City of QuincyLocal Government

Finding 2025-001: Material Restatement to Fund Balance, Net Position, and Capital Assets Condition: During audit fieldwork, our testing resulted in a material restatement of Fund Balance, Net Position, and Capital Assets. Criteria: A good system of internal controls would provide for accurate recording of accruals and deferrals on a regular basis to provide for accurate financial reporting. Cause: Year-end entries related to fund balance, net position and fixed asset balances were required to accurately present the City’s financial statements. Effect: Material adjustments to the City’s fund balance, net position, and fixed asset balances were required to properly state the City’s prior year end balances. Recommendation: We recommend that the City implement effective internal controls in order to provide an accurate assessment of reporting requirements for year-end balances. This implementation of improved controls would result in the appropriate recognition of financial reporting requirements. Corrective Action Plan: The City should implement internal controls to properly record and adjust necessary capital asset balances on a timely basis prior to audit fieldwork. Additionally, the City Comptroller should provide monthly reviews of the financial statements..

Finding 2025-002: Material Journal Entries Condition: During our current year-end audit fieldwork, our testing resulted in material journal entries to be posted to properly state the City’s financial statements. Criteria: A good system of internal controls would ensure accurate recording of necessary journal entries on a regular basis to provide for accurate financial reporting. Cause: Year-end accrual entries along with correcting entries to properly reclassify necessary revenues and expenses into the proper ledger accounts were required to accurately present the City’s financial statements. Effect: Material adjustments to the City’s ledger accounts were required to properly state the City’s financial statements as of fiscal year ended April 30, 2024. Recommendation: We recommend that the City implement effective internal controls in order to provide an accurate assessment of reporting requirements for year-end accruals and deferrals and necessary reclassification adjustments for proper classification in the City’s financial statements. Corrective Action Plan: The City Comptroller, along with staff, will review year-end adjustments as part of the audit preparation process and work to reduce the number of entries proposed by the auditors and prepare fully adjusted financial statements prior to audit fieldwork

Finding 2025-003: Reporting Compliance Federal Agency: U.S. Department of Transportation Passthrough Entity: Illinois Department of Transportation Assistance Listing Number and Federal Program: 20.106 – Airport Improvement Program Condition: During our compliance procedures, we noted that the City did not complete and submit in the proper time period the necessary annual reports to the granting agency outlined in the Compliance Requirements shown in Uniform Guidance (2 CFR Part 200) for the Airport Improvement Program. Criteria: A good system of internal controls should be put in place to reduce any risk of noncompliance with the outlined grant requirements. Specifically, reports should be completed and reviewed on time prior to submission and should be reconciled against the City’s grant ledger activity. Cause: The City’s personnel are not properly following the policies and procedures required by the granting agency and included in the Uniform Guidance (2 CFR Part 200). Effect: Without proper completion, review, and approval, the City is at risk of losing grant funding as a result of the necessary reports not being completed and submitted in a timely fashion. Recommendation: We recommend that the City Comptroller’s Office works with the Airport Department and Airport Director to review and approve the necessary Airport Improvement Program reports prior to their submission. Corrective Action Plan: The City Comptroller should meet with the Airport Director regularly to discuss the necessary reports required to be submitted in order to stay in compliance with the federal funding agency’s grant requirements. Prior to submission, the reports should be reviewed by the City Comptroller and submitted and filed by the Airport Director

Finding 2024-001: Material Restatement to Capital Assets and Accounts Payable Condition: During our current year-end audit fieldwork, our testing resulted in a material restatement of Capital Assets and Accounts Payable. Criteria: A good system of internal controls would provide for accurate recording of accruals and deferrals on a regular basis to provide for accurate financial reporting. Cause: Year-end entries related to accounts payable and fixed asset balances were required to accurately present the City’s financial statements. Effect: Material adjustments to the City’s accounts payable and fixed asset balances were required to properly state the City’s prior year end balances. Recommendation: We recommend that the City implement effective internal controls in order to provide an accurate assessment of reporting requirements for year-end balances. This implementation of improved controls would result in the appropriate recognition of financial reporting requirements. Corrective Action Plan: The City should implement internal controls to properly record necessary accruals and deferrals on a timely basis prior to audit fieldwork. Additionally, the City Comptroller should provide monthly reviews of the financial statements.

