TITLE: Title
Follow-up to FY 2022 Audit Finding
PURPOSE: The purpose of this agenda item is to provide a status report to the Town Council on the audit finding to the FY 2022 Audit.
body
DEPARTMENT: Finance
CONTACT INFORMATION: Arche McAdoo, 918-7439; Langston Ramseur, 918-7302
A. INFORMATION: In the audit ending June 30, 2022 the independent auditors identified a material weakness in the balances provided for certain accounts including, lease related assets and liabilities upon implementation of GASB 87, capital assets, accounts receivable, and accounts payable. These errors resulted in the auditors having to identify numerous adjusting journal entries to correct the improperly reported balances. At the recommendation of the auditors and directed by Council, the Finance Director retained the services of a CPA from April through June 2023 from Robert Half and Company to conduct a thorough review of all balance sheet accounts, across funds, to ensure that the trial balances provided for audit do not contain material errors. Th CPA also:
a. reviewed the Town’s processes for capital assets, accounts receivable and accounts payable;
b. assisted finance staff with development of standard procedures and template for reconciliations of all balance sheet accounts, across funds to ensure that trial balances do not contain errors; and,
c. recommended finance team members attend at least 2 training events per year.
Reconciliation for all balance sheet accounts for the current fiscal year 2023 have been reviewed. Based on best practices, the finance staff working with the CPA have drafted the following new or revised policies, procedures and templates.
1. Year-End Closing
Communicates the expectations of all Town employees to facilitate the year-end closing of all accounts in an orderly, timely and comprehensive manner, ensuring the accurate representation of the Town’s financial statements and providing the necessary documentation for the Town’s independent auditors.
2. Month-End Closing
Describes the month-end closing process of collecting and filing all financial transaction information for review, reconciliation, accruing, and reporting the results of the Town’s operations at the end of each month.
3. Financial Calendar - Actual Results
Defines the required financial calendar (established reporting deadlines and responsibilities) for use in reporting the results to the Town’s Finance Officer or designee.
4. Account Reconciliations and Analyses
Defines the Town’s policies and procedures for the completion and maintenance of general ledger account reconciliations and analyses, accompanied by supporting documentation.
5. Bank Reconciliation
Defines the Best Practice for completing and maintaining accurate and complete general ledger bank account reconciliations, accompanied by supporting documentation, ensuring the accounting records agree with the balance on the bank statements.
6. Journal Entry System
Defines the procedures for the journal entry system and for preparing and processing journal entries (standard, non-standard, recurring) and their supporting documents, including those that are unusual in nature (not recurring nor standard) and amount.
7. Prepaid Expenses
Defines the Best Practice for the accounting of prepaid expenses (payments made in advance of the benefits to be received), and for processing those payments - capitalized and classified as prepaid expenses and recognized/amortized incrementally over the period in which the benefits will be received (passage of time).
8. Cash Handling
Defines the policies and procedures for handling cash, ensuring the existence of proper controls (safeguard, account for, and document) over all cash receipts collected at any Town site.
Thes draft policies have been used in the preparation for the FY 2023 audit, and should result in increase accuracy of data for the independent auditors.
FISCAL & STAFF IMPACT: There is no fiscal impact.
RECOMMENDATION:r That the Town Council accept this status report on the audit findings for Fiscal Year Ended June 30, 2022.