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CITY OF GEM LAKE, MINNESOTA <br />SCHEDULE OF FINDINGS AND RESPONSES (CONTINUED) <br />YEAR ENDED DECEMBER 31, 2017 <br /> <br /> <br /> <br />(38) <br />MATERIAL WEAKNESS (CONTINUED) <br /> <br />2017-003: Material Audit Adjustments <br />Condition: During our audit procedures we identified several material audit adjustments that needed to <br />be posted to the City’s general ledger in order to arrive at the correct year-end balances. These <br />includes adjustments to beginning fund balances, accounts receivable, special assessment receivables <br />and revenues, and deferred inflows of resources. <br /> <br />Criteria: Management is responsible for having adequate controls and processes in place to ensure <br />that all year-end balances are reconciled, accurate, and free from material misstatements. <br /> <br />Effect: The likelihood of a material misstatement in the year-end financial statements increases when <br />the City does not have procedures in place to identify errors in final general ledger balances. <br /> <br />Cause: The City does not have the appropriate procedures and/or personnel in place to properly <br />reconcile year-end balances. <br /> <br />Recommendation: We recommend City management work with the finance personnel to ensure there <br />are appropriate procedures in place to reconcile and review all year-end balances to ensure they are <br />free from material misstatements. <br /> <br />Management Response: <br />Management is exploring ways to provide a reconciliation between systems.