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Crrv OF ABC, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS Reportable Conditions 05-01 Financial Records and Closing Process Criteria Prudent policies include a formal closing process with supervisory Finance Department personnel being responsible for the review and evaluation of transactions and balances recorded. Condition Our audit procedures included the performance of extensive procedures on the amounts recorded as assets, liabilities, revenues, expenditures and fund balances amongst the various funds of the City. Our findings are as follow: . We noted that for several balance sheet accounts, including due from other governments and deferred revenues, a detailed analysis of the components of the accounts was not maintained on a current basis. . We noted that the balances retlected on the books within cel1ain funds for accrued payroll liabilities and accounts payable were not in agreement with supporting documentation and/or subsidiary schedules. . We noted that the General Fund, Public Services Tax Fund and the Debt Service Funds fund balances retlected on the trial balances were not in agreement with the fund balances retlected in the prior year's financial statement. We noted that these governmental funds, which are maintained on the modified accrual basis of accounting, included amounts that pertained to the government-wide statements which are on the full accrual basis of accounting. . An excessive amount of journal entries were required to be proposed by the auditor to ensure that the financial statements of the City were fairly stated. Substantially all of these entries were to correct bookkeeping errors, or to make accruals and other adjustments that should have been made by the Finance Department prior to providing the auditors with final trial balances. . Governmental funds measure and report activities using the current financial resources measurement focus and the modified accrual basis of accounting. As a result, the data reported in the governmental fund financial statements must be converted to the economic resources measurement focus and the accrual basis of accounting before the data can be reported in the governmental activities in the government-wide financial statements. Formal journal entries to convel1 the data were not prepared by City personnel. As a result, in order to verify the amounts retlected in the City's government-wide statements, we prepared a conversion worksheet, and the related adjustments. A comparison of amounts calculated by Finance Department staff and our audited amounts disclosed large discrepancies in numerous account balances and net asset restrictions Effect The lack of a formal closing process, which includes the thorough revIew of account balances by supervisory Finance Department personnel, can result in material misstatements in the financial statements. The current method of preparing the financial statements is prone to error. Calise The cause of the conditions is the lack of a formal closing process which incorporates a thorough review by supervisory Finance Department personnel. -9-