Condition Found:
During our search for unrecorded liabilities, we noted that the cost of numerous services performed during the year ended June 30, 2024 were not recorded in accounts payable. In addition, prior year accruals were not properly reversed.
Criteria:
Internal controls around the cutoff of payables are critical for the accuracy of the accrual basis of accounting. Under the accrual basis of accounting, expenses are recorded when then they occur or transferred to the buyer, rather than at the time expenses are paid.
Cause:
Expenses relating to the 2024 fiscal year were not recorded in the proper period.
Possible Asserted Effect:
Due to inappropriate cutoff procedures established at year-end, the School did not record accruals for printing and utilities services totaling approximately $48,228. In addition, the School did not book the accruals for payables of approximately $13,000 and credit card payable of approximately $24,000. Lastly, $153,000 of accounts payable from the end of the prior year were still included in payables at June 30, 2024. Overall, accounts payable was adjusted by approximately $86,000. Future years will likely experience similar errors if proper internal controls are not designed and implemented.
Repeat Finding:
See Finding 2023-001 for a similar finding in the prior year.
Recommendation:
We recommend that the School prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specific positions/staff responsible for performing such procedures and controls.
Management Response:
Management acknowledges the auditors’ recommendation regarding the need to strengthen the accounts payable policy to improve operational efficiency and minimize risks. We will ensure segregation of duties so that no single employee has control over the entire payment process. Responsibility for Accounts Payable is assigned to the Business Manager with oversight from and approval by the Internal Auditor. We are committed to strengthening internal controls and ensuring the accounts payable function operates effectively, aligns with best practices, and mitigates risks.
Condition Found:
During our testing, we noted that there was an unaccounted discrepancy between the bank statement and the reconciliation performed by the School. In addition, we noted material differences between contributions traced in the donor database and the records of the accounting department, which are recorded in the general ledger.
Criteria:
The School should reconcile cash accounts accurately and on a timely basis using the bank balance and the balance per the general ledger. In addition, there should be a reconciliation between the donor database and the general ledger. Reconciliations should be reviewed by a member of management who is knowledgeable in such matters.
Cause:
During the audit, it appeared that a proper bank reconciliation was not performed throughout the year that led to the material differences between contributions tracked in the donor database and the records of the accounting department.
Possible Asserted Effect:
This resulted in cash being understated by approximately $29,000 at year-end. In addition, there could potentially be future material adjustments to cash due to the improper method used to reconcile cash. There was also an approximately $100,000 difference between the donor database and the general ledger.
Repeat Finding:
See Finding 2023-002 for a similar finding in the prior year.
Recommendation:
We recommend that all bank accounts be reconciled monthly and in a timely manner. The School should pursue adding the bank reconciliation module to their accounting software. In addition, reconciliations should be prepared using the bank balance and the balance per the general ledger instead of the check register balance. Lastly, we suggest that a member of management review the bank reconciliations for any unusual items, investigate and fully resolve any such items, and document his or her approval.
We also recommend that management review the cash receipts process. From review of the process of the daily cash receipts log, it includes both cash receipts received in hand along with cash receipts from credit cards. Cash receipts received are deposited either the same day or the next day. However, cash receipts from credit cards are not received until a few days or even a week after. Therefore, the cash receipts log does not agree to bank statements on a daily basis. We strongly suggest that the cash receipts log match the bank statements on a daily basis. This will assist in bank reconciliation process at the end of the month.
Lastly, we suggest that as part of the School’s normal close and reporting process, the donor database be reconciled to the general ledger on a monthly basis. Any differences should be investigated, resolved, and documented on a timely basis.
Management Response:
Proper cash reconciliations are now occurring. In addition, a new donor processing software has been implemented as of July 1, 2024, and a separate bank account has been opened as of October 1, 2024 to track donations.
Condition Found:
During our search for unrecorded liabilities, we noted that the cost of numerous services performed during the year ended June 30, 2024 were not recorded in accounts payable. In addition, prior year accruals were not properly reversed.
Criteria:
Internal controls around the cutoff of payables are critical for the accuracy of the accrual basis of accounting. Under the accrual basis of accounting, expenses are recorded when then they occur or transferred to the buyer, rather than at the time expenses are paid.
Cause:
Expenses relating to the 2024 fiscal year were not recorded in the proper period.
Possible Asserted Effect:
Due to inappropriate cutoff procedures established at year-end, the School did not record accruals for printing and utilities services totaling approximately $48,228. In addition, the School did not book the accruals for payables of approximately $13,000 and credit card payable of approximately $24,000. Lastly, $153,000 of accounts payable from the end of the prior year were still included in payables at June 30, 2024. Overall, accounts payable was adjusted by approximately $86,000. Future years will likely experience similar errors if proper internal controls are not designed and implemented.
