Segregation of Duties
Criteria: No one person should have access to both physical assets and the related accounting records or to all phases of a transaction.
Condition: Many of the accounting functions are performed by a few individuals. No approval process in place.
Cause: Limited staff available.
Effect: Material weakness in internal controls. Increased possibility of undetected errors or irregularities. Less likely errors or irregularities would be discovered internally. Financial statement misstatement caused by error or fraud that would not be detected or prevented by management.
Questioned Costs: None noted.
Recommendation: Board of directors remain involved with the review and oversight regarding the Organizations’ financial statements and budgets. Segregate functions between employees and put controls in place so that the accounting functions can be reviewed by someone other than the person recording them. Monthly financial activity such as journal entries, detail of significant asset and liability balances, bank statements and cancelled check images should be reviewed by another member of management for reasonableness. Views of Responsible Officials and Planned Corrective Actions: Management will continue to review processes to determine where improvements can be made. Our 2021 findings were not reported until mid-year 2022. As a part of Inspiration's corrective action, we
contracted with professional CPA firm, Butler CPA out of Kendallville, Indiana in August 2022. This has enhanced our efficiency, accuracy, and segregation of duties. The board of directors plays an active role in oversight of Inspiration Ministries Inc.’s activities. The monthly board packets include but are not limited to reconciled financial statements such as profit and loss statement and balance sheet.
Material Adjustments
Criteria: Management is responsible for preparing financial statements in accordance with the modified cash basis of accounting.
Condition: Insufficient controls over financial reporting. Material audit adjustments were required to prevent the financial statements from being materially misstated.
Cause: Management relied on auditors to propose entries and had not recorded all entries needed at the time of the audit.
Effect: Could result in undetected errors and irregularities and misstated interim financial reports. Some audit adjustments were due to insufficient internal controls over financial reporting, or lack of knowledge with the modified cash basis of accounting to properly make the required adjustment(s). The risk with this condition is that necessary adjustments to the financial statements to record material misstatements may be missed and there is no control in place to detect and correct this condition.
Questioned Costs: None noted.
Recommendation: Improve internal controls to prevent these types of adjustments. Document which accounting procedures are needed to be completed on a recurring basis to detect material adjustments. Management should provide training to make personnel more knowledgeable about their responsibility for the financial statements.
Views of Responsible Officials and Planned Corrective Actions: Management, with the inclusion of Butler CPA firm, will incorporate financial reporting internal controls to detect material adjustments, prevent materially misstated financial statements and increase the accuracy of the interim financial reports used by management.
Lack of Documentation
Criteria: Management is responsible for maintaining sufficient financial records.
Condition: Insufficient documentation maintained by the Organization to support fixed assets, repairs and maintenance and receipts.
Cause: Lack of controls. No document retention and destruction policy in place.
Effect: Could result in undetected errors and irregularities and misstated interim financial reports. Questioned Costs: None noted.
Recommendation: Implement a document retention and destruction policy which is communicated to all staff. Establish policies and procedures that describe proper supporting documentation for each type of transaction.
Views of Responsible Officials and Planned Corrective Actions: Our 2021 findings were not reported until mid-year 2022. On June 30, 2022, Inspiration implemented a Document Retention and Destruction Policy that is still currently active and followed.
Schedule of Expenditures of Federal Awards
Criteria: CFR Part 200.508 Audit Responsibilities state that the auditee must prepare the Schedule of Expenditures of Federal Awards, which must list individual federal awards by federal agency, including the total federal awards expended, name of pass-through entity, assistance listing number, and total amount provided to subrecipients. The information contained in the Schedule of Expenditures of Federal Awards should be derived from and relate directly to the underlying accounting and other records used to prepare the
financial statements.
Condition: The Schedule of Expenditures of Federal Awards was prepared by the auditor based on federal award contracts provided by the auditee. Also, during 2022 an additional federal award was received that management was not aware of.
Cause: Management has limited knowledge on requirements of a Single Audit. Management relied on auditors to prepare the Schedule of Expenditures of Federal Awards.
Effect: Potential understatement or overstatement of expenditures could exist in the Schedule of Expenditures of Federal Awards and not be detected or corrected.
Questioned Costs: None noted.
