Audit 25570

Finding 2022-001 ? Financial Reporting and Material Adjustments Statement of Condition: Coburn Place Safehaven II, Inc. (Safehaven) does not have an internal control system designed to provide for the preparation of the financial statements being audited which include the accompanying footnotes, as required by U.S. generally accepted accounting principles (GAAP). In conjunction with completion of our audit, we were requested to draft the financial statements with accompanying notes to the financial statements and make material adjustments. Criteria: A properly designed system of internal control over financial reporting includes the 1) preparation of accrual based financial statements with accompanying notes to the financial statements and 2) various statement of financial position amounts being supported with detailed schedules and reconciled on a periodic basis. Management is responsible for establishing and maintaining internal control over financial reporting and procedures related to the fair presentation of the financial statements in accordance with GAAP. Cause: Internal controls over financial reporting were not operating effectively to prepare accrual based financial statements with accompanying notes and detect material adjustments in the financial statements. Various statement of financial position amounts were not reconciled or monitored on a periodic basis and supported by schedules or other documentation. Effect: This control deficiency could result in misstatements to the financial statements as well as required information being omitted from the financial statements. Furthermore, it is possible that new standards may not be adopted and applied timely to the interim financial statements. Material audit adjusting entries were proposed and recorded by management to properly reflect Safehaven?s activities in the financial statements. Recommendation: We recommend that management 1) continue reviewing operating procedures in order to obtain the maximum internal control over financial reporting possible under the circumstances to enable staff to draft the financial statements internally and 2) review and strengthen the internal controls over its financial reporting processes to ensure revenue is being recognized when earned and expenses are recognized when incurred. Also, various statement of financial position amounts should be reconciled and monitored on a periodic basis and supported by schedules or other documentation. Reporting Views of Responsible Officials: Management agrees with the finding and took significant measures throughout 2022 and 2023 to establish new procedures, technology, and staff roles to mitigate any future risk of necessary material adjustments. 2022 was a transformational year for Coburn Place?s financial operations as the organization emerged from the stressors of COVID-19 and the Great Resignation,; both were cataclysmic events coinciding with a handful of years that saw the organization?s budget triple, both in public dollars and in major gifts from individuals. The need to focus on enhancing internal controls was exacerbated by a complete turnover in organizational leadership and the necessary existence of a second organizational entity and budget, the LP, which separately tracked revenues and expenses related to the upkeep and operation of the Coburn Place building. After an assessment, new Senior Leadership and the Board finance committee found a deeply complicated budget and finance approach that failed to provide current and actionable data for decision-making and in-the-minute tracking. It was clear the organization had outgrown outsourcing key finance functions to an outside party. Change was needed. Two finance positions on the Operations team were upgraded from light management of outside bookkeeping to a full Director of Finance and Business Support Manager role. This team, senior leadership, and the Board further determined the organization should cease its outsourced bookkeeping contract on 9/30/2022 due to delays in processing finances, the difficulty of allocating expenses to appropriate revenues, and the urgent need for granular and accurate material information.Reporting Views of Responsible Officials: (continued) It was further determined that the instance of Quickbooks utilized by the outsourced bookkeeping team was inadequate to meet the demands of the agency?s many public grants and best practice timecard compliance. The alternative system selected was Sage Intacct?one used by many homeless-serving organizations in Indianapolis. To prepare for the system migration, Coburn Place contracted with CLA Connect, a reputable accounting consulting firm, who helped Coburn Place significantly reduce its General Ledger codes from over 600 to around 300. Staff worked diligently to further winnow this to just over 100 GL codes before the migration. The accounting system migration process showed additional gaps in the previous outsourced arrangement, and especially its reliance on institutional memory of past staff at Coburn Place. The Director of Finance and the Grants Compliance Manager (another new position created in 2022) worked closely with a team of grants finance experts at the Indiana Coalition Against Domestic Violence to set up Grants Accounting appropriately. At the same time, discrepancies were discovered between historic ways of accounting for revenues and new approaches to allocating expenses to grants much more directly within the reduced number of General Ledger codes. The result was that a material number of journal entry adjustments were regrettably necessary in the completion of this audit. In addition to the changes discussed here, the Coburn Place Board of Directors will approve a revised Financial Policies and Procedures before the end of 2023 that includes more details about how the organization exerts internal controls over our financial operations and the preparation of financial statements.

