materially misstated. In addition, the year-end closing procedures should be supervised and reviewed by City officials that possess an adequate knowledge of the City’s activities during the fiscal year. Condition: This year, as in the past, we assisted the accounting staff with the basic year-end bookkeeping and accounting procedures that are necessary to prepare the books for audit purposes. This also included the preparation of several year-end adjusting entries that were necessary to keep the financial statements from being materially misstated. Cause: Management does not have the expertise necessary to prepare the year-end adjusting entries or other procedures so that the accounting records are ready for financial reporting and audit purposes. Effect: This situation could allow the misstatement of the financial statements. Recommendation: We recommend that the City acquire the expertise necessary to perform the year-end closing procedures so that the annual financial statements can be prepared in accordance with U.S. GAAP. Response: We are aware of this deficiency and believe it is not cost beneficial in our situation to acquire this expertise. We will continue to use our external auditors for this technical assistance. We would expect this situation to be ongoing in future years.

Corrective Action Plan

Recommendation: It is recommended that the City acquire the expertise necessary to complete the year-end accounting procedures, to prepare the City’s accounting records needed for the audit, and to prepare the annual financial statements including the required disclosures in accordance with U.S. generally accepted accounting principles. Action to be taken: We acknowledge these findings and agree that these recommendations would help strengthen internal controls. However, due to the cost of implementing these recommendations, we believe the cost of obtaining the necessary expertise would out-weigh the benefit. We will continue to request assistance from our financial statement auditors for these nonattest services.

Categories

Reporting

Other Findings in this Audit

  • 1165093 2025-004
    Material Weakness Repeat
  • 1165094 2025-005
    Material Weakness Repeat
  • 1165095 2025-001
    Material Weakness Repeat
  • 1165096 2025-004
    Material Weakness Repeat
  • 1165097 2025-005
    Material Weakness Repeat
  • 1165098 2025-001
    Material Weakness Repeat
  • 1165100 2025-005
    Material Weakness Repeat
  • 1165101 2025-001
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
21.027 CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS $441,382