Township of Pointe Aux Barques

Finding: 2023-001 Year-End Accounting Procedures Criteria: It is the responsibility of management to perform the year-end closing procedures and to prepare the appropriate year-end closing entries in order to ensure that the year-end financial statements are not materially misstated. Also, the year-end closing procedures should be supervised and reviewed by Township officials that have an adequate knowledge of the Township’s activities during the fiscal year. Condition: The auditors of the financial statements assisted the Township’s management with the basic year-end accounting procedures that were necessary to prepare the accounting records for financial reporting and audit purposes. This included the preparation of several year-end adjusting entries that were necessary to keep the financial statements from being misstated. Cause: Management does not have the expertise necessary to prepare the year-end adjusting entries or other procedures so that the accounting records are ready for financial reporting and audit purposes. Effect: This situation could allow the misstatement of the financial statements. Perspective: Although this finding is considered to be a significant deficiency, we do not perceive it to negatively impact the audit opinions issued. The Township has engaged the financial statement auditors to perform year-end closing procedures which is a nonattest service. This is a systemic problem that is likely to continue due to the small size of the Township and an overall lack of resources. Recommendation: We recommend that the Township acquire the expertise necessary to complete the year-end accounting procedures and to prepare the Township’s accounting records needed for the audit. Response: The Township acknowledges this situation and agrees that this recommendation would help strengthen internal controls. However, due to the cost of implementing this recommendation, the Township Board believes the cost of obtaining the necessary expertise would out-weigh the benefit. Therefore, the Township will continue to request assistance from its financial statement auditors with its year-end account closing procedures.

Finding: 2023-002 Preparation of the U.S. GAAP Basis Financial Statements Criteria: The responsibility of the Township’s annual financial statements prepared in accordance with U.S. generally accepted accounting principles rests with the management of the Township. Management is also responsible for the system of internal accounting controls used to ensure that the financial statements are not materially misstated. Condition: Along with assisting with the year-end closing procedures to the Township’s accounting records, the financial statement auditors also assisted the Township by preparing the annual financial statements (including related notes). Cause: Management does not have the expertise necessary to prepare the financial statements in accordance with U.S. generally accepted accounting principles. Effect: This situation could allow the misstatement of the financial statements. Perspective: Although this finding is considered to be a significant deficiency, we do not perceive it to negatively impact the audit opinions issued. The Township has engaged the financial statement auditors to prepare financial statements in accordance with U.S. generally accepted accounting principles which is a nonattest service. This is a systemic problem that is likely to continue due to the small size of the Township and an overall lack of resources.Recommendation: We recommend that the Township acquire the expertise necessary to prepare the annual financial statements including the required disclosures in accordance with U.S. generally accepted accounting principles. Response: The Township acknowledges this situation and agrees that this recommendation would help strengthen internal controls. However, due to the cost of implementing this recommendation, the Township Board believes the cost of obtaining the necessary expertise would out-weigh the benefit. Therefore, the Township will continue to request assistance from its financial statement auditors with the preparation of its annual financial statements.

Finding: 2024-001 Budget Amendments Criteria: The Michigan Public Act 621 of 1978 requires governmental units to adopt budgets for all applicable governmental type funds before the beginning of the fiscal year and all budget amendments approved prior to the end of the respective fiscal year. Condition: The Township adopted budget amendments for fiscal year 2024 after the year ended March 31, 2024. Cause: Management did not have all budget amendments related to fiscal year 2024 approved until after March 31, 2024. Effect: This situation results in noncompliance of the Michigan Public Act 621 of 1978. Perspective: While we consider this finding to be an instance of noncompliance with State of Michigan budget requirements, we do not perceive it to negatively impact the audit opinions issued. This appears to be an isolated instance as it has not been reported in prior audits. Recommendation: We recommend the Township approve all budget amendments for their governmental funds prior to the end of the fiscal year. Response: The Township acknowledges the situation and will work to avoid any future issues by amending the budget before the end of each fiscal year.

