Finding 393174 (2023-001)

Significant Deficiency
Requirement
I
Questioned Costs
-
Year
2023
Accepted
2024-04-15
Audit: 303493
Organization: City of Dinuba (CA)

AI Summary

  • Core Issue: The City had to restate its financial statements due to accounting errors, indicating weaknesses in internal controls over financial reporting.
  • Impacted Requirements: Financial statements were not accurately presented according to generally accepted accounting principles, leading to potential inaccuracies in records and future restatements.
  • Recommended Follow-Up: Enhance internal controls by improving year-end closing procedures, ensuring thorough review of journal entries, and accurately accounting for all transactions.

Finding Text

Criteria: The City is responsible for the fair presentation of the financial statements in conformity with accounting principles generally accepted in the United States of America. An effective internal control system over financial closing and reporting provides reasonable assurance for the safeguarding of assets, the reliability of financial information, and compliance with laws and regulations. Condition: The City restated its previously issued financial statements to correct several accounting errors relating to capital assets, OPEB and unreconciled opening balances in the enterprise funds. Cause: The City’s internal controls over financial reporting did not identify the misstatements in a timely manner resulting in restatements. Effect: The City’s previously issued financial statements were not fairly stated in conformity with accounting principles generally accepted in the United States of America. Accounting records may be inaccurate, incomplete, or not adequately supported. Issued financial statements may be inaccurate and may require restatements in the future. Recommendation: We recommend that the City enhance its internal control over financial reporting to ensure complete and accurate financial reporting. The City can accomplish this by expanding its year-end closing procedures to ensure that all non-routine and nonsystematic transactions are accounted for, the appropriate accounting standards are applied, and transactions are accounted for in the proper period. In addition, we recommend that the City develop procedures to ensure that journal entries are effectively reviewed and supported and that closing procedures incorporate all needed closing entries. Management Response: The City has recorded prior period adjustments to properly account for financial transactions in the correct reporting period, particularly in entries related to Capital Assets. The City recognizes the need for these transactions to be recorded in the appropriate period; however, in order to accurately record the transactions, prior period adjustments were necessary. Staff will take into careful consideration future prior period adjustments and will issue them only as absolutely necessary for accurate reporting.

Categories

Reporting Internal Control / Segregation of Duties

Other Findings in this Audit

  • 393173 2023-001
    Significant Deficiency
  • 393175 2023-001
    Significant Deficiency
  • 969615 2023-001
    Significant Deficiency
  • 969616 2023-001
    Significant Deficiency
  • 969617 2023-001
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
21.027 Coronavirus State and Local Fiscal Recovery Funds $2.65M
20.205 Highway Planning and Construction $694,116
14.239 Home Investment Partnerships Program $2,344
14.228 Community Development Block Grants/state's Program and Non-Entitlement Grants in Hawaii $10