January 16, 2025
The Town of Vinton respectfully submits the following corrective action plan for the year ending June 30, 2023.
Name and address of independent public accounting firm:
Brown, Edwards & Company, L.L.P.
3906 Electric Road
Roanoke, VA 24018
Audit period: June 30, 2023
The findings from the June 30, 2023, 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
2023-001: Audit Adjustments (Material Weakness)
Condition:
During the audit, we noted that several year-end audit adjustments were required to ensure that the financials were prepared in accordance with accounting principles generally accepted in the United States of America. The adjustments were related to debt, accounts receivable, and capital assets.
Criteria:
Audit adjustments were required to correct balances in order for the financial statements to be presented in accordance with accounting principles generally accepted in the United States of America.
Cause:
With regard to governmental activity long-term debt, it appears that the roll forward was not reviewed before year-end entries were made, resulting in additional adjustments to long-term debt balances. With regard to business-type activities' long-term debt, principal payments were recorded as an expense rather than a reduction to long-term debt, resulting in additional adjustments to these accounts. With regard to governmental activities and business-type activities' accrued interest, amortization schedules were not reviewed before entries were made, resulting in additional adjustments to these accounts. With regard to governmental activities and business-type activities capital assets, roll forwards, and depreciation schedules were not reviewed before entries were made, resulting in additional adjustments. With regard to governmental activities receivables and deferred revenue were not correctly captured and recorded at year end.
FINDINGS – FINANCIAL STATEMENT AUDIT (CONTINUED)
2023-001: Audit Adjustments (Material Weakness) (Continued)
Effect:
There is an increased risk of financial statement misstatement
Recommendation:
We recommend establishing procedures in which qualified supervisors are reviewing year-end work papers that feed into the final general ledger and focus on the accuracy of year-end balances.
Planned Corrective Action:
Management has noted the opportunities for improvement in the review process and segregated duties as it pertains to audit preparation. The department continues to work on separating duties between the Assistant Finance Director and (Senior) Financial Administrators, who will complete the working papers. The Finance Director/Treasurer will then review them for correctness. In addition, the team will work to link the documents to reduce the adjustments of the final documents.
2023-002: Segregation of Duties (Material Weakness)
Condition:
A fundamental concept of internal controls is the separation of duties. No one employee should have access to both physical assets and the related accounting records, or to all phases of a transaction. A proper segregation of duties has not been established in functions related to accounts payable, accounts receivable, cash disbursements, and information technology.
Criteria:
• Mail should be opened by an employee not responsible for accounting, such as the Town Clerk. Cash receipts could be recorded and the deposit prepared by this person. The cash receipts journal, supplemented by remittance advice, could be forwarded to the accounting staff for postings to the general ledger and detailed customer accounts.
• Customer complaints, returned checks, disputed items, and other such matters should be investigated by someone who is independent of preparing daily cash receipts and deposits.
• Checks and remittance advice should be placed into envelopes and mailed by someone with no other accounting responsibilities.
• Water and sewer billing should be independent of the accounts receivable function.
Cause:
The size of the Town’s accounting staff prohibits complete adherence to segregation of duties.
Effect:
Internal controls are designed to safeguard assets and detect losses from employee dishonesty or error.
FINDINGS – FINANCIAL STATEMENT AUDIT (CONTINUED)
2023-002: Segregation of Duties (Material Weakness) (Continued)
Recommendation:
Steps should be taken to eliminate the performance of conflicting duties where possible or to implement effective compensating controls.
Planned Corrective Action:
Management noted this finding. The Finance Director has segregated duties, to the extent practical, to minimize instances where the same person has complete control of a transaction or conflicting duties.
FINDINGS AND QUESTIONED COSTS – MAJOR FEDERAL AWARD PROGRAM AUDIT
2023-003: Coronavirus State and Local Fiscal Recovery Fund – AL# 21.027, Highway Planning and Construction – AL# 20.205, Late Filling of Data Collection Form
Condition:
The Town did not file the data collection form for the year ended June 30, 2023, timely.
Criteria:
For June 30, 2023, year-end audits, under the requirements in the Uniform Guidance and the Office of Management and Budget (OMB), all entities are required to submit 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.
Cause:
Management did not complete and certify their portion of the form before the deadline. Form cannot be completed before audit is issued.
Effect:
The entity’s form was submitted to the Federal Audit Clearinghouse late, delaying the completion of all annual audit requirements for the Town.
Recommendation:
Management should take steps to ensure that the form is filed timely
Planned Corrective Action:
Management takes note of this finding. The Finance Director is working with the department to ensure that reports and the audit are completed in a timely manner.
FINDINGS AND QUESTIONED COSTS – MAJOR FEDERAL AWARD PROGRAM AUDIT (CONTINUED)
2023-004: Schedule of Expenditures and Federal Awards (Significant Deficiency)
Condition:
The Schedule of Expenditures and Federal Awards (SEFA) was prepared without supervisor review resulting in several auditor corrections.
Criteria:
Segregation of duties and review procedures should be applied to federal award workpapers.
Cause:
Town has not established written internal control policies with regard to federal awards.
Effect:
Risk that the Town’s information in the SEFA is not accurate, complete, or appropriately presented in accordance with Uniform Guidance.
Recommendation:
Management should develop and implement written internal control policies.
Planned Corrective Action:
Management has noted the opportunities for improvement in the review process and segregated duties as it pertains to audit preparation. The department continues to work on separating duties between the Assistant Finance Director and (Senior) Financial Administrators, who will complete the working papers. The Finance Director/Treasurer will then review them for correctness. In addition, the team will work to link the documents to reduce the adjustments of the final documents.
If the Federal Audit Clearinghouse has questions regarding this plan, please call Andrew Keen, Finance Director (540) 983-0608 ext. 7012.
Sincerely yours,
Name: Andrew Keen
Title: Finance Director