Audit 365678

Finding 2024-001 Financial Close Process Type of Finding: Material Weakness in Internal Control over Financial Reporting Condition: During the audit, it was noted that the Organization lacked a robust financial close and review process. This deficiency resulted in multiple material audit adjustments across key financial statement accounts, including inventory, accounts payable, fixed assets, deferred revenue, and related activity accounts. These adjustments were proposed by the auditors and subsequently recorded by management in order to fairly present the financial statements in accordance with generally accepted accounting principles. The extent and materiality of the adjustments indicate that the Organization's existing closing procedures were insufficient to identify and correct errors prior to the audit. Criteria: Management is responsible for adopting sound accounting policies and establishing and maintaining a system of internal control for the fair presentation of the basis financial statements in accordance with accounting principles generally accepted in the United States of America. Cause: The underlying cause appears to be a combination of a lack of formalized month-end and year-end close procedures and limited coordination between management and the Organization’s external contract accounting firm. Without clearly defined timelines, responsibilities, and communication protocols, important financial information may not have been shared or reviewed in a timely manner, increasing the risk of errors or omissions during the close process. Possible of Known Effect: Because of this gap in process and communication, material misstatements were present in the Organization’s financial records and required auditor-proposed adjustments to ensure the financial statements were fairly stated. While these corrections were made before issuance, the absence of a consistent and well-coordinated close process creates a risk that financial statements could be misstated in future periods if similar issues are not identified in advance. Recommendation: We recommend that the Organization develop and implement a formal financial close process that includes clear timelines, assigned responsibilities, and review steps for all key account areas. In addition, improving communication protocols between internal management and the external accounting firm—particularly around the timing and completeness of financial information—will help ensure that the financial records are accurate and complete prior to the start of the audit. Views of Responsible Officials: The Organization will develop a financial close calendar with clear deadlines. We will create a standard operating procedure for account reconciliations, journal entries, and financial reporting with assignments to specifics staff. The Organization will implement a review and sign-off process for financial reports at board meetings. The Organization plans on hiring a part-time finance manager to help us with documentation and reporting.

Finding 2024-002 Insufficient Documentation of Personnel Expenses Type of Finding: Noncompliance and Material Weakness in Internal Control over Compliance Condition: The Organization charges a material amount of payroll-related costs to its major federal program. However, it does not maintain sufficient documentation to support the level of effort charged to the award, as required by federal regulations. While staff members are required to complete timesheets, the current format does not capture the level of detail needed to substantiate payroll allocations to federal programs. Additionally, there is no formal process for supervisory review and approval of these timesheets. Although no overcharges or double-dipping were identified, the lack of adequate documentation results in known and likely questioned costs due to noncompliance with documentation requirements. Criteria: According to Uniform Guidance 2 CFR §200.430(g), the Organization's charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. The records also must reasonably reflect the total activity for which the employee is compensated. The records also must support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Cause: This issue appears to stem from two primary causes: (1) the timesheet system in use was not designed to capture the information needed to support federal payroll charges, and (2) there is a lack of formal internal controls around timekeeping, including supervisory review and approval of reported time. Possible of Known Effect: As a result, a material amount of salary and payroll taxes charged to the federal program is not adequately supported in accordance with 2 CFR 200.430. This leads to both known and likely questioned costs. The absence of proper documentation increases the risk of misallocated expenses and undermines the Organization’s ability to demonstrate compliance with federal cost principles. Questioned Costs: Known questioned costs of $36,262 were identified. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization revise its timekeeping system to ensure that staff members record time in a manner that clearly supports the allocation of payroll costs to federal programs. Timesheets should include sufficient detail and be reviewed and approved by supervisors, with documentation of this review retained for audit purposes. For senior leadership, including the CEO, the Organization should implement appropriate methods such as time studies or activity logs to document effort charged to federal awards. Additionally, we recommend the development and documentation of internal controls to oversee the time reporting process and ensure compliance with federal requirements. Views of Responsible Officials: The Organization will develop and implement a standardized timesheet template (Gusto) that captures employee name, pay period, hours worked by funding source, and supervisory approval. Provide mandatory training for all staff whose salaries are charged in whole or in part to grants on documentation and time allocation requirements. Require monthly reconciliation of time sheets to payroll records before submission to grants. The Organization will conduct quarterly internal reviews to ensure compliance and adjust as needed.