Finding 2024-002: Material Journal Entries Condition: During our current year-end audit fieldwork, our testing resulted in material journal entries to be posted to properly state the City’s financial statements. Criteria: A good system of internal controls would ensure accurate recording of necessary journal entries on a regular basis to provide for accurate financial reporting. Cause: Year-end accrual entries along with correcting entries to properly reclassify necessary revenues and expenses into the proper ledger accounts were required to accurately present the City’s financial statements. Effect: Material adjustments to the City’s ledger accounts were required to properly state the City’s financial statements as of fiscal year ended April 30, 2024. Recommendation: We recommend that the City implement effective internal controls in order to provide an accurate assessment of reporting requirements for year-end accruals and deferrals and necessary reclassification adjustments for proper classification in the City’s financial statements. Corrective Action Plan: The City Comptroller, along with staff, will review year-end adjustments as part of the audit preparation process and work to reduce the number of entries proposed by the auditors and prepare fully adjusted financial statements prior to audit fieldwork

Finding 2024-003: Grant Reporting, Reconciliation, and Monitoring Condition: During our current year-end audit fieldwork, we noted that the City does not reconcile grants throughout the fiscal year, thus requiring many journal entries to properly adjust revenues and record grant accruals and deferrals at year-end. Criteria: A good system of internal controls would provide for accurate representation of grant activity for all City accounts prior to audit fieldwork. Cause: Year-end preparation of grant lead sheets and detailed schedules were required to be completed by the auditors to correctly and accurately reflect the City’s grant activity for the fiscal year. Effect: The City’s financial statements were not correctly reconciled and adjusted prior to fieldwork as a result of the unreconciled grant activity. Recommendation: A vital process of effective internal controls is to review grant activity throughout the fiscal year and adjust as necessary for any receivables that are outstanding and to include any payable for invoices incurred during the year but paid after fiscal year end in order to properly state the City’s grant expenditures and revenue activity for the fiscal year. Corrective Action Plan: We recommend that the City Comptroller’s Office and the Treasurer’s Office act together as a central location for grant activity. As it stands currently, each department is responsible for the grant application, authorization, and reporting of grant activity. This has led to a breakdown in communication between the departments and the Treasurer and Comptroller’s Offices, where information was recorded to the ledger, but reconciliations were not being performed throughout the year to properly display the City’s grant expenditure and revenue activity. While Departments may manage their own grants, it is important that consistent reconciliation is completed monthly and is reviewed by the Comptroller and Treasurer’s Office for use in preparation of monthly and year-end financial statements.

Finding 2024-004: Reporting Compliance Federal Agency: U.S. Department of Transportation Passthrough Entity: Illinois Department of Transportation Assistance Listing Number and Federal Program: 20.106 – Airport Improvement Program Condition: During our compliance procedures, we noted that the City was not completing, reviewing, and submitting the necessary reports outlined in the Compliance Requirements shown in Uniform Guidance (2 CFR Part 200) for the Airport Improvement Program. Criteria: A good system of internal controls should be put in place to reduce any risk of noncompliance with the outlined grant requirements. Specifically, reports should be completed and reviewed on time prior to submission and should be reconciled against the City’s grant ledger activity. Cause: The City’s personnel are not properly following the policies and procedures required by the granting agency and included in the Uniform Guidance (2 CFR Part 200). Effect: Without proper completion, review, and approval, the City is at risk of losing grant funding as a result of the necessary reports not being completed and submitted in a timely fashion. Recommendation: We recommend that the City Comptroller’s Office works with the Airport Department and Airport Director to review and approve the necessary Airport Improvement Program reports prior to their submission. Corrective Action Plan: The City Comptroller should meet with the Airport Director regularly to discuss the necessary reports required to be submitted in order to stay in compliance with the federal funding agency’s grant requirements. Prior to submission, the reports should be reviewed by the City Comptroller and submitted and filed by the Airport Director.