Repeat Finding:
See Finding 2023-001 for a similar finding in the prior year.
Recommendation:
We recommend that the School prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specific positions/staff responsible for performing such procedures and controls.
Management Response:
Management acknowledges the auditors’ recommendation regarding the need to strengthen the accounts payable policy to improve operational efficiency and minimize risks. We will ensure segregation of duties so that no single employee has control over the entire payment process. Responsibility for Accounts Payable is assigned to the Business Manager with oversight from and approval by the Internal Auditor. We are committed to strengthening internal controls and ensuring the accounts payable function operates effectively, aligns with best practices, and mitigates risks.
Condition Found:
During our testing, we noted that there was an unaccounted discrepancy between the bank statement and the reconciliation performed by the School. In addition, we noted material differences between contributions traced in the donor database and the records of the accounting department, which are recorded in the general ledger.
Criteria:
The School should reconcile cash accounts accurately and on a timely basis using the bank balance and the balance per the general ledger. In addition, there should be a reconciliation between the donor database and the general ledger. Reconciliations should be reviewed by a member of management who is knowledgeable in such matters.
Cause:
During the audit, it appeared that a proper bank reconciliation was not performed throughout the year that led to the material differences between contributions tracked in the donor database and the records of the accounting department.
Possible Asserted Effect:
This resulted in cash being understated by approximately $29,000 at year-end. In addition, there could potentially be future material adjustments to cash due to the improper method used to reconcile cash. There was also an approximately $100,000 difference between the donor database and the general ledger.
Repeat Finding:
See Finding 2023-002 for a similar finding in the prior year.
Recommendation:
We recommend that all bank accounts be reconciled monthly and in a timely manner. The School should pursue adding the bank reconciliation module to their accounting software. In addition, reconciliations should be prepared using the bank balance and the balance per the general ledger instead of the check register balance. Lastly, we suggest that a member of management review the bank reconciliations for any unusual items, investigate and fully resolve any such items, and document his or her approval.
We also recommend that management review the cash receipts process. From review of the process of the daily cash receipts log, it includes both cash receipts received in hand along with cash receipts from credit cards. Cash receipts received are deposited either the same day or the next day. However, cash receipts from credit cards are not received until a few days or even a week after. Therefore, the cash receipts log does not agree to bank statements on a daily basis. We strongly suggest that the cash receipts log match the bank statements on a daily basis. This will assist in bank reconciliation process at the end of the month.
Lastly, we suggest that as part of the School’s normal close and reporting process, the donor database be reconciled to the general ledger on a monthly basis. Any differences should be investigated, resolved, and documented on a timely basis.
Management Response:
Proper cash reconciliations are now occurring. In addition, a new donor processing software has been implemented as of July 1, 2024, and a separate bank account has been opened as of October 1, 2024 to track donations.
Federal Agency: U.S. Department of Education; Office of Federal Student Aid
Pass through Entity: Not applicable
Program Name: Federal Pell Grant Program
AL# and Program Expenditures: 84.063 ($679,498)
Award Number: P063P233976
Federal Award Year: July 1, 2023 to June 30, 2024
Questioned Costs: $591.50
Condition Found:
The amount of Pell grant awarded was calculated incorrectly for one of the twenty-one students who received Pell in our sample. The student in question was subjected to the lifetime eligibility used limitation. The College calculated the percentage of the Pell grant funds the student was eligible to receive correctly, but the percentage was applied to the full-time Pell award when the student was only enrolled ¾ time.
Criteria:
Federal Pell Grant eligibility is determined by a student’s expected family contribution (“EFC”), cost of attendance, and enrollment status. If a student has used between 500% and 600% of his or her Pell Lifetime Eligibility, the amount of Pell grant funds awarded should be prorated.
Cause:
The financial aid office was not informed of the change in the student’s enrollment status.
Possible Asserted Effect:
The amount of Pell grant funds awarded to the student was incorrect. $591.50 of Pell grant funds should be returned to the Department of Education.
Repeat Finding:
There was not a similar finding in the prior year.
Recommendation:
$591.50 of Pell grant funds should be returned to the Department of Education. Communication between the registrar and financial aid should be improved. The financial aid office should be made aware of enrollment status changes timely.
Management Response:
The School returned $591.50 of Pell grant funds on February 4, 2025. Communication will be improved between the financial aid office and the registrar.