Finding 2024-003 Insufficient Documentation of Other Direct Expenses Type of Finding: Noncompliance and Material Weakness in Internal Control over Compliance Condition: During testing of direct costs charged to the federal program, the Organization did not maintain sufficient documentation to fully support all expenditures claimed. In one instance, a receipt supporting a claimed expense was missing. In three additional cases, although the expenditures were generally supported, the documentation did not clearly reflect how the amounts allocated to the major federal program were determined. While these issues were isolated and the known and likely questioned costs were immaterial, the lack of complete documentation represents noncompliance with federal requirements for allowable costs. Criteria: According to Uniform Guidance 2 CFR §200.302(b)(3), the Organization's financial management system must maintain records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. All records must be supported by source documentation. Additionally, 2 CFR §200.403(g) requires that all costs charged to federal awards must be adequately documented. Cause: These exceptions appear to result from informal documentation practices and a lack of consistent application of procedures. Management is heavily involved in the Organization’s financial processes, including allocation of costs, which can limit opportunities for independent oversight or review. The absence of a standardized and consistently enforced process for documenting cost allocations contributes to inconsistent recordkeeping. Possible of Known Effect: Although the overall financial impact of these exceptions was not material, the missing documentation prevents the Organization from fully demonstrating compliance with 2 CFR 200.403 and 200.302. Overreliance on a single individual for documentation and procedural execution without accompanying review or monitoring controls can increase the risk of errors, omissions, or audit findings, even when expenditures are reasonable and allowable. Questioned Costs: Known questioned costs of $2,742 were identified. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization implement a standardized procedure for documenting all direct and indirect cost allocations charged to federal programs, ensuring that each claim includes full supporting documentation such as receipts and annotated allocation details with consistent allocation methods. To strengthen internal controls, the Organization should consider establishing a review process for claims preparation that includes someone other than the individual preparing or allocating the expenditures. This will enhance accountability and help ensure compliance with federal documentation requirements. Views of Responsible Officials: The Organization will develop written guidelines specifying the required supporting documentation for each type of direct expense. Set up vendors in QuickBooks. We will hire and train Finance Manager to manage and track revenue and expenses, QuickBooks, grant reporting etc. All receipts and expenses will be scanned in and kept electronically. The Organization will provide training on documentation requirements, proper record submission, and compliance expectations.

Finding 2024-004 Insufficient Documentation Supporting Eligibility Determination Type of Finding: Noncompliance and Significant Deficiency in Internal Control over Compliance Condition: The Organization uses a database to collect and store documentation related to eligibility determinations for program participants. While this tool was used consistently throughout the year, the audit identified a lack of documented review procedures to verify that eligibility criteria were appropriately assessed and that all required documentation was obtained and retained. There is no established process to review or confirm the completeness and accuracy of eligibility documentation within the database. As a result, three of the sixty transactions tested did not include sufficient documentation to support eligibility determinations, representing instances of noncompliance with the eligibility requirements under the federal program. Criteria: According to Uniform Guidance 2 CFR §200.303(a), the Organization is required to establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Further, per the federal grant award document, the eligibility documentation files must be maintained until three years has elapsed from the las payment under the grant. Cause: The deficiency appears to stem from an underdeveloped system of internal control surrounding the eligibility determination process. Although the Organization adopted a digital solution to facilitate documentation, it did not implement corresponding review or monitoring controls to ensure compliance. In addition, the absence of documented policies or assigned responsibilities contributed to gaps in oversight and follow-through. Possible of Known Effect: Due to the lack of review procedures and internal control mechanisms, the Organization did not retain adequate documentation to support eligibility determinations in 3 out of 60 transactions tested. This resulted in known compliance findings under the eligibility requirements of the federal program. In the auditor’s judgment, the combination of the control deficiencies and noncompliant transactions indicates that the Organization did not have a system of internal control in place capable of providing reasonable assurance of compliance with federal eligibility requirements, as required under 2 CFR 200.303 and the applicable program-specific provisions. Questioned Costs: Known questioned costs of $270 were identified. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization enhance its internal control structure over eligibility determination by implementing a formal review process to verify that all required documentation is obtained, reviewed, and retained in the system. Responsibilities for eligibility review should be clearly assigned, and staff should be trained to ensure that documentation standards are consistently met. Periodic quality checks or file reviews may help reinforce compliance and identify any gaps before claims are submitted or services are rendered. Views of Responsible Officials: The Organization will transition to Pantry Soft, a new CRM to centralize client records, eligibility documentation and service dates. We will include mandatory eligibility fields and document upload requirements before service can be recorded. We will develop a standardized eligibility checklist to be completed for all new and returning participants. Staff will be trained on Pantry Soft usage, eligibility requirements and document retention stands.

