CORRECTIVE ACTION PLAN
March 24, 2025
Greg Lunsford, Town Manager respectfully submits the following corrective action plan for the year ended June 30, 2024.
Name and address of independent public accounting firm:
Brown, Edwards & Company, L.L.P. 1909 Financial Drive
Harrisonburg, VA 22801
Audit period: June 30, 2024
The findings from the June 30, 2024 Schedule of Findings and Questioned Costs (the "Schedule") are discussed below. The findings are numbered consistently with the number assigned in the Schedule.
Findings - Financial Statement Audit
2024-001: Material Audit Adjustments (Material Weakness)
Condition
During the audit, we detected material misstatements in the trial balance. Generally accepted auditing standards dictate that detection of errors in an audit is a strong indicator of a significant deficiency or material weakness. Accordingly, we are required to communicate this finding as such.
Criteria
The financial statements must be presented fairly, in all material respects.
Cause
The Town does not have a formal process for annual and monthly entries.
Effect
The financial information presented to us for the audit was missing or inaccurate.
Recommendation
We recommend that management implement processes to ensure accuracy of accounts.
Views of Responsible Officials
The Treasurer drafted a formal monthly close process which will be implemented immediately.
2024-002: Segregation of Duties (Material Weakness)
Condition
Multiple duties in a transaction cycle are performed by the same individual. Consequently, errors or irregularities may occur and not be detected.
Criteria
Ideally, no individual would perform more than one duty in connection with any transaction or series of transactions. In particular, no one individual should have access to both physical assets and the related accounting records.
Cause
Incompatible duties and the limited number of staff.
Effect
A lack of separation of duties could allow error or fraud to go undetected.
Recommendation
While we understand that limited staff can make this difficult, controls should be in place to mitigate the risk. We have suggested specific controls in a separate communication.
Views of Responsible Officials
This continues to be a work in progress. The Treasurer has divided up the duties among her employees. Now one employee is processing the utility bills and two other employees are collecting/inputting payments.
2024-003: Annual and Monthly Close Process (Material Weakness)
Condition
The Town does not have a complete monthly or annual close process in place that accurately reflects all needed adjustments.
Criteria
Each period should be closed to properly reflect accruals or other transactions not previously recorded to ensure the period reporting is materially correct.
Cause
The annual and monthly close process does not currently capture adjustments needed for all accruals.
Effect
Material audit adjustments were required.
Recommendation
We recommend the Town improve a monthly and annual close process to ensure financial records are accurate and complete.
Views of Responsible Officials
The Treasurer has drafted a formal monthly close process to ensure completion and accuracy of the Town's financial records. The annual close process currently consists of physically closing the Treasurer's Office on June 30th to input all utility/tax payments received by noon and then final reports for the fiscal year are printed. The actual fiscal year closure does not happen until the formal audit is completed.
Findings and Questioned Costs - Major Federal Award Programs Audit
2024-004: COVID-19 Coronavirus State and local Fiscal Recovery Funds AlN 21.027, late Filing of Data Collection Form
Condition
The Town filed the data collection form one day late due to issues with the Federal Audit Clearinghouse website.
Criteria
Under the requirements in the Uniform Guidance and the Office of Management and Budget (0MB), all entities are required to file the annual data collection form with the Federal Audit Clearinghouse the earlier of either 30 days after the issuance of the entity's annual audit or nine months after the entity's fiscal year-end (March 31st for the Town of Elkton).
Cause
Management did not complete and certify auditee portion of the form before the deadline.
Effect
The Town's form was not submitted to the Federal Audit Clearinghouse on time.
Recommendation
Management should take steps to ensure that the form is filed timely.
Views of Responsible Officials and Planned Corrective Action
As noted above, the Town Manager had issues with submitting the report through the Federal Audit Clearinghouse website. The Treasurer is aware that an annual audit needs to be completed for all major federal awards. She will work with the auditing firm and the Town Manager to ensure that the report is filed by the deadline.
2024-005: COVID-19 Coronavirus State and local Fiscal Recovery Funds AlN 21.027, Controls over Reporting
Condition
The FY23 expenditures reported to the Treasury did not reconcile to the audited SEFA and the FY24 expenditures did not agree to the tracking spreadsheet.
Criteria
Reporting should reconcile to accounting records and have a review by an individual other than the preparer.
Cause
Lack of review and reconciliation to the general ledger prior to submission.
Effect
The annual reporting was inaccurate for FY23 and FY24 expenditures.
Recommendation
Ensure that all information reported as been reviewed and reconciled prior to submission to the grantor.
Views of Responsible Officials and Planned Corrective Action
Going forward, the Treasurer will compile the information and have the Town Manager approve the report prior to submitting it through the online portal.
2024-006: Federal Procurement Policies
Condition
There are no written procurement policies specific to the federal awards cost principle requirements under Uniform Grant Guidance. Existing procurement policies are minimal and do not meet federal requirements.
Criteria
Federal award recipients must have written policies, procedures, and standards of conduct as required by 2 CFR 200, Subparts D and E.
Cause
Certain required policies under 2 CFR 200, Subparts D and E are not present.
Effect
Lack of required policies may create noncompliance with regulations as stated requirements may not be followed.
Recommendation
Develop procurement policies and financial policies that meet federal standards.
Views of Responsible Officials and Planned Corrective Action
The Treasurer drafted a Federal Procurement Policy for consideration in May 2024; however, it was not presented to Council. Therefore, the Treasurer will get the proposed policy added to the Council's agenda for consideration and approval at the next scheduled meeting.
If the Federal Audit Clearinghouse has questions regarding this plan, please call Donna Curry, Treasurer at
540-298-1951.
Sincerely yours,
Greg Lunsford Town Manager
Town of Elkton, Virginia