Federal Agency: U.S. Department of Education; Office of Federal Student Aid
Pass through Entity: Not applicable
Program Name: Federal Pell Grant Program
AL# and Program Expenditures: 84.063 ($679,498)
Award Number: P063P233976
Federal Award Year: July 1, 2023 to June 30, 2024
Questioned Costs: $2,376.25
Condition Found:
The R2T4 was not calculated correctly for two of the twenty-five students in the compliance testing sample. A separate sample was selected to test additional R2T4 calculations. The R2T4 was not calculated correctly for four of the six students in the R2T4 testing sample. Between the two samples, all of the R2T4s completed during the year were reviewed.
Criteria:
Institutional charges used in the R2T4 calculation are always the institutional charges that were initially assessed to the student for the period of enrollment unless the School made a change to the charges before the student withdrew from the institution.
Scheduled breaks of five or more consecutive days should be subtracted from the number of days in the semester.
Cause:
The Director of Financial Aid misunderstood how to calculate institutional charges. The Director thought a standard amount for tuition and fees were used no matter what a student’s actual charges were.
One institutional schedule break of five consecutive days during the spring semester was not subtracted from the number of days in the semester.
Possible Asserted Effect:
The R2T4 calculations were not completed accurately. Between the six students, $2,384.57 of Federal Pell Grant Funds was awarded to students on February 4, 2025 and $8.32 was returned to the Department of Education on February 4, 2025.
Repeat Finding:
There was not a similar finding in the prior year.
Recommendation:
The R2T4s that were not calculated correctly should be recalculated. A total of $2,384.57 of additional Federal Pell Grant Funds should be awarded to students and $8.32 of Federal Pell Grant Funds should be returned to the Department of Education. Procedures should be improved to ensure that R2T4s are calculated correctly.
Management Response:
All of the R2T4s completed during the year were recalculated in January 2025. On February 4, 2025, $2,384.57 of Federal Pell Grant Funds were awarded to students and $8.32 of Federal Pell Grant Funds were returned to the Department of Education. Procedures will be improved to ensure that R2T4s are calculated correctly.
Condition Found:
During our search for unrecorded liabilities, we noted that the cost of numerous services performed during the year ended June 30, 2024 were not recorded in accounts payable. In addition, prior year accruals were not properly reversed.
Criteria:
Internal controls around the cutoff of payables are critical for the accuracy of the accrual basis of accounting. Under the accrual basis of accounting, expenses are recorded when then they occur or transferred to the buyer, rather than at the time expenses are paid.
Cause:
Expenses relating to the 2024 fiscal year were not recorded in the proper period.
Possible Asserted Effect:
Due to inappropriate cutoff procedures established at year-end, the School did not record accruals for printing and utilities services totaling approximately $48,228. In addition, the School did not book the accruals for payables of approximately $13,000 and credit card payable of approximately $24,000. Lastly, $153,000 of accounts payable from the end of the prior year were still included in payables at June 30, 2024. Overall, accounts payable was adjusted by approximately $86,000. Future years will likely experience similar errors if proper internal controls are not designed and implemented.
Repeat Finding:
See Finding 2023-001 for a similar finding in the prior year.
Recommendation:
We recommend that the School prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specific positions/staff responsible for performing such procedures and controls.
Management Response:
Management acknowledges the auditors’ recommendation regarding the need to strengthen the accounts payable policy to improve operational efficiency and minimize risks. We will ensure segregation of duties so that no single employee has control over the entire payment process. Responsibility for Accounts Payable is assigned to the Business Manager with oversight from and approval by the Internal Auditor. We are committed to strengthening internal controls and ensuring the accounts payable function operates effectively, aligns with best practices, and mitigates risks.
Condition Found:
During our testing, we noted that there was an unaccounted discrepancy between the bank statement and the reconciliation performed by the School. In addition, we noted material differences between contributions traced in the donor database and the records of the accounting department, which are recorded in the general ledger.
Criteria:
The School should reconcile cash accounts accurately and on a timely basis using the bank balance and the balance per the general ledger. In addition, there should be a reconciliation between the donor database and the general ledger. Reconciliations should be reviewed by a member of management who is knowledgeable in such matters.
Cause:
During the audit, it appeared that a proper bank reconciliation was not performed throughout the year that led to the material differences between contributions tracked in the donor database and the records of the accounting department.
Possible Asserted Effect:
This resulted in cash being understated by approximately $29,000 at year-end. In addition, there could potentially be future material adjustments to cash due to the improper method used to reconcile cash. There was also an approximately $100,000 difference between the donor database and the general ledger.
Repeat Finding:
See Finding 2023-002 for a similar finding in the prior year.
Recommendation:
We recommend that all bank accounts be reconciled monthly and in a timely manner. The School should pursue adding the bank reconciliation module to their accounting software. In addition, reconciliations should be prepared using the bank balance and the balance per the general ledger instead of the check register balance. Lastly, we suggest that a member of management review the bank reconciliations for any unusual items, investigate and fully resolve any such items, and document his or her approval.
