Management_Letter.pdf

MAULDIN & JENKINS, LLC • 300 MULBERRY STREET • POST OFFICE BOX 1877 • MACON, GEORGIA 31202-1877

478-464-8000 • FAX 478-464-8051 • www.mjcpa.com

MEMBERS OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

To the County Council Of Beaufort County Beaufort, South Carolina

In planning and performing our audit of the financial statements of Beaufort County, South Carolina (the “County”) as of and for the year ended June 30, 2025, in accordance with auditing standards generally accepted in the United States of America, we considered the County’s internal control over financial reporting (“internal control”) as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the County’s internal control. Accordingly, we do not express an opinion on the effectiveness of the County’s internal control.

However, during our audit, we became aware of several matters that are opportunities for strengthening internal controls and operating efficiency. This letter includes comments and suggestions with respect to matters that came to our attention in connection with our audit of the financial statements of the County as of and for the year ended June 30, 2025. A separate report dated December 31, 2025 contains our report on internal control. This letter does not affect our report dated December 31, 2025, on the financial statements of the County.

The following items are offered as constructive suggestions to be considered part of the ongoing process of modifying and improving the County's practices and procedures.

1) Trial Balances During our audit, we noted that the year-end trial balance was not properly rolled forward. This resulted in a ledger that did not balance and opening equity accounts that did not tie to the prior year's final audited figures.

Good sound internal controls require that the trial balance be validated for mathematical accuracy—where total debits equal total credits—to ensure the integrity of the financial reporting process. Inaccuracies in the trial balance can impact the integrity of the financial reporting process and lead to unreliable data for management decision-making.

We recommend management formalize a trial balance validation procedure as a prerequisite to the year-end close.

This should include a documented "tie-out" of opening balances.

2) Management’s Discussion and Analysis (“MD&A”) During our audit, we noted insufficient precision and analytical depth in the preparation and review of the MD&A.

Specifically, numerous figures cited within the narrative did not reconcile to the audited trial balance. Furthermore, the explanations provided for year-over-year variances were frequently illogical or inconsistent with the underlying financial data. The section functioned primarily as a superficial summary of account changes rather than a credible analysis of operational drivers.

The MD&A is intended to provide a transparent and reliable view of the County’s financial trajectory. When the narrative includes inaccurate data or inconsistent explanations, it undermines the clarity of the financial report and may lead to reporting that does not fully meet the objectives of the GASB standards.

We recommend management implement a formal review process to ensure MD&A figures tie directly to the audited trial balance. Furthermore, the narrative should be expanded to include the "why" behind fluctuations, specifically addressing changes in volume, price, and one-time events.

3) Accrued Payroll During our testing, we noted that year-end accrued payroll liabilities were improperly recorded as "outstanding checks" within the bank reconciliation rather than as a separate accrued liability on the balance sheet.

Due to the nature of these funds, it is important to distinguish between issued payments and earned but unpaid obligations. Misclassifying these funds understates the book cash balance and misstates total liabilities, leading to inaccurate liquidity reporting.

We recommend that all earned but unpaid wages at year-end be recorded as a credit to an Accrued Payroll liability account. A month-end review of the bank reconciliation should be performed to ensure only checks actually issued are reflected as outstanding.

4) Post-Trial Balance Adjustments During the course of the audit, it was noted that the County continued to post journal entries to the general ledger after the final trial balance had been formally provided to the audit team.

Internal control procedures should ensure that the audit team is notified of any adjustments made after the start of fieldwork. Testing performed on inaccurate or incomplete data is invalid and necessitates the repetition of audit procedures, leading to significant delays.

We recommend that once the trial balance is provided to the auditors, the period be "locked." If adjustments are necessary, management should maintain a log of these entries and proactively communicate them to the audit team to ensure the impact is evaluated immediately.

5) Timeliness of Financial Statement Support During the current reporting period, several key financial statement schedules, specifically the A&D schedule, were not provided to the audit team in a timely fashion.

Sound internal controls and financial oversight require that supporting schedules be prepared promptly to avoid operational bottlenecks and ensure the audit remains on the established timeline. Rushed preparation of these documents increases the likelihood of error and prevents a timely close.

We recommend management implement formal month-end and year-end closing checklists. These lists should assign specific ownership and firm due dates for every supporting schedule to ensure all necessary data is available for the audit team.

6) Provided by Client Items During the engagement, we noted that several schedules and supporting documents provided by management lacked clear context regarding their purpose and relationship to the trial balance. This was a particular issue with the Passenger Facility Charges reports.

Submitting unverified documentation leads to operational inefficiencies, as it requires multiple rounds of revisions and increases the likelihood of errors in the final financial reports. This lack of initial review by management can delay the reporting timeline and may obscure underlying accounting issues that should have been addressed prior to the audit or review.

We recommend that management implement a "pre-submission review" process. Before providing data to external parties, a designated individual should verify that all schedules tie to the general ledger, include clear headers and explanations for variances, and have been internally vetted for accuracy. This will ensure that the documentation is "audit-ready" and reflects a deliberate, accurate snapshot of the company’s financials.

Macon, Georgia December 31, 2025