Criteria: The general ledger and accounting records used to maintain the financial information of the Organization should be reconciled in conjunction with the preparation of monthly internal financial statements.
Condition: We noted that significant adjustments were made to correct the account balances during the audit as well as adjustments to record expenses in the proper period.
Cause: At the time of the audit, the Organization did not have a formal financial statement close process.
Effect or Potential Effect: Misstatements due to unrecorded transactions and improper cut off occurred in the presentation of the monthly and year-end financial statements.
Recommendation: We recommend that management develop and implement a comprehensive formal closing process, accompanied by robust internal control mechanisms. This will ensure accuracy, efficiency, and compliance in financial reporting, ultimately enhancing the organization's overall financial integrity and operational effectiveness.
Additionally, the proper review of contracts and agreements is imperative to ensure the proper recording of revenue and expenditures in the appropriate period. We recommend that management review its policies and procedures related to recognition of revenue and expenditures and ensure that the process has sufficient controls that are designed to ensure the proper recording of revenue and expenses. If necessary, any unusual items should immediately be investigated and adjusted in the books to minimize the significance of year-end adjusting journal entries.
Views of Responsible Officials:
The Organization acknowledges the deficiencies in the closing process that resulted in significant adjustments to correct account balances during the audit, as well as adjustments to record expenses in the proper period. These deficiencies were primarily caused by various staffing changes and shortages, including within key management. In May 2023, the Organization hired a new Finance Director. It was determined at that time that the Finance Department had not been adequately staffed for almost a year. In August of 2023, the resignation of the General Director and Chief Advancement Officer was communicated to the staff, and a new General Director assumed the role in October of 2023. Other changes in personnel followed, including the transfer of the Finance Associate to another department. These unforeseen changes in key leadership and other personnel gaps further contributed to temporary challenges during the audit in 2023-2024. The result of these changes caused a shift in responsibilities amongst the remaining staff and a further burden on the Finance Department. The cumulative result of these circumstances resulted in a limited capacity to obtain the information necessary to properly analyze all the accounts during the monthly closing process. To address the impact of these deficiencies and challenges, an accounting firm was engaged to manage the Organization’s accounting and financial reporting in October of 2024. This firm is working closely with the Organization to secure all the documentation needed for the accurate recording of revenue and expenses in the appropriate period.
Criteria: The Organization lacked adequate segregation of duties within the journal entry and account reconciliation processes for the year ended May 31, 2022.
Condition: Manual journal entries and account reconciliations prepared by the Director of Finance lacked a designated reviewer.
Cause: The Organization lacked policies and procedures to ensure appropriate segregation of duties in the preparation and review of journal entries and account reconciliations. Additionally, the accounting department was not sufficiently staffed with personnel possessing the necessary skills and expertise, resulting in the Director of Finance both preparing and reviewing these entries and account reconciliations.
Effect or Potential Effect: Without proper segregation of duties, there is an increased risk of errors in the financial statements and potential override of existing internal controls.
Recommendation: We believe that the Organization should establish policies and procedures and add additional resources to its accounting department to allow for appropriate segregation of duties.
Views of Responsible Officials:
The Organization acknowledges the deficiencies with the Organization’s segregation of duties during the period ended May 31, 2022. The Organization has been proactive in attempting to resolve these matters on a go forward basis. In October 2024, an accounting firm was engaged to manage the Organization’s accounting and financial reporting. This firm is working closely with the Organization to establish appropriate policies and procedures to ensure there is appropriate segregation of duties.
2022-003: Period of Performance
Identification of Federal Program:
U.S. Small Business Administration
Assistance Listing Number: 59.075
Assistance Listing Name: COVID-19 Shuttered Venue Operators Grant
Criteria or Specific Requirement: The Organization's Schedule of Expenditures of Federal Awards should be prepared using the same accounting basis as its financial statements. These financial statements are presented on an accrual basis in accordance with U.S. GAAP, which requires that expenses be recognized in the period they are incurred.
Condition: In evaluating the Organization’s compliance with the requirements for period of performance, our test work identified instances where transactions were recorded within the incorrect period.
Cause: The Organization lacked policies and procedures to ensure the proper cutoff of expenditures between fiscal years and to meet the grant award's period of performance requirements. In some instances, the Organization recorded expenditures based on the invoice receipt date without reviewing service dates, which compromised accurate expenditure cutoff.
Effect or Potential Effect: Prior to the audit, the Organization incorrectly recorded grant revenues and expenditures within the incorrect period. This resulted in grant revenues being overstated by $12,256 during the year ended May 31, 2022. Additionally, this resulted in $392 of grant expenditures that were identified to not be within the period of performance of the grant. Without proper cutoff procedures, there is a risk that grant revenues and expenditures may be recorded in the wrong accounting period, potentially affecting compliance with grant terms and financial statement accuracy.
