Finding 1167595 (2024-001)

Material Weakness Repeat Finding
Requirement
A
Questioned Costs
-
Year
2024
Accepted
2026-01-05
Audit: 378791
Organization: City of North Chicago (IL)

AI Summary

  • Core Issue: Significant audit adjustments were needed to ensure the City’s financial statements were accurate.
  • Impacted Requirements: Internal controls should ensure all account balances are correctly adjusted before audits.
  • Recommended Follow-Up: The Comptroller should implement a review process for year-end adjustments to minimize auditor entries and ensure accurate financial statements ahead of audits.

Finding Text

Significant Deficiency Finding 2024 – 001: Audit Journal Entries Condition: During audit fieldwork, our testing resulted in significant audit adjustments in order to present materially accurate financial statements. Criteria: A good system of internal controls would provide for accurate representations of adjusted account balances for all City accounts prior to audit fieldwork. Cause: Year-end entries related to various accruals and other items were required in order to accurately present the City’s financial statements. Effect: The City’s financial statements were not fully adjusted prior to audit fieldwork. Recommendation: A vital process of effective internal controls is the review and subsequent adjustment of general ledger balances. This review and adjustment will aid in the appropriate budgeting and management of the City’s financial activities and resources. Corrective Action Plan: The Comptroller, along with staff, will review year-end adjustments as part of the audit preparation process and work to reduce the number of entries proposed by the auditors and prepare fully adjusted financial statements prior to audit fieldwork.

Corrective Action Plan

Finding 2024 – 001: Audit Journal Entries Condition: During audit fieldwork, our testing resulted in significant audit adjustments in order to present materially accurate financial statements. Corrective Action Plan: The Comptroller, along with staff, will review year-end adjustments as part of the audit preparation process and work to reduce the number of entries proposed by the auditors and prepare fully adjusted financial statements prior to audit fieldwork. Anticipated Date of Completion: Fiscal Year 2025 Name of Contact Person: Tawanda Joyner, Comptroller Management Response: The Comptroller, with staff, will review year-end adjustments as part of audit preparation, aiming to reduce auditor-proposed entries and to deliver an adjusted trial balance before fieldwork. City was short staffed however, currently have a full staff to be able to complete journal entries. Our actions to correct include an internal review of year-end adjustments to identify causes and implement fixes, along with the use of pre-audit checklists and earlyanalytics to minimize auditor entries. Our team will finalize adjustments well ahead of fieldwork.At the start of the audit, the fully adjusted financial statements will be submitted and inquiries addressed. Our target is a 70% reduction in auditor-proposed entries and for adjustments resolved pre-fieldwork. The plan also calls for documenting any delays with the team responding to auditor inquiries within 24 hours and for misclassifications to be reviewed by two staff members to ensure accuracy.

Categories

Significant Deficiency Internal Control / Segregation of Duties

Programs in Audit

ALN Program Name Expenditures
66.468 CAPITALIZATION GRANTS FOR DRINKING WATER STATE REVOLVING FUNDS $2.48M
21.027 CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS $470,406
16.710 PUBLIC SAFETY PARTNERSHIP AND COMMUNITY POLICING GRANTS $100,738