FY25 audit: clean opinion but auditors flag payroll controls and year‑end adjustments

The Wonalancet Finance Committee on March 23 heard that auditors issued an unmodified (clean) opinion on the town’s FY25 financial statements but found two material weaknesses that require prompt correction.

"The town received an unmodified opinion, which means the financial statements are fairly stated in accordance with generally accepted accounting principles," auditor Casey Leonard said, adding that the auditors also performed a Yellow Book review of internal controls and compliance.

The auditors’ first material weakness concerned payroll controls. In a test of 40 payroll transactions they found multiple errors: one instance of incorrect employee and employer health‑insurance withholdings and contributions; three instances of incorrect employee and employer state retirement withholdings and contributions; two time cards lacking required supervisory approval; two employees lacking documentation of approved rates of pay; and 10 instances of other pay that lacked documented approvals. "These are deficiency in internal controls such that there's a reasonable possibility that a material misstatement…will not be prevented, detected, or corrected in a timely manner," Casey said.

Auditors recommended management strengthen approval, review and monitoring procedures, and the committee asked for the management response letter to see planned corrective steps. Town staff acknowledged administrative turnover and said they are rebuilding processes and providing additional training; staff named Sierra Blade as the payroll clerk who handled recent open‑enrollment changes.

The second material weakness was that auditors had to make several significant audit adjustments to correct balances for accounts receivable, capital assets, accounts payable, debt and deferred revenue. The auditors urged regular, timely reconciliations—monthly for most areas—to avoid reliance on auditors to make year‑end corrections.

Other recommendations included asking the town’s outsourced ambulance‑billing vendor (MRS) to obtain a SOC 1 (system and organization controls type 2) report so the town can rely on the vendor’s internal controls, and updating purchasing‑policy thresholds to match actual practice. Staff said a new purchasing policy and a standard operating procedure for department heads are being rolled out.

The auditors said they will circulate the digital audit and management letter to committee members and expect to present the package to the full council in the next one or two meetings. The audit team also discussed scheduling for FY26 fieldwork and interim dates.

The committee noted the findings will be included in the management response that accompanies the audit when it goes before the full council.