Town of Massena audit finds three 'significant deficiencies'

Jun. 14—MASSENA — Three "significant deficiencies" that were identified during a 2020 audit of the town of Massena repeated themselves in the latest audit.

"The findings that we're reporting are very similar as we reported on last year for the 2020 audit," Lyndi Hill, a partner with Bowers & Company, told the Massena Town Board.

She said that among them was preparation of financial statements that management was unable to prepare in accordance with GASB 34.

GASB 34 is a set of accounting standards established by the Government Accounting Standards Board which requires government entities to report the value of their capital assets on their financial statements. The board oversees and works to improve government-related accounting and financial reporting.

Ms. Hill said the town relied on the auditors to prepare the financial statements.

"The current year, we had just over 100 journal entries among all the funds to get the financial statements issued in accordance with standards," she said. "Overall, management does need to exercise control over the preparation of the financial statements and the accounting expertise to prevent, detect and correct potential misstatements in the financial statements."

She said that would continue to be a significant deficiency in future years unless the town was able to prepare the financial statements, "which is a challenge based on the size and staffing of the town."

In their response, town officials said size and staffing were an issue.

"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," they said. "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 (Generally Accepted Accounting Principles) standards."

They said that's because the town "is in a deficit due to sale of the Hospital (the former Massena Memorial Hospital) and taking on the liabilities that came with the same that was not budgeted for in recent years. The Town of Massena is in a deficit of $5 million due to the Massena Memorial Hospital NYS retirement payments. The Town is not financially capable."

The second significant deficiency related to reconciliation procedures.

"It was found that the town has not been completing bank account reconciliations timely and they're not being reconciled to all general ledger accounts properly as part of the monthly reconciliation process. So, we found that bank reconciliations for the 2021 fiscal year end didn't play out to the general ledger due to some discrepancies and adjustments made after the initial bank reconciliation was prepared. So, additional audit adjustments were required to reconcile cash to your general ledger accounts," Ms. Hill said.

She said there were "significant internal control and required procedures lacking in regard to monthly bank reconciliations procedures which ensure accurate financial reporting." As a result, she said, financial statements aren't being accurately presented through the year or internally by management.

Town officials, in their response, said, "The Town has been working on the bank reconciliations. As of today, all bank reconciliations are up to date."

In their third significant finding, Ms. Hill said they found that "multiple 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."

She also noted that final year-end budget adjustments made before the audit process "were not reflective of many year-end adjustments required for the modified accrual basis of accounting, which have been recorded as part of the audit process."

"Material audit adjusting journal entries have caused significant variances between budget to actual performance within the general fund in 2021. Also, the general fund budget for 2021 was adopted with an operating deficit, with no fund balance available to appropriate as noted in the budget that was provided to the board for approval," she said.

Town officials responded that the bookkeeper sends any budget transfers and amendments that need to be reviewed to the board and town supervisor prior to the approval at the board meeting.

"After the budget transfers and amendments have been approved, the bookkeeper makes the entries in the system," they said.

They said several reports are provided to the town board and supervisor monthly, including budget transfers and amendments, revenue-expense, year-to-date 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.