We also recommend that management review the cash receipts process. From review of the process of the daily cash receipts log, it includes both cash receipts received in hand along with cash receipts from credit cards. Cash receipts received are deposited either the same day or the next day. However, cash receipts from credit cards are not received until a few days or even a week after. Therefore, the cash receipts log does not agree to bank statements on a daily basis. We strongly suggest that the cash receipts log match the bank statements on a daily basis. This will assist in bank reconciliation process at the end of the month.
Lastly, we suggest that as part of the School’s normal close and reporting process, the donor database be reconciled to the general ledger on a monthly basis. Any differences should be investigated, resolved, and documented on a timely basis.
Management Response:
Proper cash reconciliations are now occurring. In addition, a new donor processing software has been implemented as of July 1, 2024, and a separate bank account has been opened as of October 1, 2024 to track donations.
Condition Found:
During our search for unrecorded liabilities, we noted that the cost of numerous services performed during the year ended June 30, 2024 were not recorded in accounts payable. In addition, prior year accruals were not properly reversed.
Criteria:
Internal controls around the cutoff of payables are critical for the accuracy of the accrual basis of accounting. Under the accrual basis of accounting, expenses are recorded when then they occur or transferred to the buyer, rather than at the time expenses are paid.
Cause:
Expenses relating to the 2024 fiscal year were not recorded in the proper period.
Possible Asserted Effect:
Due to inappropriate cutoff procedures established at year-end, the School did not record accruals for printing and utilities services totaling approximately $48,228. In addition, the School did not book the accruals for payables of approximately $13,000 and credit card payable of approximately $24,000. Lastly, $153,000 of accounts payable from the end of the prior year were still included in payables at June 30, 2024. Overall, accounts payable was adjusted by approximately $86,000. Future years will likely experience similar errors if proper internal controls are not designed and implemented.
Repeat Finding:
See Finding 2023-001 for a similar finding in the prior year.
Recommendation:
We recommend that the School prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specific positions/staff responsible for performing such procedures and controls.
Management Response:
Management acknowledges the auditors’ recommendation regarding the need to strengthen the accounts payable policy to improve operational efficiency and minimize risks. We will ensure segregation of duties so that no single employee has control over the entire payment process. Responsibility for Accounts Payable is assigned to the Business Manager with oversight from and approval by the Internal Auditor. We are committed to strengthening internal controls and ensuring the accounts payable function operates effectively, aligns with best practices, and mitigates risks.
Condition Found:
During our testing, we noted that there was an unaccounted discrepancy between the bank statement and the reconciliation performed by the School. In addition, we noted material differences between contributions traced in the donor database and the records of the accounting department, which are recorded in the general ledger.
Criteria:
The School should reconcile cash accounts accurately and on a timely basis using the bank balance and the balance per the general ledger. In addition, there should be a reconciliation between the donor database and the general ledger. Reconciliations should be reviewed by a member of management who is knowledgeable in such matters.
Cause:
During the audit, it appeared that a proper bank reconciliation was not performed throughout the year that led to the material differences between contributions tracked in the donor database and the records of the accounting department.
Possible Asserted Effect:
This resulted in cash being understated by approximately $29,000 at year-end. In addition, there could potentially be future material adjustments to cash due to the improper method used to reconcile cash. There was also an approximately $100,000 difference between the donor database and the general ledger.
Repeat Finding:
See Finding 2023-002 for a similar finding in the prior year.
Recommendation:
We recommend that all bank accounts be reconciled monthly and in a timely manner. The School should pursue adding the bank reconciliation module to their accounting software. In addition, reconciliations should be prepared using the bank balance and the balance per the general ledger instead of the check register balance. Lastly, we suggest that a member of management review the bank reconciliations for any unusual items, investigate and fully resolve any such items, and document his or her approval.
We also recommend that management review the cash receipts process. From review of the process of the daily cash receipts log, it includes both cash receipts received in hand along with cash receipts from credit cards. Cash receipts received are deposited either the same day or the next day. However, cash receipts from credit cards are not received until a few days or even a week after. Therefore, the cash receipts log does not agree to bank statements on a daily basis. We strongly suggest that the cash receipts log match the bank statements on a daily basis. This will assist in bank reconciliation process at the end of the month.
Lastly, we suggest that as part of the School’s normal close and reporting process, the donor database be reconciled to the general ledger on a monthly basis. Any differences should be investigated, resolved, and documented on a timely basis.
Management Response:
Proper cash reconciliations are now occurring. In addition, a new donor processing software has been implemented as of July 1, 2024, and a separate bank account has been opened as of October 1, 2024 to track donations.
