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CITY OF SAN LEANDRO <br />MEMORANDUM ON INTERNAL CONTROL <br />SCHEDULE OF SIGNIFICANT DEFICIENCY <br />2017-01 Year-End Close <br />Criteria: Management is responsible for the accuracy of the financial statements and the <br />maintenance of the general ledger system and other records used to prepare the financial <br />statements. Timeliness of the financial statements is key to a best practices approach in providing <br />policy makers the year-end financial results soon enough to be useful and to meet filing <br />deadlines. <br />Condition: The City provided approximately twenty-five post-closing adjusting journal entries <br />which resulted in a delay in the timely completion of multiple financial statement items primarily <br />pension, cash and investments, and capital assets. <br />Cause: The City has experienced key staff turnover since fiscal year 2015-2016 and as a result <br />fell behind in the completion of the year-end close process. <br />Effect: Without adequate staff resources to ensure that the year-end closing was completed <br />properly and accurately, there is an increased risk that material misstatements of the City’s <br />financial statements will not be prevented, or detected and corrected on a timely basis. <br />Recommendation: The City’s fiscal year end closing process and journal entries associated with <br />the close should be completed and posted prior to the commencement of year-end fieldwork. <br />Staff should plan accordingly to ensure that a complete close of the books is performed prior to <br />scheduling auditors to perform fieldwork. <br />Management Response: As noted, the City experienced key staff turnover in fiscal year 2015- <br />2016, which continued through the current fiscal year 2017-18. As a result, the year-end close <br />process fell behind. The Accounting division is now fully staffed as of April 1, 2018 with two <br />new accountants. Management will continue to train new staff to ensure the close of fiscal year <br />2017-18 results in fewer delays and fewer adjusting journal entries. Furthermore, the final audit <br />for fiscal year 2017-18 is scheduled to be later than it has been in prior years to ensure staff has <br />sufficient time to close the fiscal year. <br />704