Recommendation: Establish procedures to prepare the annual Schedule of Expenditures of Federal Awards and reconcile amounts reported to the Organization's general ledger. The Organization should provide appropriate training to staff who work with government funding.
Views of Responsible Officials and Planned Corrective Actions: Management concurs with the recommendation. Management has hired a compliance administrator to track all grants, including federal, state and county. Management and Butler CPA firm will ensure training to establish procedures and the preparation of the Schedule of Expenditures of Federal Awards.
Inadequate Controls Over Related Party Transactions
Criteria: Management is responsible for implementing adequate controls to ensure proper documentation and approval of related party transactions.
Condition: Insufficient controls over related party transactions.
Cause: Lack of controls. No policies or procedures that describe the proper supporting documentation for related party transactions. No policies or procedures that describe the proper review and approval of related party transactions.
Effect: Could result in undetected errors and irregularities and misstated interim financial reports.
Questioned Costs: None noted.
Recommendation: Improve internal controls over related party transactions. Implement written procedures for related party transactions, including required documentation and approval.
Views of Responsible Officials and Planned Corrective Actions: Our 2021 findings were not reported until mid-year 2022. Management has included Butler CPA to help in accurately reporting and documenting internal and third-party transactions.
Negative Operating Cash
Criteria: Management is responsible for implementing adequate controls to spend restricted funds.
Management is responsible for implementing adequate controls to ensure proper cash to meet operating needs.
Condition: Insufficient controls over restricted contributions and grants.
Cause: Lack of controls. No process in place to track restricted fund spending.
Effect: Could result in misused funds.
Questioned Costs: None noted.
Recommendation: Improve internal controls over restricted contributions and grants. Implement a system to track revenue and expenses for restricted funds. Request additional funding for general operations. Views of Responsible Officials and Planned Corrective Actions: Management will enhance internal controls over restricted contributions and grants while implementing a system to track revenue and expenses for restricted funds. Inspiration has already hired a compliance administrator with the responsibility of tracking all local, state, and federal grant revenues and expenditures. Inspiration has also hired a position to enhance relationship development with funders and foundations to increase operating funds.
Segregation of Duties
Criteria: No one person should have access to both physical assets and the related accounting records or to all phases of a transaction.
Condition: Many of the accounting functions are performed by a few individuals. No approval process in place.
Cause: Limited staff available.
Effect: Material weakness in internal controls. Increased possibility of undetected errors or irregularities. Less likely errors or irregularities would be discovered internally. Financial statement misstatement caused by error or fraud that would not be detected or prevented by management.
Questioned Costs: None noted.
Recommendation: Board of directors remain involved with the review and oversight regarding the Organizations’ financial statements and budgets. Segregate functions between employees and put controls in place so that the accounting functions can be reviewed by someone other than the person recording them. Monthly financial activity such as journal entries, detail of significant asset and liability balances, bank statements and cancelled check images should be reviewed by another member of management for reasonableness. Views of Responsible Officials and Planned Corrective Actions: Management will continue to review processes to determine where improvements can be made. Our 2021 findings were not reported until mid-year 2022. As a part of Inspiration's corrective action, we
contracted with professional CPA firm, Butler CPA out of Kendallville, Indiana in August 2022. This has enhanced our efficiency, accuracy, and segregation of duties. The board of directors plays an active role in oversight of Inspiration Ministries Inc.’s activities. The monthly board packets include but are not limited to reconciled financial statements such as profit and loss statement and balance sheet.
Material Adjustments
Criteria: Management is responsible for preparing financial statements in accordance with the modified cash basis of accounting.
Condition: Insufficient controls over financial reporting. Material audit adjustments were required to prevent the financial statements from being materially misstated.
Cause: Management relied on auditors to propose entries and had not recorded all entries needed at the time of the audit.
Effect: Could result in undetected errors and irregularities and misstated interim financial reports. Some audit adjustments were due to insufficient internal controls over financial reporting, or lack of knowledge with the modified cash basis of accounting to properly make the required adjustment(s). The risk with this condition is that necessary adjustments to the financial statements to record material misstatements may be missed and there is no control in place to detect and correct this condition.
Questioned Costs: None noted.