Condition Found:
During our search for unrecorded liabilities, we noted that the cost of numerous services performed during the year ended June 30, 2024 were not recorded in accounts payable. In addition, prior year accruals were not properly reversed.
Criteria:
Internal controls around the cutoff of payables are critical for the accuracy of the accrual basis of accounting. Under the accrual basis of accounting, expenses are recorded when then they occur or transferred to the buyer, rather than at the time expenses are paid.
Cause:
Expenses relating to the 2024 fiscal year were not recorded in the proper period.
Possible Asserted Effect:
Due to inappropriate cutoff procedures established at year-end, the School did not record accruals for printing and utilities services totaling approximately $48,228. In addition, the School did not book the accruals for payables of approximately $13,000 and credit card payable of approximately $24,000. Lastly, $153,000 of accounts payable from the end of the prior year were still included in payables at June 30, 2024. Overall, accounts payable was adjusted by approximately $86,000. Future years will likely experience similar errors if proper internal controls are not designed and implemented.
Repeat Finding:
See Finding 2023-001 for a similar finding in the prior year.
Recommendation:
We recommend that the School prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specific positions/staff responsible for performing such procedures and controls.
Management Response:
Management acknowledges the auditors’ recommendation regarding the need to strengthen the accounts payable policy to improve operational efficiency and minimize risks. We will ensure segregation of duties so that no single employee has control over the entire payment process. Responsibility for Accounts Payable is assigned to the Business Manager with oversight from and approval by the Internal Auditor. We are committed to strengthening internal controls and ensuring the accounts payable function operates effectively, aligns with best practices, and mitigates risks.
Condition Found:
During our testing, we noted that there was an unaccounted discrepancy between the bank statement and the reconciliation performed by the School. In addition, we noted material differences between contributions traced in the donor database and the records of the accounting department, which are recorded in the general ledger.
Criteria:
The School should reconcile cash accounts accurately and on a timely basis using the bank balance and the balance per the general ledger. In addition, there should be a reconciliation between the donor database and the general ledger. Reconciliations should be reviewed by a member of management who is knowledgeable in such matters.
Cause:
During the audit, it appeared that a proper bank reconciliation was not performed throughout the year that led to the material differences between contributions tracked in the donor database and the records of the accounting department.
Possible Asserted Effect:
This resulted in cash being understated by approximately $29,000 at year-end. In addition, there could potentially be future material adjustments to cash due to the improper method used to reconcile cash. There was also an approximately $100,000 difference between the donor database and the general ledger.
Repeat Finding:
See Finding 2023-002 for a similar finding in the prior year.
Recommendation:
We recommend that all bank accounts be reconciled monthly and in a timely manner. The School should pursue adding the bank reconciliation module to their accounting software. In addition, reconciliations should be prepared using the bank balance and the balance per the general ledger instead of the check register balance. Lastly, we suggest that a member of management review the bank reconciliations for any unusual items, investigate and fully resolve any such items, and document his or her approval.
We also recommend that management review the cash receipts process. From review of the process of the daily cash receipts log, it includes both cash receipts received in hand along with cash receipts from credit cards. Cash receipts received are deposited either the same day or the next day. However, cash receipts from credit cards are not received until a few days or even a week after. Therefore, the cash receipts log does not agree to bank statements on a daily basis. We strongly suggest that the cash receipts log match the bank statements on a daily basis. This will assist in bank reconciliation process at the end of the month.
Lastly, we suggest that as part of the School’s normal close and reporting process, the donor database be reconciled to the general ledger on a monthly basis. Any differences should be investigated, resolved, and documented on a timely basis.
Management Response:
Proper cash reconciliations are now occurring. In addition, a new donor processing software has been implemented as of July 1, 2024, and a separate bank account has been opened as of October 1, 2024 to track donations.
Condition Found:
During our search for unrecorded liabilities, we noted that the cost of numerous services performed during the year ended June 30, 2024 were not recorded in accounts payable. In addition, prior year accruals were not properly reversed.
Criteria:
Internal controls around the cutoff of payables are critical for the accuracy of the accrual basis of accounting. Under the accrual basis of accounting, expenses are recorded when then they occur or transferred to the buyer, rather than at the time expenses are paid.
Cause:
Expenses relating to the 2024 fiscal year were not recorded in the proper period.
Possible Asserted Effect:
Due to inappropriate cutoff procedures established at year-end, the School did not record accruals for printing and utilities services totaling approximately $48,228. In addition, the School did not book the accruals for payables of approximately $13,000 and credit card payable of approximately $24,000. Lastly, $153,000 of accounts payable from the end of the prior year were still included in payables at June 30, 2024. Overall, accounts payable was adjusted by approximately $86,000. Future years will likely experience similar errors if proper internal controls are not designed and implemented.
