City of Lead

Federal Program Affected: Community Development Block Grants (CDBG) (AL #14.228) Compliance Requirement: Reporting Questioned Costs: None. Condition and Cause: We were requested to draft the audited modified cash basis financial statements, Schedule of Expenditures of Federal Awards, and related footnote disclosures as part of our regular audit services. Auditing standards require auditors to communicate this situation to the City Commission as an internal control deficiency. Ultimately, it is management’s responsibility to provide for the preparation of the City’s statements and footnotes, and the responsibility of the auditor to determine the fairness and presentation of those statements. From a practical standpoint, we do both for the City at the same time in connection with our audit. This is not unusual for cities of your size. Criteria and Effect: It is our responsibility to inform the City Commission that this deficiency could result in a material misstatement to the financial statements and/or SEFA that would not have been prevented or detected by the City’s management. Repeat Finding from Prior Year: Yes, revised prior year finding 2022-001. Recommendation: We have instructed management to review a draft of the auditor prepared financials in detail for accuracy; we have answered any questions they might have, and have encouraged research of any accounting guidance in connection with the adequacy and appropriateness of classification and disclosure in the City’s financial statements. We are satisfied that the appropriate steps have been taken to provide the City with the completed financial statements. It is the responsibility of management and the City Commission to make the decision whether to accept the degree of risk associated with this condition because of cost or other considerations. Views of Responsible Officials: See City’s Corrective Action Plan.

Federal Program Affected: Community Development Block Grant (ALN #14.228) Compliance Requirement: Allowable Costs/Cost Principles Questioned Costs: None Condition and Cause: The City does not have written policies for Uniform Guidance. Criteria and Effect: Uniform Guidance specifically requires entities to maintain written policies. Not properly maintaining such policies leads to noncompliance. Repeat Finding from Prior Year: No. Recommendation: The City should create written policies in accordance with Uniform Guidance. Response/Corrective Action Plan: The City is in agreement with the finding. See City’s Corrective Action Plan.