Finding 2023-001: Restatement to Fund Balance Condition: During audit fieldwork, our testing resulted in a restatement of fund balance in order to correct prior year accruals and deferrals related to property taxes, accounts payable, grant receivables, etc. that were not included on the unadjusted trial balances. Criteria: A good system of internal controls would provide for accurate recording of accruals and deferrals on a regular basis in order to provide for accurate financial reporting. Cause: Year-end entries related to property taxes, accounts payable, grant receivables, etc. were required in order to accurately present the City’s financial statements. Effect: A material adjustment to the City’s beginning fund balance was required to properly state the City’s prior year end accruals and deferrals. Recommendation: We recommend that the City implement effective internal controls in order to provide an accurate assessment of reporting requirements for year-end accruals and deferrals. This implementation of improved controls would result in the appropriate recognition of financial reporting requirements. Corrective Action Plan: The City should implement internal controls to properly record necessary accruals and deferrals on a timely basis prior to audit fieldwork. Additionally, the City Comptroller should provide monthly reviews of the financial statements.

Finding 2023-002: Material Journal Entries Condition: During audit fieldwork, our testing resulted in material journal entries to be posted in order to properly state the City’s financial statements. Criteria: A good system of internal controls would provide for accurate recording of necessary journal entries on a regular basis in order to provide for accurate financial reporting. Cause: Year-end accrual entries along with correcting entries to properly reclassify necessary revenues and expenses into the proper ledger accounts were required in order to accurately present the City’s financial statements. Effect: Material adjustments to the City’s ledger accounts were required to properly state the City’s financial statements as of fiscal year ended April 30, 2023. Recommendation: We recommend that the City implement effective internal controls in order to provide an accurate assessment of reporting requirements for year-end accruals and deferrals and necessary reclassification adjustment for proper classification in the City’s financial statements. Corrective Action Plan: The City Comptroller, along with staff, will review year-end adjustments as part of the audit preparation process and work to reduce the number of entries proposed by the auditors and prepare fully adjusted financial statements prior to audit fieldwork

Finding 2023-003: Grant Reporting, Reconciliation, and Monitoring Condition: During audit fieldwork, we noted that the City does not reconcile grants throughout the fiscal year, thus requiring many journal entries to properly adjust revenues and record grant accruals and deferrals at year-end. Criteria: A good system of internal controls would provide for accurate representation of grant activity for all City accounts prior to audit fieldwork. Cause: Year-end preparation of grant lead sheets and detailed schedules were required to be completed by the auditors to correctly and accurately reflect the City’s grant activity for the fiscal year. Effect: The City’s financial statements were not correctly reconciled and adjusted prior to fieldwork as a result of the unreconciled grant activity. Recommendation: A vital process of effective internal controls is to review grant activity throughout the fiscal year and adjust as necessary for any receivables that are outstanding and to include any payable for invoices incurred during the year but paid after fiscal year end in order to properly state the City’s grant expenditures and revenue activity for the fiscal year. Corrective Action Plan: We recommend that the City Comptroller’s Office and the Treasurer’s Office act together as a central location for grant activity. As it stands currently, each department is responsible for the grant application, authorization, and reporting of grant activity. This has led to a breakdown in communication between the departments and the Treasurer and Comptroller’s Offices, where information was recorded to the ledger, but reconciliations were not being performed throughout the year to properly display the City’s grant expenditure and revenue activity. While Departments may manage their own grants, it is important that a consistent reconciliation is completed monthly and is reviewed by the Comptroller and Treasurer’s Office for use in preparation of monthly and year-end financial statements.

Finding 2023-004: Reporting Compliance Federal Agency: U.S. Department of Transportation Passthrough Entity: Illinois Department of Transportation Assistance Listing Number and Federal Program: 20.106 – Airport Improvement Program Condition: During our compliance procedures, we noted that the City was not completing, reviewing, and submitting the necessary reports outlined in the Compliance Requirements shown in Uniform Guidance (2 CFR Part 200) for the Airport Improvement Program. Criteria: A good system of internal controls should be put in place to reduce any risk of noncompliance with the outlined grant requirements. Specifically, reports should be completed and reviewed on time prior to submission and should be reconciled against the City’s grant ledger activity. Cause: The City’s personnel are not properly following the policies and procedures required by the granting agency and included in the Uniform Guidance (2 CFR Part 200). Effect: Without proper completion, review, and approval, the City is at risk of losing grant funding as a result of the necessary reports not being completed and submitted in a timely fashion. Recommendation: We recommend that the City Comptroller’s Office works with the Airport Department and Airport Director to review and approve the necessary Airport Improvement Program reports prior to their submission. Corrective Action Plan: The City Comptroller should meet with the Airport Director regularly to discuss the necessary reports required to be submitted in order to stay in compliance with the federal funding agency’s grant requirements. Prior to submission, the reports should be reviewed by the City Comptroller and submitted and filed by the Airport Director.