Finding 2022-001 ? Financial Reporting and Material Adjustments Statement of Condition: Coburn Place Safehaven II, Inc. (Safehaven) does not have an internal control system designed to provide for the preparation of the financial statements being audited which include the accompanying footnotes, as required by U.S. generally accepted accounting principles (GAAP). In conjunction with completion of our audit, we were requested to draft the financial statements with accompanying notes to the financial statements and make material adjustments. Criteria: A properly designed system of internal control over financial reporting includes the 1) preparation of accrual based financial statements with accompanying notes to the financial statements and 2) various statement of financial position amounts being supported with detailed schedules and reconciled on a periodic basis. Management is responsible for establishing and maintaining internal control over financial reporting and procedures related to the fair presentation of the financial statements in accordance with GAAP. Cause: Internal controls over financial reporting were not operating effectively to prepare accrual based financial statements with accompanying notes and detect material adjustments in the financial statements. Various statement of financial position amounts were not reconciled or monitored on a periodic basis and supported by schedules or other documentation. Effect: This control deficiency could result in misstatements to the financial statements as well as required information being omitted from the financial statements. Furthermore, it is possible that new standards may not be adopted and applied timely to the interim financial statements. Material audit adjusting entries were proposed and recorded by management to properly reflect Safehaven?s activities in the financial statements. Recommendation: We recommend that management 1) continue reviewing operating procedures in order to obtain the maximum internal control over financial reporting possible under the circumstances to enable staff to draft the financial statements internally and 2) review and strengthen the internal controls over its financial reporting processes to ensure revenue is being recognized when earned and expenses are recognized when incurred. Also, various statement of financial position amounts should be reconciled and monitored on a periodic basis and supported by schedules or other documentation. Reporting Views of Responsible Officials: Management agrees with the finding and took significant measures throughout 2022 and 2023 to establish new procedures, technology, and staff roles to mitigate any future risk of necessary material adjustments. 2022 was a transformational year for Coburn Place?s financial operations as the organization emerged from the stressors of COVID-19 and the Great Resignation,; both were cataclysmic events coinciding with a handful of years that saw the organization?s budget triple, both in public dollars and in major gifts from individuals. The need to focus on enhancing internal controls was exacerbated by a complete turnover in organizational leadership and the necessary existence of a second organizational entity and budget, the LP, which separately tracked revenues and expenses related to the upkeep and operation of the Coburn Place building. After an assessment, new Senior Leadership and the Board finance committee found a deeply complicated budget and finance approach that failed to provide current and actionable data for decision-making and in-the-minute tracking. It was clear the organization had outgrown outsourcing key finance functions to an outside party. Change was needed. Two finance positions on the Operations team were upgraded from light management of outside bookkeeping to a full Director of Finance and Business Support Manager role. This team, senior leadership, and the Board further determined the organization should cease its outsourced bookkeeping contract on 9/30/2022 due to delays in processing finances, the difficulty of allocating expenses to appropriate revenues, and the urgent need for granular and accurate material information.Reporting Views of Responsible Officials: (continued) It was further determined that the instance of Quickbooks utilized by the outsourced bookkeeping team was inadequate to meet the demands of the agency?s many public grants and best practice timecard compliance. The alternative system selected was Sage Intacct?one used by many homeless-serving organizations in Indianapolis. To prepare for the system migration, Coburn Place contracted with CLA Connect, a reputable accounting consulting firm, who helped Coburn Place significantly reduce its General Ledger codes from over 600 to around 300. Staff worked diligently to further winnow this to just over 100 GL codes before the migration. The accounting system migration process showed additional gaps in the previous outsourced arrangement, and especially its reliance on institutional memory of past staff at Coburn Place. The Director of Finance and the Grants Compliance Manager (another new position created in 2022) worked closely with a team of grants finance experts at the Indiana Coalition Against Domestic Violence to set up Grants Accounting appropriately. At the same time, discrepancies were discovered between historic ways of accounting for revenues and new approaches to allocating expenses to grants much more directly within the reduced number of General Ledger codes. The result was that a material number of journal entry adjustments were regrettably necessary in the completion of this audit. In addition to the changes discussed here, the Coburn Place Board of Directors will approve a revised Financial Policies and Procedures before the end of 2023 that includes more details about how the organization exerts internal controls over our financial operations and the preparation of financial statements.