TOWN OF MIDDLEBURY

The audit resulted in over 30 adjusting journal entries proposed to management. Some of these entries were material to the financial statements as a whole and required in order to issue an unmodified opinion. The Town does not have the experience and training needed to – - Prepare all of its year end reconciliations and journal entries and prepare financial statements, complete with notes, in accordance with accounting principles generally accepted in the United States of America. Accordingly, the Town is unable to and has not established internal controls over the preparation of year-end reconciliations and journal entries and the preparation of the financial statements. - Select and apply accounting principles that are in conformity with accounting principles generally accepted in the United States of America. Accordingly, the Town is unable to, and has not established, internal controls over the selection and application of accounting principles.Criteria - Under SAS 115, an internal control deficiency exists when management does not possess the financial expertise to prepare end reconciliations and prepare financial statements in accordance with generally accepted accounting principles. Cause: Unknown Effect: Because management lacks expertise in financial accounting and reporting, there is more than a remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected under the provisions of SAS 115. Recommendation: To correct these deficiencies, management would need to hire personnel with adequate accounting experience to perform these functions. The Town would need to weigh the costs of these corrections verse the benefit. Management Response: The Town hired a new director of finance with a strong educational background.

During the course of our audit it was noted that the depreciation schedules were not completed, this led to a delay in the completion of the audit. Criteria: Management should review all assets to ensure that depreciation expenses is calculating properly and that live assets are applied consistently based on capitalization policy. The depreciation schedule for should be updated quarterly at the very least to ensure that they are ready for the audit. Cause: Unknown Effect: Funds are not adequately representing a true reflection of the depreciating assets throughout the year. Recommendation: A standard monthly entry would provide the financial statements with an adequate representation of the depreciation expense per month. Management Response: Management is going to keep up to date with its depreciation schedule and monthly entry.

During the course of our audit it was noted that loan reimbursement request is not being conducted timely. Criteria: Loan reimbursements should be requested in a timely manner or else the taxpayers are being responsible to cover the bills. This also makes calculating expenditures related to possible single audits to be reconciled. Cause: Unknown Effect: Taxpayers are being responsible to cover the bills of projects that they previous approved to be paid by debt. Recommendation: Request reimbursement of loans throughout the project. Management Response: Management is making more of an effort to request reimbursement throughout a project rather than completion.

During the course of our audit it was noted that debt, fixed assets and accounts payable are not being reconciled monthly. Criteria: Management should reconcile all debt, fixed assets and accounts payable accounts monthly to prevent errors from compounding. Cause: Unknown Effect: Unrecorded activity was noted throughout the year. Recommendation: All debt, fixed assets and accounts payable should be reconciled monthly Management Response: Management will reconcile all debt, fixed assets and accounts payable accounts monthly.

2024 – 1 Year End Audit Entries and Financial Reporting - The audit resulted in over 30 adjusting journal entries proposed to management. Some of these entries were material to the financial statements as a whole and required in order to issue an unmodified opinion. The Town does not have the experience and training needed to – - Prepare all of its year end reconciliations and journal entries and prepare financial statements, complete with notes, in accordance with accounting principles generally accepted in the United States of America. Accordingly, the Town is unable to, and has not established internal controls over the preparation of year-end reconciliations and journal entries and the preparation of the financial statements. - Select and apply accounting principles that are in conformity with accounting principles generally accepted in the United States of America. Accordingly, the Town is unable to, and has not established, internal controls over the selection and application of accounting principles. Criteria - Under SAS 115, an internal control deficiency exists when management does not possess the financial expertise to prepare end reconciliations and prepare financial statements in accordance with generally accepted accounting principles. Cause: Unknown Effect: Because management lacks expertise in financial accounting and reporting, there is more than a remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected under the provisions of SAS 115. Recommendation: To correct these deficiencies, management would need to hire personnel with adequate accounting experience to perform these functions. The Town would need to weigh the costs of these corrections verse the benefit. Management Response: The Town hired a new director of finance with a strong educational background.

2024 – 2 Depreciation Schedules - During the course of our audit it was noted that the depreciation schedules were not completed, this led to a delay in the completion of the audit. Criteria: Management should review all assets to ensure that depreciation expenses is calculating properly and that live assets are applied consistently based on capitalization policy. The depreciation schedule for should be updated quarterly at the very least to ensure that they are ready for the audit. Cause: Unknown Effect: Funds are not adequately representing a true reflection of the depreciating assets throughout the year Recommendation: A standard monthly entry would provide the financial statements with an adequate representation of the depreciation expense per month. Management Response: Management is going to keep up to date with its depreciation schedule and monthly entry.