Recommendation: Improve internal controls to prevent these types of adjustments. Document which accounting procedures are needed to be completed on a recurring basis to detect material adjustments. Management should provide training to make personnel more knowledgeable about their responsibility for the financial statements.
Views of Responsible Officials and Planned Corrective Actions: Management, with the inclusion of Butler CPA firm, will incorporate financial reporting internal controls to detect material adjustments, prevent materially misstated financial statements and increase the accuracy of the interim financial reports used by management.
Lack of Documentation
Criteria: Management is responsible for maintaining sufficient financial records.
Condition: Insufficient documentation maintained by the Organization to support fixed assets, repairs and maintenance and receipts.
Cause: Lack of controls. No document retention and destruction policy in place.
Effect: Could result in undetected errors and irregularities and misstated interim financial reports. Questioned Costs: None noted.
Recommendation: Implement a document retention and destruction policy which is communicated to all staff. Establish policies and procedures that describe proper supporting documentation for each type of transaction.
Views of Responsible Officials and Planned Corrective Actions: Our 2021 findings were not reported until mid-year 2022. On June 30, 2022, Inspiration implemented a Document Retention and Destruction Policy that is still currently active and followed.
Schedule of Expenditures of Federal Awards
Criteria: CFR Part 200.508 Audit Responsibilities state that the auditee must prepare the Schedule of Expenditures of Federal Awards, which must list individual federal awards by federal agency, including the total federal awards expended, name of pass-through entity, assistance listing number, and total amount provided to subrecipients. The information contained in the Schedule of Expenditures of Federal Awards should be derived from and relate directly to the underlying accounting and other records used to prepare the
financial statements.
Condition: The Schedule of Expenditures of Federal Awards was prepared by the auditor based on federal award contracts provided by the auditee. Also, during 2022 an additional federal award was received that management was not aware of.
Cause: Management has limited knowledge on requirements of a Single Audit. Management relied on auditors to prepare the Schedule of Expenditures of Federal Awards.
Effect: Potential understatement or overstatement of expenditures could exist in the Schedule of Expenditures of Federal Awards and not be detected or corrected.
Questioned Costs: None noted.
Recommendation: Establish procedures to prepare the annual Schedule of Expenditures of Federal Awards and reconcile amounts reported to the Organization's general ledger. The Organization should provide appropriate training to staff who work with government funding.
Views of Responsible Officials and Planned Corrective Actions: Management concurs with the recommendation. Management has hired a compliance administrator to track all grants, including federal, state and county. Management and Butler CPA firm will ensure training to establish procedures and the preparation of the Schedule of Expenditures of Federal Awards.
Inadequate Controls Over Related Party Transactions
Criteria: Management is responsible for implementing adequate controls to ensure proper documentation and approval of related party transactions.
Condition: Insufficient controls over related party transactions.
Cause: Lack of controls. No policies or procedures that describe the proper supporting documentation for related party transactions. No policies or procedures that describe the proper review and approval of related party transactions.
Effect: Could result in undetected errors and irregularities and misstated interim financial reports.
Questioned Costs: None noted.
Recommendation: Improve internal controls over related party transactions. Implement written procedures for related party transactions, including required documentation and approval.
Views of Responsible Officials and Planned Corrective Actions: Our 2021 findings were not reported until mid-year 2022. Management has included Butler CPA to help in accurately reporting and documenting internal and third-party transactions.
Negative Operating Cash
Criteria: Management is responsible for implementing adequate controls to spend restricted funds.
Management is responsible for implementing adequate controls to ensure proper cash to meet operating needs.
Condition: Insufficient controls over restricted contributions and grants.
Cause: Lack of controls. No process in place to track restricted fund spending.
Effect: Could result in misused funds.
Questioned Costs: None noted.
Recommendation: Improve internal controls over restricted contributions and grants. Implement a system to track revenue and expenses for restricted funds. Request additional funding for general operations. Views of Responsible Officials and Planned Corrective Actions: Management will enhance internal controls over restricted contributions and grants while implementing a system to track revenue and expenses for restricted funds. Inspiration has already hired a compliance administrator with the responsibility of tracking all local, state, and federal grant revenues and expenditures. Inspiration has also hired a position to enhance relationship development with funders and foundations to increase operating funds.