Audit 1010

Internal Control Impact: Material Weakness. Repeat Finding: No. Questioned Costs: None. Criteria: TMSA, Incorporated (the “School”) management is responsible for having internal controls and procedures in place to accurately report the results of its operations, close its books, and properly prepare the financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. This includes properly recognizing expenses and revenues in the proper period on the accrual basis of accounting. Condition: The lack of appropriate policies, procedures, and internal control processes led to a failure to accurately record financial information in the proper period and material audit adjusting entries. During the audit, auditor proposed adjusting journal entries were posted for the following: Current year pension activity in accordance with Governmental Accounting Standards Board (GASB) No. 68, Accounting and Financial Reporting for Pensions, current year lease activity in accordance with GASB No. 87, Leases, correction of duplicate payments, capitalization of property and equipment expenditures, calculation and posting of current year depreciation, correction of unrecorded accounts payable and related expenses, and correction of unrecorded accounts receivable and related governmental revenues. Cause: The School has experienced turnover in its financial department and outsourced accounting function. This has led to a failure to establish adequate internal control processes to detect and prevent inaccurate financial reporting. Effect: Insufficient internal controls over financial reporting could result in accounting errors or material misstatement due to error or fraud. Recommendation: Marshall Jones recommends that the School receive additional assistance in improving their financial reporting processes from individuals who are familiar with GAAP and governmental grant accounting. Marshall Jones also recommends that management establish policies and procedures to ensure that management level reviews of monthly and annual financial information are performed on a timely basis. Views of Responsible Officials: Management of the School acknowledges the finding. Please refer to the Corrective Action Plan.

Internal Control Impact: Material Weakness. Repeat Finding: No. Questioned Costs: None. Criteria: TMSA, Incorporated (the “School”) management is responsible for having internal controls and procedures in place to accurately report the results of its operations, close its books, and properly prepare the financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. This includes properly recognizing expenses and revenues in the proper period on the accrual basis of accounting. Condition: The lack of appropriate policies, procedures, and internal control processes led to a failure to accurately record financial information in the proper period and material audit adjusting entries. During the audit, auditor proposed adjusting journal entries were posted for the following: Current year pension activity in accordance with Governmental Accounting Standards Board (GASB) No. 68, Accounting and Financial Reporting for Pensions, current year lease activity in accordance with GASB No. 87, Leases, correction of duplicate payments, capitalization of property and equipment expenditures, calculation and posting of current year depreciation, correction of unrecorded accounts payable and related expenses, and correction of unrecorded accounts receivable and related governmental revenues. Cause: The School has experienced turnover in its financial department and outsourced accounting function. This has led to a failure to establish adequate internal control processes to detect and prevent inaccurate financial reporting. Effect: Insufficient internal controls over financial reporting could result in accounting errors or material misstatement due to error or fraud. Recommendation: Marshall Jones recommends that the School receive additional assistance in improving their financial reporting processes from individuals who are familiar with GAAP and governmental grant accounting. Marshall Jones also recommends that management establish policies and procedures to ensure that management level reviews of monthly and annual financial information are performed on a timely basis. Views of Responsible Officials: Management of the School acknowledges the finding. Please refer to the Corrective Action Plan.