Finding 2022-002 ? Allowable Costs Federal Agency: U.S. Department of Treasury Passthrough Entity: Illinois Department of Revenue Assistance Listing Number and Federal Program: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Criteria: Internal controls should be in place to reduce the risk of noncompliance with grant requirements. Specifically, costs need to be reviewed and approved by qualified personnel to ensure they are allowable costs. In a memo dated January 24, 2017, and approved by the Council, the City implemented procedures that requires all nonunion, non-exempt personnel to clock in and out for each shift. Police and Fire employees have their own sign-in and sign-out sheets that are to be approved daily by their respective supervisors. Statement of Condition: Salaries paid to essential workers to perform essential work during the COVID-19 public health emergency were used for reimbursement under this grant. Selected employees? timesheets did not have the proper supervisor approval. Statement of Cause: Personnel are not properly following the policy put in place by the above-mentioned memo. Statement of Effect: Without proper review and approval, employees may not be compensated correctly which can lead to erroneous payroll tax documents and additional administrative time to correct misstatements. Additionally, if qualified personnel are not reviewing costs associated with the grant to ensure they are allowable, there is a great possibility that unallowable costs could be claimed for reimbursement. This may lead to the City being responsible for reimbursing the grant funding to the awarding agency. Questioned Costs: No questioned costs were identified.Perspective Information: This appears to be a systemic problem. Payroll for essential workers from the 911, Police, and Fire departments from May 14, 2021 to October 1, 2021 was claimed for reimbursement under this grant. We haphazardly selected 5 employees from the pay periods during that time frame and reviewed the daily timesheets for supervisor approval. There were no supervisor approvals on the 911 timesheets and supervisor approvals were consistently missing for Police and Fire departments. Identification of Repeat Findings: Not a repeat finding. Recommendation: Timesheets need to be approved by the supervisor before submission to Comptroller?s office. If the timesheets do not have the proper approvals, then they should not be processed until the signature is obtained.

Finding 2021-001 ? Allowable Costs Federal Agency: U.S. Department of Transportation Passthrough Entity: Illinois Department of Transportation CFDA Number and Federal Program: 20.509 Formula Grants for Rural Areas (Federal Award Identification Number OP-20-32-FED) and 20.509 COVID-19 Formula Grants for Rural Areas (Federal Award Identification Number OP-21-32-CARE) Criteria: The City must comply with the provisions of 2 CFR part 200 in which direct charges to Federal awards were for allowable costs. Statement of Condition: The City submits monthly budget requests for payment reimbursement. The request includes actual project revenue and expenses, which is the basis for the payment amount. During our audit, it was found the revenue and expenses included on the monthly budget requests were not correct. Statement of Cause: The City created a report to generate all revenues and expenses related to the program from the general ledger. This report was not being used to complete the budget requests at the time of filing. There was also no review process in place to ensure proper reporting of all revenue and expenses. Statement of Effect: The City is at risk for claiming unallowable costs. There is also potential the grant may be over or under reported leading the City to receive too much funding or too little funding. Questioned Costs: No questioned costs were identified. Perspective Information: This appears to be a systemic problem considering each monthly reporting was incorrect. There is no process in place to ensure correct grant report and no reviews are in place. Identification of Repeat Findings: Not a repeat finding. Recommendation: We recommend each budget request is reconciled to the general ledger for the month and year to date to ensure inclusion of all allowable costs. We further recommend the City appoint a grant manager to oversee all City grants. This would provide additional oversight for State and Federal compliance requirements and enable the City to ensure required reporting is properly completed. Views of Responsible Officials: Marty Stegeman, Transportation Director, agrees with the finding and has already implemented a new process for ensuring all revenues and expenses are properly included in the budget requests. See Corrective Action Plan.