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Jackson audit issues clean opinion but flags repeated internal-control weaknesses
Summary
External auditors issued a clean (unmodified) opinion on Jackson’s FY24 financial statements and compliance for the coronavirus relief program, but the audit included repeat internal-control findings (reconciliations, revenue/expense recognition and interfund balances) that the city says stem from system transitions and staffing turnover.
James Vince, a partner at Malden and Jenkins, told the Jackson City Council on Nov. 4 that the firm issued an unmodified (clean) opinion on the city’s June 30, 2024, financial statements and on compliance testing for the Coronavirus State and Local Fiscal Recovery Funds. Vince said auditors proposed adjustment entries that were included in the financial statements and that those adjustments produced findings and several material weaknesses in internal control.
Council members pressed auditors and city staff about repeated findings from prior years. The audit identified four repeat issues: revenue recognition, expenditure recognition, interfund balance reconciliations and a reporting control problem tied to the coronavirus relief grant. Vince and city financial staff said the repeats were driven in part by a transition between accounting and banking systems and by turnover in staff who previously performed critical close-out tasks.
City staff described steps they are taking to address the issues. Staff said current work to post audit adjustments will correct cash balances for FY24 and that conversion to a new purchase-order system and better year-end processes should reduce the risk of overspending in future years. The city estimated a rough fund-balance level of about $13,100,000 as of Sept. 30, though auditors and staff stressed that figure is an estimate and subject to final close-out adjustments.
Council members asked whether the audit process, internal audit or the audit committee could provide earlier warning of repeat problems. The external auditor said his office can review corrective-action plans and remind management of prior findings during interim procedures, but that external auditors cannot perform the internal-control remediation themselves. The city’s internal auditor offered to review corrective-action plans and provide feedback to management as a non-audit support role so long as it does not compromise audit independence.
Auditors said the city exceeded appropriations in multiple funds in recent years and recommended improved controls; staff said implementing a purchase-order system will be an important control. The auditors said the FY25 audit work is beginning; if the city can provide a trial balance by December or January, the auditors estimated a target issuance of late March or early April for the FY25 report.
The audit presentation required no council vote; the council accepted the presentation and moved related discussions to the audit committee for follow-up.
