Finding Text
Finding 2024-001: Timeliness of Financial Reporting (Material Weakness/Noncompliance)
Condition:
The City did not complete the financial close and reporting process in a timely manner, resulting in a delay in the
submission of the audited financial statements and the single audit report to the federal awarding agencies. The City’s
financial statements and the single audit report were due on March 31, 2025, as required by the Uniform Guidance.
However, the information and documentation, including the trial balance, provided to the external auditors required
multiple corrections and revisions to balance and audit, and therefore, the audited financial statements and the single
audit report were not issued until past the required deadline.
Criteria:
According to the Uniform Guidance, §200.508, non-federal entities that expend $750,000 or more in a year in federal
awards must have a single audit conducted for that year in accordance with the provisions of this part. The audit must
be completed, and the data collection form and reporting package must be submitted within the earlier of 30 calendar
days after receipt of the auditor's report(s), or nine months after the end of the audit period. The Uniform Guidance
also requires non-federal entities to submit their audited financial statements to the federal awarding agencies within
the same time frame.
Cause of Condition:
The cause of the condition was the lack of management oversight and internal controls over the financial close and
reporting process. Turnover at key positions within the Finance Department did not allow for the timely preparation
and review of the financial statements and the SEFA. Key information required to be audited also needed multiple
corrections, revisions, and versions to be suitable for audit purposes, including the trial balance and bank
reconciliations which added to the time necessary to complete the audit.
Effect or Potential Effect of Condition:
The effect of the condition was the noncompliance with the Uniform Guidance and there exists the potential loss of
federal funding. The City risks sanctions from the federal awarding agencies, such as withholding of payments,
suspension or termination of awards, or disallowance of costs.
Recommendation:
We recommend that the City:
- Review and update its policies and procedures for the financial close and reporting process to ensure
compliance with the GAAP and the Uniform Guidance.
- Assess its staffing and resource needs and allocate sufficient personnel and funds to perform the financial close
and reporting process efficiently and effectively.
- Maintain accurate and complete records and reconciliations of the various general ledger accounts and ensure
that they are consistent with the financial statements and the SEFA.
- Develop and implement a realistic timeline for the financial close and reporting process and monitor the progress
regularly.
- Communicate and coordinate with the external auditors throughout the audit process and respond to their
requests promptly and accurately.
Management’s Response and Corrective Action:
The City acknowledges that the financial information and documentation, including the trial balance, was not prepared
in a timely manner. This prevented the auditors from completing the audit, and the Single Audit, by March 31, 2025.
The implementation of the new financial software system, which went live on July 1, 2023, necessitated almost all of
the Finance Department’s staff hours to be allocated to ensuring the software system was accurate in its financial
reporting. This allocation of resources prevented the City from producing timely financial information.