Finding 2024-005 Inadequate System of Internal Controls over Benefit Limitation Type of Finding: Significant Deficiency in Internal Control over Compliance Condition: The Organization is required by the federal grant award to limit eligible client families to a maximum of eleven diapering supply "package" distributions per participating child over the course of the grant agreement period. While the program design includes efforts to control this requirement, the eligibility database lacks the capability to assign or track unique participant identifiers needed to reliably enforce this limit. Additionally, there is no documentation to demonstrate that processes related to benefit limits are periodically reviewed or monitored. Due to the nature of recordkeeping in this area, testing compliance is challenging. Although no instances of noncompliance were identified in the sample tested, the Organization has not implemented an adequate system of internal controls to ensure consistent compliance with this grant criterion. Criteria: According to the federal grant award, eligible client families will receive a maximum of eleven diapering supply "package" distributions for each participating child, over the course of the grant agreement period. The Organization is required to implement a system of internal controls to ensure compliance with this criteria. Cause: This condition results from limitations within the eligibility database system, which lacks both unique participant tracking and comprehensive reporting capabilities necessary to enforce the distribution limit. Combined with the absence of formal review or monitoring procedures, these factors indicate that despite efforts to comply, the Organization has not developed or documented a sufficient internal control system to provide reasonable assurance that this federal requirement is consistently met. Possible of Known Effect: The absence of robust internal controls and reporting functionality increases the risk that families may receive benefits exceeding the maximum allowable amount during the grant period. While no noncompliance was identified during testing, these deficiencies hinder the Organization’s ability to prevent or detect potential violations, which could result in questioned costs. Questioned Costs: There were no questioned costs identified. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization improve its internal control framework by implementing methods to assign unique participant identifiers and accurately track diapering supply distributions within the eligibility system. Enhancing reporting capabilities to allow consolidation of activities across all sites and the full grant period would significantly strengthen monitoring and compliance efforts. Additionally, formalizing periodic reviews and documentation of compliance with the benefit limit, along with staff training, will help ensure adherence to federal grant requirements and reduce compliance risks. Views of Responsible Officials: The Organization will transition to Pantry Soft a new CRM to track benefit limitation and mandatory documentation. We will include mandatory eligibility fields and document upload requirements before service can be recorded. We will develop a standardized eligibility checklist to be completed for all new and returning participants. Staff will be trained on Pantry Soft usage, eligibility requirements and document retention stands.

Finding 2024-001 Financial Close Process Type of Finding: Material Weakness in Internal Control over Financial Reporting Condition: During the audit, it was noted that the Organization lacked a robust financial close and review process. This deficiency resulted in multiple material audit adjustments across key financial statement accounts, including inventory, accounts payable, fixed assets, deferred revenue, and related activity accounts. These adjustments were proposed by the auditors and subsequently recorded by management in order to fairly present the financial statements in accordance with generally accepted accounting principles. The extent and materiality of the adjustments indicate that the Organization's existing closing procedures were insufficient to identify and correct errors prior to the audit. Criteria: Management is responsible for adopting sound accounting policies and establishing and maintaining a system of internal control for the fair presentation of the basis financial statements in accordance with accounting principles generally accepted in the United States of America. Cause: The underlying cause appears to be a combination of a lack of formalized month-end and year-end close procedures and limited coordination between management and the Organization’s external contract accounting firm. Without clearly defined timelines, responsibilities, and communication protocols, important financial information may not have been shared or reviewed in a timely manner, increasing the risk of errors or omissions during the close process. Possible of Known Effect: Because of this gap in process and communication, material misstatements were present in the Organization’s financial records and required auditor-proposed adjustments to ensure the financial statements were fairly stated. While these corrections were made before issuance, the absence of a consistent and well-coordinated close process creates a risk that financial statements could be misstated in future periods if similar issues are not identified in advance. Recommendation: We recommend that the Organization develop and implement a formal financial close process that includes clear timelines, assigned responsibilities, and review steps for all key account areas. In addition, improving communication protocols between internal management and the external accounting firm—particularly around the timing and completeness of financial information—will help ensure that the financial records are accurate and complete prior to the start of the audit. Views of Responsible Officials: The Organization will develop a financial close calendar with clear deadlines. We will create a standard operating procedure for account reconciliations, journal entries, and financial reporting with assignments to specifics staff. The Organization will implement a review and sign-off process for financial reports at board meetings. The Organization plans on hiring a part-time finance manager to help us with documentation and reporting.

