Finding Text
2024-01 Material Weakness in Internal Control over Financial Reporting – Material Adjusting Journal Entries
Criteria: Under professional standards, a material weakness exists when material misstatements are not identified through an entity’s system of controls.
Condition: During the audit, there were several material adjusting journal entries proposed to management to issue an unmodified opinion.
Cause: Procedures are in place for the review of the ledger on a regular basis and for monthly and annual reporting but due to the increased activity from grant funding that is outside the Town’s normal operations and the compressed time to review end of year financial reports, there were material adjustments proposed to management to issue an unmodified opinion.
Effect: There is more than a remote chance that material misstatements could occur without detection.
Context: The Town had several federally funded projects during 2024. The State of Vermont was still finalizing funding when the audit fieldwork started. The funding structure was complex and funding sources were unexpectedly changed during the year. The Town does not normally receive a significant amount of federal grant funds, so they were not familiar with the reporting effects.
Recommendation: Management has discussed the reporting differences and is now familiar with the proper and timely accounting for these transactions. Views of Responsible
Officials and Planned
Corrective Actions: The Town feels that these are isolated instances due to the increased funding and changes during the year. Management has reviewed the accounting requirements and is confident that they can correct these deficiencies during the year.