Finding Text
Financial Reporting – Held Checks Condition – A material amount of disbursements were improperly recorded in the City’s financial statements. During June 2025, the City issued three checks totaling $142,411 to a contractor for future work anticipated to be completed on a water project. Upon advice from the City’s engineering firm, the City issued and held the three checks until the contractor completed the project. Holding the checks allowed the City to circumvent the budgeting process. In November 2025, the City voided these three checks and issued a check in the amount of $23,130 for work completed prior to June 30, 2025. An adjustment was subsequently made by the City to properly report these amounts in the financial statements. Cause – Although the City has policies requiring checks (payments) be supported by written evidence, such as an invoice, when the materials or service has been received, the City did not follow the established policies. Effect – A material amount of checks were issued and held until services were provided in the future. As a result, material adjustments to the City’s financial statements were necessary. Recommendation – The City should follow established procedures to ensure payments are supported by invoices when the materials or service has been received. Checks should not be written until the goods or services have been received. Response – The City was poorly advised by our engineer to issue and hold the checks until the work was all complete. In the future checks will only be issued when work is complete or services are delivered. Conclusion – Response accepted.