Year-End Accounting Procedures Criteria: It is the responsibility of management to perform the year-end closing procedures and to prepare the appropriate year-end closing entries in order to ensure that the year-end financial statements are not materially misstated. Also, the year-end closing procedures should be supervised and reviewed by Township officials that have an adequate knowledge of the Township’s activities during the fiscal year. Condition: The auditors of the financial statements assisted the Township’s management with the basic year-end accounting procedures that were necessary to prepare the accounting records for financial reporting and audit purposes. This included the preparation of several year-end adjusting entries that were necessary to keep the financial statements from being misstated. Cause: Management does not have the expertise necessary to prepare the year-end adjusting entries or other procedures so that the accounting records are ready for financial reporting and audit purposes. Effect: This situation could allow the misstatement of the financial statements. Perspective: Although this finding is considered to be a significant deficiency, we do not perceive it to negatively impact the audit opinions issued. The Township has engaged the financial statement auditors to perform year-end closing procedures which is a nonattest service. This is a systemic problem that is likely to continue due to the small size of the Township and an overall lack of resources. Recommendation: We recommend that the Township acquire the expertise necessary to complete the year-end accounting procedures and to prepare the Township’s accounting records needed for the audit. Response: The Township acknowledges this situation and agrees that this recommendation would help strengthen internal controls. However, due to the cost of implementing this recommendation, the Township Board believes the cost of obtaining the necessary expertise would out-weigh the benefit. Therefore, the Township will continue to request assistance from its financial statement auditors with its year-end account closing procedures.

Preparation of the U.S. GAAP Basis Financial Statements Criteria: The responsibility of the Township’s annual financial statements prepared in accordance with U.S. generally accepted accounting principles rests with the management of the Township. Management is also responsible for the system of internal accounting controls used to ensure that the financial statements are not materially misstated. Condition: Along with assisting with the year-end closing procedures to the Township’s accounting records, the financial statement auditors also assisted the Township by preparing the annual financial statements (including related notes). Cause: Management does not have the expertise necessary to prepare the financial statements in accordance with U.S. generally accepted accounting principles. Effect: This situation could allow the misstatement of the financial statements. Perspective: Although this finding is considered to be a significant deficiency, we do not perceive it to negatively impact the audit opinions issued. The Township has engaged the financial statement auditors to prepare financial statements in accordance with U.S. generally accepted accounting principles which is a nonattest service. This is a systemic problem that is likely to continue due to the small size of the Township and an overall lack of resources. Recommendation: We recommend that the Township acquire the expertise necessary to prepare the annual financial statements including the required disclosures in accordance with U.S. generally accepted accounting principles. Response: The Township acknowledges this situation and agrees that this recommendation would help strengthen internal controls. However, due to the cost of implementing this recommendation, the Township Board believes the cost of obtaining the necessary expertise would out-weigh the benefit. Therefore, the Township will continue to request assistance from its external auditors with the preparation of its annual financial statements.

Internal Control Over Financial Reporting and Compliance Criteria: Management is responsible for the internal controls that address the assertions related to financial reporting and compliance requirements related to the Township’s federal award programs. Management is responsible for designing and implementing a system of internal controls which include written policies and procedures for how various accounting and transaction reporting will be performed and documented for financial reporting and compliance purposes. Condition: Although the Township appears to have a system of internal controls in place, the Township does not have written policies and procedures that outline how accounting and transaction reporting will be performed and documented for cash disbursements, cash receipts, federal award programs, etc. This is a requirement of the Uniform Guidance. Cause: Due to the small size of the Township, a complex system of internal controls has not appeared necessary. This has resulted in management not taking the time to document written policies and procedures over significant internal control areas. Effect: This situation could allow noncompliance with the Uniform Guidance and federal regulations to occur. Perspective: While we consider this finding to be a significant deficiency, we do not perceive it to negatively impact the audit opinions issued. This is a systemic problem caused by a lack of experience within the Township related to the Uniform Guidance. The Township is actively working to remedy the situation. Recommendation: We recommend that the Township implement written policies and procedures over significant internal control areas. Response: The Township acknowledges this situation and agrees that this recommendation would help strengthen internal controls. The Board of Trustees is working to implement written policies and procedures over significant internal control areas including federal award programs.