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<br /> <br />2022-001 Material Audit Adjustments <br /> <br />Condition: During our audit, material adjustments were needed to correct the year-end balances for various <br />accounts receivable and accounts payable balances. <br /> <br />Criteria: Such adjustments were needed to correct year end balances. Amounts reported in the City’s <br />accounting system need to agree to the underlying supporting documentation. <br /> <br />Cause: City staff did not correctly adjust for receivable and payable balances during the year. <br /> <br />Effect: This indicates that misstatements may occur and not be detected by the City’s system of internal <br />control, which could lead to a material misstatement. <br /> <br />Recommendation: We recommend management review the related journal entries, obtain an understanding of why <br />the entries were necessary and modify current procedure to ensure that future corrections are not <br />needed. <br /> <br />Management Response: <br /> <br />Management agrees with the finding and understands the reason the adjustments were needed. Procedures over year- <br />end adjustments will be reevaluated to eliminate the need for related audit adjustments in the future. <br /> <br />Compliance and Other Matters <br /> <br />As part of obtaining reasonable assurance about whether the City's financial statements are free from material <br />misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant <br />agreements, noncompliance with which could have a direct and material effect on the financial statement amounts. <br />However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we <br />do not express such an opinion. The results of ou r tests disclosed one instance of noncompliance or other matters that <br />are required to be reported under Government Auditing Standards or Minnesota State Statutes and which are described as <br />item 2022-002. <br /> <br />2022-002 Time Period for Payment <br /> <br />Condition: Auditing for legal compliance requires a review of the City’s payment of claims. Our study <br />indicated an instance of non-compliance that we believe is required to be remedied. <br /> <br />Criteria: Minnesota statute section 471.425 requires that the City pay bills within 35 days from receipt. If <br />the invoice is not paid within the 35 days, interest at 1.5 percent per month is to be added to <br />amount due. <br /> <br />Cause: We noted seven of 25 invoices sampled that were paid after the 35 day period. This occurred <br />during staff turnover and transition. <br /> <br />Effect: The City is in violation of this statute. <br /> <br />Recommendation: We recommend that the City develop policies and procedures related to the accounts payable <br />cycle. These policies and procedures should include payment terms that are outlined within State <br />statutes. Implementing this recommendation will not result in any additional cost to the City. <br /> <br />Management Response: <br /> <br />Management believes that current procedures are sufficient to prevent future noncompliance. <br /> <br /> <br /> <br /> <br /> <br />3 208