Repeat Finding:
See Finding 2023-001 for a similar finding in the prior year.
Recommendation:
We recommend that the School prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specific positions/staff responsible for performing such procedures and controls.
Management Response:
Management acknowledges the auditors’ recommendation regarding the need to strengthen the accounts payable policy to improve operational efficiency and minimize risks. We will ensure segregation of duties so that no single employee has control over the entire payment process. Responsibility for Accounts Payable is assigned to the Business Manager with oversight from and approval by the Internal Auditor. We are committed to strengthening internal controls and ensuring the accounts payable function operates effectively, aligns with best practices, and mitigates risks.
Condition Found:
During our testing, we noted that there was an unaccounted discrepancy between the bank statement and the reconciliation performed by the School. In addition, we noted material differences between contributions traced in the donor database and the records of the accounting department, which are recorded in the general ledger.
Criteria:
The School should reconcile cash accounts accurately and on a timely basis using the bank balance and the balance per the general ledger. In addition, there should be a reconciliation between the donor database and the general ledger. Reconciliations should be reviewed by a member of management who is knowledgeable in such matters.
Cause:
During the audit, it appeared that a proper bank reconciliation was not performed throughout the year that led to the material differences between contributions tracked in the donor database and the records of the accounting department.
Possible Asserted Effect:
This resulted in cash being understated by approximately $29,000 at year-end. In addition, there could potentially be future material adjustments to cash due to the improper method used to reconcile cash. There was also an approximately $100,000 difference between the donor database and the general ledger.
Repeat Finding:
See Finding 2023-002 for a similar finding in the prior year.
Recommendation:
We recommend that all bank accounts be reconciled monthly and in a timely manner. The School should pursue adding the bank reconciliation module to their accounting software. In addition, reconciliations should be prepared using the bank balance and the balance per the general ledger instead of the check register balance. Lastly, we suggest that a member of management review the bank reconciliations for any unusual items, investigate and fully resolve any such items, and document his or her approval.
We also recommend that management review the cash receipts process. From review of the process of the daily cash receipts log, it includes both cash receipts received in hand along with cash receipts from credit cards. Cash receipts received are deposited either the same day or the next day. However, cash receipts from credit cards are not received until a few days or even a week after. Therefore, the cash receipts log does not agree to bank statements on a daily basis. We strongly suggest that the cash receipts log match the bank statements on a daily basis. This will assist in bank reconciliation process at the end of the month.
Lastly, we suggest that as part of the School’s normal close and reporting process, the donor database be reconciled to the general ledger on a monthly basis. Any differences should be investigated, resolved, and documented on a timely basis.
Management Response:
Proper cash reconciliations are now occurring. In addition, a new donor processing software has been implemented as of July 1, 2024, and a separate bank account has been opened as of October 1, 2024 to track donations.
Federal Agency: U.S. Department of Education; Office of Federal Student Aid
Pass through Entity: Not applicable
Program Name: Federal Pell Grant Program
AL# and Program Expenditures: 84.063 ($679,498)
Award Number: P063P233976
Federal Award Year: July 1, 2023 to June 30, 2024
Questioned Costs: $591.50
Condition Found:
The amount of Pell grant awarded was calculated incorrectly for one of the twenty-one students who received Pell in our sample. The student in question was subjected to the lifetime eligibility used limitation. The College calculated the percentage of the Pell grant funds the student was eligible to receive correctly, but the percentage was applied to the full-time Pell award when the student was only enrolled ¾ time.
Criteria:
Federal Pell Grant eligibility is determined by a student’s expected family contribution (“EFC”), cost of attendance, and enrollment status. If a student has used between 500% and 600% of his or her Pell Lifetime Eligibility, the amount of Pell grant funds awarded should be prorated.
Cause:
The financial aid office was not informed of the change in the student’s enrollment status.
Possible Asserted Effect:
The amount of Pell grant funds awarded to the student was incorrect. $591.50 of Pell grant funds should be returned to the Department of Education.
Repeat Finding:
There was not a similar finding in the prior year.
Recommendation:
$591.50 of Pell grant funds should be returned to the Department of Education. Communication between the registrar and financial aid should be improved. The financial aid office should be made aware of enrollment status changes timely.
Management Response:
The School returned $591.50 of Pell grant funds on February 4, 2025. Communication will be improved between the financial aid office and the registrar.
