Finding Text
2025-002 Material Weakness in Internal Control over financial Reporting – Lacks Ability to Prepare Financial Statements Criteria: Under professional standards, management is responsible for the fair presentation in the financial statements of financial position, results of operations, and cash flows, including the notes to financial statements, in conformity with U.S. generally accepted accounting principles. Condition: During the audit, we noted that the Town employees lack the expertise to prepare financial statements in accordance with GAAP. Cause: During the audit, we noted that the Town employs competent personnel who understand the Town’s operations. While they record the Town’s day-to-day transactions in a consistent manner, they lack the expertise to ensure all transactions are properly recorded in the financial statements in accordance with GAAP. Effect: There is more than a remote chance that material misstatements could occur without detection. Context: As is common in small operations, the Town’s personnel work only part-time and do not have the experience and training needed. Remediation of this material weakness would be cost prohibitive to the Town. Recommendation: We recommend that management assess the time requirements of the Treasurer position and the capabilities of accounting employees and either (a) develop a training program to ensure that they obtain the skills and knowledge necessary to prepare financial statements in accordance with GAAP or (b) hire accounting personnel with the requisite knowledge and skill to do so. Views of Responsible Officials and Planned Corrective Actions: The Town feels that this year presented reporting requirements under the Uniform Guidance, understands that these requirements will continue for the near future, and plans to have employees receive the necessary training required for proper financial statement presentation.