Audit of town of Massena financials finds three 'significant' deficiencies

Bob Beckstead, Watertown Daily Times, N.Y.
·4 min read

Jul. 26—MASSENA — The review of the town of Massena's 2020 financial statements came up with what auditors from Bowers and Company CPAs said were three "significant" deficiencies.

One of those findings dealt with preparation of financial statements.

"Management is unable to prepare the accrual statements in accordance with GASB 34 and relies on external auditor to prepare the financial statements in accordance with GAAP (generally accepted accounting principles)," auditors said in their report, which was presented to the Massena Town Board last week. "Awareness that this condition is a significant deficiency and will be in future years unless management is able to prepare their financial statements in accordance with GAAP."

Laurie Podvin, a partner with Bowers & Company, said Massena isn't alone.

"Your responsibility is to prepare these financial statements, but these are 126 pages of financials. We don't have any of our clients that prepare their own financial statements. So we make a decision if that's a significant deficiency or not," she said.

Town officials, in their response, said they did not have the appropriate staffing to prepare GASB-level financial statements.

"The town prepares internal financial statements that are approved by the comptroller's office and funding agencies. Once that is done, the town contracts with an outside auditing firm to prepare its audited financial statements. The town of Massena recognizes that this is viewed as a significant deficiency; however, it is not financially feasible at this time, to hire someone with the expertise to prepare detailed financial statements that meet GASB 34 and GAAP standards. The town of Massena is in a deficit due to sale of the hospital and taking on the liabilities that came with the same that was not budgeted for. The town is not financially capable," town officials said.

A second significant deficiency was cited for reconciliation procedures.

"In preparing monthly reconciliations of the bank accounts, it was found that the town is not completing such reconciliations timely and they also are not being reconciled to the general ledger accounts as part of the monthly reconciliation process. We found that bank reconciliations for the 2020 fiscal year were subsequently reviewed and reconciled to the general ledger over 11 months after yearend and discrepancies were found and adjustments were required to reconcile cash to the general ledger accounts. Overall, there are significant internal control and required procedures lacking in regard to monthly bank reconciliations procedures which ensure accurate financial reporting," auditors said.

"Bank reconciliations are not being reconciled to the general ledger timely and therefore, financial statements are not being accurately presented throughout the year or internally by management," they added.

"In a perfect world, we come in, the financial state or the general ledgers all reconcile, their supporting documentation attached, and then we audit those numbers," Ms. Podvin said. "There was cleanup that was done, us finding and making several adjustments. We had 100-plus journal entries to do. So that's a significant deficiency."

Town officials said they had been working on the bank reconciliations.

"As of today, all bank reconciliations are up to date," they said.

The final significant deficiency was related to budgeting procedures and monitoring.

"It was found that some actual revenue and expenditure amounts among funds were significantly less or larger than the budgeted amounts, and no applicable budget modifications were made throughout the year to account for the significant variances or reduction in funding sources subsequently deemed uncollectible," auditors said.

"Also, final yearend budget adjustments that were made were not approved by the board of trustees until almost a year after yearend and final adjustments were not reflective of many yearend adjustments required for the modified accrual basis of accounting, including adjustments relating to the sale of Massena Memorial Hospital and liabilities retained by the town as of Jan. 1, 2020," they said.

"So if you have a shortfall of revenues, then you have to assume that has to come from somewhere. It has to either come from fund balance or are you going to have to cut expenses?" Ms. Podvin said.

Town officials said in their response that the bookkeeper sends the town board and supervisor any budget transfers and amendments that need to be reviewed for approval prior to monthly board meetings.

"After the budget transfers and amendments have been approved, the bookkeeper makes the entries in the system. The following reports are provided to the town board and supervisor monthly: Budget Transfers and Amendments, Revenue-Expense, YTD Fund Summary, Voucher Summary and Warrant. The town is working on correcting to make sure adjustments and transfers are made in a timely manner," they said.