Federal Agency: U.S. Department of Education; Office of Federal Student Aid
Pass through Entity: Not applicable
Program Name: Federal Pell Grant Program
AL# and Program Expenditures: 84.063 ($679,498)
Award Number: P063P233976
Federal Award Year: July 1, 2023 to June 30, 2024
Questioned Costs: $2,376.25
Condition Found:
The R2T4 was not calculated correctly for two of the twenty-five students in the compliance testing sample. A separate sample was selected to test additional R2T4 calculations. The R2T4 was not calculated correctly for four of the six students in the R2T4 testing sample. Between the two samples, all of the R2T4s completed during the year were reviewed.
Criteria:
Institutional charges used in the R2T4 calculation are always the institutional charges that were initially assessed to the student for the period of enrollment unless the School made a change to the charges before the student withdrew from the institution.
Scheduled breaks of five or more consecutive days should be subtracted from the number of days in the semester.
Cause:
The Director of Financial Aid misunderstood how to calculate institutional charges. The Director thought a standard amount for tuition and fees were used no matter what a student’s actual charges were.
One institutional schedule break of five consecutive days during the spring semester was not subtracted from the number of days in the semester.
Possible Asserted Effect:
The R2T4 calculations were not completed accurately. Between the six students, $2,384.57 of Federal Pell Grant Funds was awarded to students on February 4, 2025 and $8.32 was returned to the Department of Education on February 4, 2025.
Repeat Finding:
There was not a similar finding in the prior year.
Recommendation:
The R2T4s that were not calculated correctly should be recalculated. A total of $2,384.57 of additional Federal Pell Grant Funds should be awarded to students and $8.32 of Federal Pell Grant Funds should be returned to the Department of Education. Procedures should be improved to ensure that R2T4s are calculated correctly.
Management Response:
All of the R2T4s completed during the year were recalculated in January 2025. On February 4, 2025, $2,384.57 of Federal Pell Grant Funds were awarded to students and $8.32 of Federal Pell Grant Funds were returned to the Department of Education. Procedures will be improved to ensure that R2T4s are calculated correctly.
Condition Found:
During our search for unrecorded liabilities, we noted that the cost of numerous services performed during the year ended June 30, 2024 were not recorded in accounts payable. In addition, prior year accruals were not properly reversed.
Criteria:
Internal controls around the cutoff of payables are critical for the accuracy of the accrual basis of accounting. Under the accrual basis of accounting, expenses are recorded when then they occur or transferred to the buyer, rather than at the time expenses are paid.
Cause:
Expenses relating to the 2024 fiscal year were not recorded in the proper period.
Possible Asserted Effect:
Due to inappropriate cutoff procedures established at year-end, the School did not record accruals for printing and utilities services totaling approximately $48,228. In addition, the School did not book the accruals for payables of approximately $13,000 and credit card payable of approximately $24,000. Lastly, $153,000 of accounts payable from the end of the prior year were still included in payables at June 30, 2024. Overall, accounts payable was adjusted by approximately $86,000. Future years will likely experience similar errors if proper internal controls are not designed and implemented.
Repeat Finding:
See Finding 2023-001 for a similar finding in the prior year.
Recommendation:
We recommend that the School prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specific positions/staff responsible for performing such procedures and controls.
Management Response:
Management acknowledges the auditors’ recommendation regarding the need to strengthen the accounts payable policy to improve operational efficiency and minimize risks. We will ensure segregation of duties so that no single employee has control over the entire payment process. Responsibility for Accounts Payable is assigned to the Business Manager with oversight from and approval by the Internal Auditor. We are committed to strengthening internal controls and ensuring the accounts payable function operates effectively, aligns with best practices, and mitigates risks.
Condition Found:
During our testing, we noted that there was an unaccounted discrepancy between the bank statement and the reconciliation performed by the School. In addition, we noted material differences between contributions traced in the donor database and the records of the accounting department, which are recorded in the general ledger.
Criteria:
The School should reconcile cash accounts accurately and on a timely basis using the bank balance and the balance per the general ledger. In addition, there should be a reconciliation between the donor database and the general ledger. Reconciliations should be reviewed by a member of management who is knowledgeable in such matters.
Cause:
During the audit, it appeared that a proper bank reconciliation was not performed throughout the year that led to the material differences between contributions tracked in the donor database and the records of the accounting department.
Possible Asserted Effect:
This resulted in cash being understated by approximately $29,000 at year-end. In addition, there could potentially be future material adjustments to cash due to the improper method used to reconcile cash. There was also an approximately $100,000 difference between the donor database and the general ledger.
Repeat Finding:
See Finding 2023-002 for a similar finding in the prior year.
Recommendation:
We recommend that all bank accounts be reconciled monthly and in a timely manner. The School should pursue adding the bank reconciliation module to their accounting software. In addition, reconciliations should be prepared using the bank balance and the balance per the general ledger instead of the check register balance. Lastly, we suggest that a member of management review the bank reconciliations for any unusual items, investigate and fully resolve any such items, and document his or her approval.