2024 – 3 Loan Reimbursement Requests - During the course of our audit it was noted that loan reimbursement request is not being conducted timely. Criteria: Loan reimbursements should be requested in a timely manner or else the taxpayers are being responsible to cover the bills. This also makes calculating expenditures related to possible single audits to be reconciled. Cause: Unknown Effect: Taxpayers are being responsible to cover the bills of projects that they previous approved to be paid by debt. Recommendation: Request reimbursement of loans throughout the project. Management Response: Management is making more of an effort to request reimbursement throughout a project rather than completion.

2024 – 4 Reconciliations - During the course of our audit it was noted that cash, investments and accounts payable and account receivable are not being reconciled monthly. Criteria: Management should reconcile all accounts receivable, investments and accounts payable accounts monthly to prevent errors from compounding. Cause: Unknown Effect: Unrecorded activity was noted throughout the year. Recommendation: All cash, investments and accounts payable and receivable should be reconciled monthly Management Response: Management will reconcile all cash, investments and accounts payable accounts monthly.

2023 – 1 General Journal Entries - The Town posts general journal entries to numerous accounts each month in the general ledger to re-class and adjust monthly postings which are prepared and recorded by the same individual. In many cases, a month end adjustment is recorded correcting numerous different items. General ledger adjustments present additional risks of misstatement. Without proper backup for adjustments made to the trial balance, it would be easy for material amounts of improper recognition to occur. Criteria: Journal entries should have the proper documentation and supporting backup Cause: Unknown Effect: Without proper backup for adjustments made to the trial balance, it would be easy for material amounts of improper recognition to occur. Recommendation: The Town of Middlebury, Vermont should implement a system for recording journal entries and the necessary backup for those journal entries. Management Response: The Town of Middlebury, Vermont is working on developing a system of documenting journal entries, with proper back up and support.

2023 – 2 Year End Audit Entries and Financial Reporting - The audit resulted in over 30 adjusting journal entries proposed to management. Some of these entries were material to the financial statements as a whole and required in order to issue an unmodified opinion. The Town does not have the experience and training needed to – - Prepare all of its year end reconciliations and journal entries and prepare financial statements, complete with notes, in accordance with accounting principles generally accepted in the United States of America. Accordingly, the Town is unable to, and has not established internal controls over the preparation of year-end reconciliations and journal entries and the preparation of the financial statements. - Select and apply accounting principles that are in conformity with accounting principles generally accepted in the United States of America. Accordingly, the Town is unable to, and has not established, internal controls over the selection and application of accounting principles. Criteria - Under SAS 115, an internal control deficiency exists when management does not possess the financial expertise to prepare end reconciliations and prepare financial statements in accordance with generally accepted accounting principles. Cause: Unknown Effect: Because management lacks expertise in financial accounting and reporting, there is more than a remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected under the provisions of SAS 115. Recommendation: To correct these deficiencies, management would need to hire personnel with adequate accounting experience to perform these functions. The Town would need to weigh the costs of these corrections verse the benefit. Management Response: The Town hired a new director of finance with a strong educational background.

2023 – 3 Loan Reimbursement Requests - During the course of our audit it was noted that loan reimbursement request is not being conducted timely. Criteria: Loan reimbursements should be requested in a timely manner or else the taxpayers are being responsible to cover the bills. This also makes calculating expenditures related to possible single audits to be reconciled. Cause: Unknown Effect: Taxpayers are being responsible to cover the bills of projects that they previous approved to be paid by debt. Recommendation: Request reimbursement of loans throughout the project. Management Response: Management is making more of an effort to request reimbursement throughout a project rather than completion.

2023 – 4 Depreciation Schedules - During the course of our audit it was noted that the depreciation schedules were not completed, this led to a delay in the completion of the audit. Criteria: Management should review all assets to ensure that depreciation expenses is calculating properly and that live assets are applied consistently based on capitalization policy. The depreciation schedule for should be updated quarterly at the very least to ensure that they are ready for the audit. Cause: Unknown Effect: Funds are not adequately representing a true reflection of the depreciating assets throughout the year Recommendation: A standard monthly entry would provide the financial statements with an adequate representation of the depreciation expense per month. Management Response: Management is going to keep up to date with its depreciation schedule and monthly entry.

2023 – 5 Reconciliations - During the course of our audit it was noted that cash, investments and accounts payable and account receivable are not being reconciled monthly. Criteria: Management should reconcile all accounts receivable, investments and accounts payable accounts monthly to prevent errors from compounding. Cause: Unknown Effect: Unrecorded activity was noted throughout the year. Recommendation: All cash, investments and accounts payable and receivable should be reconciled monthly Management Response: Management will reconcile all cash, investments and accounts payable accounts monthly.

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