Questioned Costs: $392
Context: This was a condition identified during the testing the Organization’s compliance with period of performance requirements.
Recommendation: We recommend that the Organization enhance its internal processes to ensure a comprehensive review of all grant revenues and expenditures. This will help achieve an appropriate matching of revenues and expenses, aligning them within the same accounting period. By doing so, the organization can improve the accuracy of its financial reporting, maintain compliance with grant requirements.
Views of Responsible Officials:
The Organization agrees with the finding and will strengthen the internal process surrounding its expenditures to ensure expenses are captured within the correct period.
Identification of Federal Program:
U.S. Small Business Administration
Assistance Listing Number: 59.075
Assistance Listing Name: COVID-19 Shuttered Venue Operators Grant
Criteria or Specific Requirement: In accordance with 2 CFR 200.512(a)(1), the audit must be completed and the data collection form and reporting package must be submitted within the earlier of 30 calendar days after receipt of the auditor’s report, or nine months after the end of the audit period. OMB waived the 30-day requirement for fiscal periods ending between January 1, 2022 and October 31, 2022 and noted those would be considered timely filed if submitted within nine months after year end.
Condition: The reporting package and data collection form for the year ended May 31, 2022, was not filed with the Federal Audit Clearinghouse by the OMB extended deadline of February 2023.
Cause: The Organization’s Uniform Guidance Audit for the year ended May 31, 2022, was delayed as a result changes in staffing at the Organization as well this being the first year the Organization has had to undergo a single audit.
Effect or Potential Effect: Untimely reporting could affect funding from government agencies.
Questioned Costs: None noted.
Context: This was a condition noted per review of the Organization’s compliance with reporting requirements.
Recommendation: We recommend earlier preparation and engagement in relation to the single audit to ensure that the data collection form and reporting package are submitted by the required deadline for future federal funding.
Views of Responsible Officials:
The Organization acknowledges the Uniform Guidance Audit for the year ended May 31, 2022 was not submitted on time to the Federal Audit Clearinghouse. The delay in submission was due to staffing changes and shortages, along with this being the first year the Organization has undergone a single audit. The Uniform Guidance Audit for the year May 31, 2022 is now completed and the Organization will submit the report promptly to the Federal Audit Clearinghouse.
Criteria: The general ledger and accounting records used to maintain the financial information of the Organization should be reconciled in conjunction with the preparation of monthly internal financial statements.
Condition: We noted that significant adjustments were made to correct the account balances during the audit as well as adjustments to record expenses in the proper period.
Cause: At the time of the audit, the Organization did not have a formal financial statement close process.
Effect or Potential Effect: Misstatements due to unrecorded transactions and improper cut off occurred in the presentation of the monthly and year-end financial statements.
Recommendation: We recommend that management develop and implement a comprehensive formal closing process, accompanied by robust internal control mechanisms. This will ensure accuracy, efficiency, and compliance in financial reporting, ultimately enhancing the organization's overall financial integrity and operational effectiveness.
Additionally, the proper review of contracts and agreements is imperative to ensure the proper recording of revenue and expenditures in the appropriate period. We recommend that management review its policies and procedures related to recognition of revenue and expenditures and ensure that the process has sufficient controls that are designed to ensure the proper recording of revenue and expenses. If necessary, any unusual items should immediately be investigated and adjusted in the books to minimize the significance of year-end adjusting journal entries.
Views of Responsible Officials:
The Organization acknowledges the deficiencies in the closing process that resulted in significant adjustments to correct account balances during the audit, as well as adjustments to record expenses in the proper period. These deficiencies were primarily caused by various staffing changes and shortages, including within key management. In May 2023, the Organization hired a new Finance Director. It was determined at that time that the Finance Department had not been adequately staffed for almost a year. In August of 2023, the resignation of the General Director and Chief Advancement Officer was communicated to the staff, and a new General Director assumed the role in October of 2023. Other changes in personnel followed, including the transfer of the Finance Associate to another department. These unforeseen changes in key leadership and other personnel gaps further contributed to temporary challenges during the audit in 2023-2024. The result of these changes caused a shift in responsibilities amongst the remaining staff and a further burden on the Finance Department. The cumulative result of these circumstances resulted in a limited capacity to obtain the information necessary to properly analyze all the accounts during the monthly closing process. To address the impact of these deficiencies and challenges, an accounting firm was engaged to manage the Organization’s accounting and financial reporting in October of 2024. This firm is working closely with the Organization to secure all the documentation needed for the accurate recording of revenue and expenses in the appropriate period.
Criteria: The Organization lacked adequate segregation of duties within the journal entry and account reconciliation processes for the year ended May 31, 2022.