We also recommend that management review the cash receipts process. From review of the process of the daily cash receipts log, it includes both cash receipts received in hand along with cash receipts from credit cards. Cash receipts received are deposited either the same day or the next day. However, cash receipts from credit cards are not received until a few days or even a week after. Therefore, the cash receipts log does not agree to bank statements on a daily basis. We strongly suggest that the cash receipts log match the bank statements on a daily basis. This will assist in bank reconciliation process at the end of the month.
Lastly, we suggest that as part of the School’s normal close and reporting process, the donor database be reconciled to the general ledger on a monthly basis. Any differences should be investigated, resolved, and documented on a timely basis.
Management Response:
Proper cash reconciliations are now occurring. In addition, a new donor processing software has been implemented as of July 1, 2024, and a separate bank account has been opened as of October 1, 2024 to track donations.
Condition Found:
During our search for unrecorded liabilities, we noted that the cost of numerous services performed during the year ended June 30, 2024 were not recorded in accounts payable. In addition, prior year accruals were not properly reversed.
Criteria:
Internal controls around the cutoff of payables are critical for the accuracy of the accrual basis of accounting. Under the accrual basis of accounting, expenses are recorded when then they occur or transferred to the buyer, rather than at the time expenses are paid.
Cause:
Expenses relating to the 2024 fiscal year were not recorded in the proper period.
Possible Asserted Effect:
Due to inappropriate cutoff procedures established at year-end, the School did not record accruals for printing and utilities services totaling approximately $48,228. In addition, the School did not book the accruals for payables of approximately $13,000 and credit card payable of approximately $24,000. Lastly, $153,000 of accounts payable from the end of the prior year were still included in payables at June 30, 2024. Overall, accounts payable was adjusted by approximately $86,000. Future years will likely experience similar errors if proper internal controls are not designed and implemented.
Repeat Finding:
See Finding 2023-001 for a similar finding in the prior year.
Recommendation:
We recommend that the School prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specific positions/staff responsible for performing such procedures and controls.
Management Response:
Management acknowledges the auditors’ recommendation regarding the need to strengthen the accounts payable policy to improve operational efficiency and minimize risks. We will ensure segregation of duties so that no single employee has control over the entire payment process. Responsibility for Accounts Payable is assigned to the Business Manager with oversight from and approval by the Internal Auditor. We are committed to strengthening internal controls and ensuring the accounts payable function operates effectively, aligns with best practices, and mitigates risks.
Condition Found:
During our testing, we noted that there was an unaccounted discrepancy between the bank statement and the reconciliation performed by the School. In addition, we noted material differences between contributions traced in the donor database and the records of the accounting department, which are recorded in the general ledger.
Criteria:
The School should reconcile cash accounts accurately and on a timely basis using the bank balance and the balance per the general ledger. In addition, there should be a reconciliation between the donor database and the general ledger. Reconciliations should be reviewed by a member of management who is knowledgeable in such matters.
Cause:
During the audit, it appeared that a proper bank reconciliation was not performed throughout the year that led to the material differences between contributions tracked in the donor database and the records of the accounting department.
Possible Asserted Effect:
This resulted in cash being understated by approximately $29,000 at year-end. In addition, there could potentially be future material adjustments to cash due to the improper method used to reconcile cash. There was also an approximately $100,000 difference between the donor database and the general ledger.
Repeat Finding:
See Finding 2023-002 for a similar finding in the prior year.
Recommendation:
We recommend that all bank accounts be reconciled monthly and in a timely manner. The School should pursue adding the bank reconciliation module to their accounting software. In addition, reconciliations should be prepared using the bank balance and the balance per the general ledger instead of the check register balance. Lastly, we suggest that a member of management review the bank reconciliations for any unusual items, investigate and fully resolve any such items, and document his or her approval.
We also recommend that management review the cash receipts process. From review of the process of the daily cash receipts log, it includes both cash receipts received in hand along with cash receipts from credit cards. Cash receipts received are deposited either the same day or the next day. However, cash receipts from credit cards are not received until a few days or even a week after. Therefore, the cash receipts log does not agree to bank statements on a daily basis. We strongly suggest that the cash receipts log match the bank statements on a daily basis. This will assist in bank reconciliation process at the end of the month.
Lastly, we suggest that as part of the School’s normal close and reporting process, the donor database be reconciled to the general ledger on a monthly basis. Any differences should be investigated, resolved, and documented on a timely basis.
Management Response:
Proper cash reconciliations are now occurring. In addition, a new donor processing software has been implemented as of July 1, 2024, and a separate bank account has been opened as of October 1, 2024 to track donations.