Finding Text
Adjusting Journal Entries
Criteria: The performance of the necessary procedures involved with financial reporting and
accounting issues are an important component of the entity's reporting structure.
Condition: The Village's performance of these procedures appears to be lacking oversight procedures.
Cause: Oversight procedures performed would mitigate the likelihood of material misstatements
occurring within the financial reporting environment.
Effect: The existence of this material weakness has the potential for misstatement of financial
statement amounts and those amounts may be material.
As a result of audit procedures performed, certain suggested adjusting journal entries were proposed to
the Village for your approval. We suggested a total of ten adjustments to the various funds.
A listing of significant suggested entries is as follows:
Recording of Depreciation in Enterprise Funds
• Record current year depreciation in water and sewer funds.
Recording Debt Payment in Enterprise Funds
• Reclassify amounts from principal expense account to liability account in the
enterprise funds.
The remaining suggested adjusting journal entries were not considered significant and, therefore, were
not listed above.
Recommendation: This situation dictates that the board of trustees remain involved in the financial
affairs of the Village of Elizabeth by providing oversight and independent review of financial
reporting and accounting procedures.
Response: The Village board of trustees will continue to provide additional oversight by making the
budget committee a permanent standing committee that will meet quarterly to go over finances
presented to them by the clerk and treasurer. Additionally, the budget committee will continue to go
over line items of the budget comparison looking for incorrect entries.
Conclusion: Response accepted.
Criteria: Special revenue funds should not be used to record capital projects.
Condition: The Village recorded a capital project in the Parks Fund (special revenue).
Cause: The Village utilized an existing fund to record the capital project.
Effect: The existence of this material weakness has the potential for misstatement of financial
statement amounts and those amounts may be material. Recommendation: The Village utilize capital project funds for future capital projects related to
governmental activities.
Response: The Village will refrain from using special revenue funds for capital projects in future
years.
Conclusion: Response accepted.