Finding Text
2023-001- Preparation of Financial Statements
Finding Type: Material weakness in internal controls over financial reporting.
Criteria: The District is required to prepare financial statements in accordance with generally accepted accounting principles (GAAP). This is the responsibility of the District’s management. The preparation of the financial statements in accordance with GAAP requires internal controls over both maintaining internal books and records and reporting the external financial statements and the related footnotes.
Conditions and context: The current staffing of the District does not allow the District to have an internal control system in place designed to provide for the preparation of the financials and related footnotes being audited. The District requested that the external auditors draft the financial statements and accompanying notes as a result.
Cause of condition: Due to the cost and other considerations, the District has requested that their auditors draft the financial statement and related footnotes.
Effect of Condition: As a result of this condition, the District lacks internal controls over the preparation of the financials statements in accordance with GAAP, and instead relies, in part, on its external auditors for assistance with this task.
Recommendation: It is recommended that the District ensures that members of management responsible for the accounting and reporting function receive appropriate training to ensure they are able to apply generally accepted accounting principals in reviewing and taking responsibility over the financial statements and footnotes prepared by the external audits. We also recommend hiring additional experienced staff to oversee the accounting and reporting function.
View of Responsible Officials and Planned Corrective Action: The financial statements were prepared and presented in accordance with GAAP. The finance team continues to review the accounting and presentation of the monthly financial statements and will review the audited drafts of the financial statements for accuracy prior to finalization.
Planned Implementation Date of Corrective Action: On-going. The District will continue to evaluate the cost vs. benefit of having someone in management capable of preparation of the financial statements in accordance with GAAP.
Person Responsible for Corrective Action: F.X. Flinn, Board Chair