Finding Text
Evaluation of Finding: Material Weakness/Material Noncompliance. Criteria: Financial reports are intended to meet the needs of decision makers, including the governing board, bondholders, Federal and State oversight agencies, and constituents. Accordingly, timeliness was identified as one of the characteristics of information in financial reporting in GASB Concepts Statement No. 1 of the Governmental Accounting Standards Board (GASB), Objectives of Financial Reporting. To accomplish this objective, financial reports must be available in time for informed decision making. Therefore, financial reports should be published as soon as possible after the end of the reporting period. Sometimes the need for timeliness has to be balanced against the need for reliability, which also was identified as one of the characteristics of information in financial reporting identified in GASB Concepts Statement No. 1. While governments certainly should not sacrifice reliability for timeliness, minor gains in precision ought not to be purchased at the price of indefinite delay (e.g., accounting estimates). Legislative deadlines for submitting financial statements should be viewed as a minimum standard rather than as an ideal objective. The same holds true for the submission deadlines used by various award programs such as the Government Finance Officers Association's (GFOA) Certificate of Achievement for Excellence in Financial Reporting Program. The additional cost of more timely financial reporting (e.g., additional staff and overtime) also needs to be considered. Condition: While conducting our audit, we noted that the City experienced difficulties and delays in accurately preparing the City’s financial statements. Additionally, the City’s financial statements were not ready to be issued by the required Single Audit Reporting Package deadlines of March 31, 2024, 2025 and 2026. As a result of these conditions, the financial statements were not available to meet the needs of decision makers, including governing boards, bondholders, Federal and State oversight agencies, and constituents in a timely manner. Effect or Potential Effect of Condition: Untimely financial statement reporting can alter the value of those financial statements to the users, as well as jeopardize relationships with bondholders, and granting agencies. Repeat Finding Yes (2024-005) Recommendation: Management should establish a well-defined process for its annual financial reporting. The process and its key attributes (e.g., overall timing, methodology, communication with component units, segregation of duties, frequency of analyses and review by City management) should be formally documented, approved, and reviewed on a regular basis. In addition, the City should develop more resources capable of assisting in the preparation of its annual financial reporting package.