Condition: Manual journal entries and account reconciliations prepared by the Director of Finance lacked a designated reviewer.
Cause: The Organization lacked policies and procedures to ensure appropriate segregation of duties in the preparation and review of journal entries and account reconciliations. Additionally, the accounting department was not sufficiently staffed with personnel possessing the necessary skills and expertise, resulting in the Director of Finance both preparing and reviewing these entries and account reconciliations.
Effect or Potential Effect: Without proper segregation of duties, there is an increased risk of errors in the financial statements and potential override of existing internal controls.
Recommendation: We believe that the Organization should establish policies and procedures and add additional resources to its accounting department to allow for appropriate segregation of duties.
Views of Responsible Officials:
The Organization acknowledges the deficiencies with the Organization’s segregation of duties during the period ended May 31, 2022. The Organization has been proactive in attempting to resolve these matters on a go forward basis. In October 2024, an accounting firm was engaged to manage the Organization’s accounting and financial reporting. This firm is working closely with the Organization to establish appropriate policies and procedures to ensure there is appropriate segregation of duties.
2022-003: Period of Performance
Identification of Federal Program:
U.S. Small Business Administration
Assistance Listing Number: 59.075
Assistance Listing Name: COVID-19 Shuttered Venue Operators Grant
Criteria or Specific Requirement: The Organization's Schedule of Expenditures of Federal Awards should be prepared using the same accounting basis as its financial statements. These financial statements are presented on an accrual basis in accordance with U.S. GAAP, which requires that expenses be recognized in the period they are incurred.
Condition: In evaluating the Organization’s compliance with the requirements for period of performance, our test work identified instances where transactions were recorded within the incorrect period.
Cause: The Organization lacked policies and procedures to ensure the proper cutoff of expenditures between fiscal years and to meet the grant award's period of performance requirements. In some instances, the Organization recorded expenditures based on the invoice receipt date without reviewing service dates, which compromised accurate expenditure cutoff.
Effect or Potential Effect: Prior to the audit, the Organization incorrectly recorded grant revenues and expenditures within the incorrect period. This resulted in grant revenues being overstated by $12,256 during the year ended May 31, 2022. Additionally, this resulted in $392 of grant expenditures that were identified to not be within the period of performance of the grant. Without proper cutoff procedures, there is a risk that grant revenues and expenditures may be recorded in the wrong accounting period, potentially affecting compliance with grant terms and financial statement accuracy.
Questioned Costs: $392
Context: This was a condition identified during the testing the Organization’s compliance with period of performance requirements.
Recommendation: We recommend that the Organization enhance its internal processes to ensure a comprehensive review of all grant revenues and expenditures. This will help achieve an appropriate matching of revenues and expenses, aligning them within the same accounting period. By doing so, the organization can improve the accuracy of its financial reporting, maintain compliance with grant requirements.
Views of Responsible Officials:
The Organization agrees with the finding and will strengthen the internal process surrounding its expenditures to ensure expenses are captured within the correct period.
Identification of Federal Program:
U.S. Small Business Administration
Assistance Listing Number: 59.075
Assistance Listing Name: COVID-19 Shuttered Venue Operators Grant
Criteria or Specific Requirement: In accordance with 2 CFR 200.512(a)(1), the audit must be completed and the data collection form and reporting package must be submitted within the earlier of 30 calendar days after receipt of the auditor’s report, or nine months after the end of the audit period. OMB waived the 30-day requirement for fiscal periods ending between January 1, 2022 and October 31, 2022 and noted those would be considered timely filed if submitted within nine months after year end.
Condition: The reporting package and data collection form for the year ended May 31, 2022, was not filed with the Federal Audit Clearinghouse by the OMB extended deadline of February 2023.
Cause: The Organization’s Uniform Guidance Audit for the year ended May 31, 2022, was delayed as a result changes in staffing at the Organization as well this being the first year the Organization has had to undergo a single audit.
Effect or Potential Effect: Untimely reporting could affect funding from government agencies.
Questioned Costs: None noted.
Context: This was a condition noted per review of the Organization’s compliance with reporting requirements.
Recommendation: We recommend earlier preparation and engagement in relation to the single audit to ensure that the data collection form and reporting package are submitted by the required deadline for future federal funding.
Views of Responsible Officials:
The Organization acknowledges the Uniform Guidance Audit for the year ended May 31, 2022 was not submitted on time to the Federal Audit Clearinghouse. The delay in submission was due to staffing changes and shortages, along with this being the first year the Organization has undergone a single audit. The Uniform Guidance Audit for the year May 31, 2022 is now completed and the Organization will submit the report promptly to the Federal Audit Clearinghouse.