Finding 2024-001 Financial Close Process Type of Finding: Material Weakness in Internal Control over Financial Reporting Condition: During the audit, it was noted that the Organization lacked a robust financial close and review process. This deficiency resulted in multiple material audit adjustments across key financial statement accounts, including inventory, accounts payable, fixed assets, deferred revenue, and related activity accounts. These adjustments were proposed by the auditors and subsequently recorded by management in order to fairly present the financial statements in accordance with generally accepted accounting principles. The extent and materiality of the adjustments indicate that the Organization's existing closing procedures were insufficient to identify and correct errors prior to the audit. Criteria: Management is responsible for adopting sound accounting policies and establishing and maintaining a system of internal control for the fair presentation of the basis financial statements in accordance with accounting principles generally accepted in the United States of America. Cause: The underlying cause appears to be a combination of a lack of formalized month-end and year-end close procedures and limited coordination between management and the Organization’s external contract accounting firm. Without clearly defined timelines, responsibilities, and communication protocols, important financial information may not have been shared or reviewed in a timely manner, increasing the risk of errors or omissions during the close process. Possible of Known Effect: Because of this gap in process and communication, material misstatements were present in the Organization’s financial records and required auditor-proposed adjustments to ensure the financial statements were fairly stated. While these corrections were made before issuance, the absence of a consistent and well-coordinated close process creates a risk that financial statements could be misstated in future periods if similar issues are not identified in advance. Recommendation: We recommend that the Organization develop and implement a formal financial close process that includes clear timelines, assigned responsibilities, and review steps for all key account areas. In addition, improving communication protocols between internal management and the external accounting firm—particularly around the timing and completeness of financial information—will help ensure that the financial records are accurate and complete prior to the start of the audit. Views of Responsible Officials: The Organization will develop a financial close calendar with clear deadlines. We will create a standard operating procedure for account reconciliations, journal entries, and financial reporting with assignments to specifics staff. The Organization will implement a review and sign-off process for financial reports at board meetings. The Organization plans on hiring a part-time finance manager to help us with documentation and reporting.

Finding 2024-002 Insufficient Documentation of Personnel Expenses Type of Finding: Noncompliance and Material Weakness in Internal Control over Compliance Condition: The Organization charges a material amount of payroll-related costs to its major federal program. However, it does not maintain sufficient documentation to support the level of effort charged to the award, as required by federal regulations. While staff members are required to complete timesheets, the current format does not capture the level of detail needed to substantiate payroll allocations to federal programs. Additionally, there is no formal process for supervisory review and approval of these timesheets. Although no overcharges or double-dipping were identified, the lack of adequate documentation results in known and likely questioned costs due to noncompliance with documentation requirements. Criteria: According to Uniform Guidance 2 CFR §200.430(g), the Organization's charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. The records also must reasonably reflect the total activity for which the employee is compensated. The records also must support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Cause: This issue appears to stem from two primary causes: (1) the timesheet system in use was not designed to capture the information needed to support federal payroll charges, and (2) there is a lack of formal internal controls around timekeeping, including supervisory review and approval of reported time. Possible of Known Effect: As a result, a material amount of salary and payroll taxes charged to the federal program is not adequately supported in accordance with 2 CFR 200.430. This leads to both known and likely questioned costs. The absence of proper documentation increases the risk of misallocated expenses and undermines the Organization’s ability to demonstrate compliance with federal cost principles. Questioned Costs: Known questioned costs of $36,262 were identified. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization revise its timekeeping system to ensure that staff members record time in a manner that clearly supports the allocation of payroll costs to federal programs. Timesheets should include sufficient detail and be reviewed and approved by supervisors, with documentation of this review retained for audit purposes. For senior leadership, including the CEO, the Organization should implement appropriate methods such as time studies or activity logs to document effort charged to federal awards. Additionally, we recommend the development and documentation of internal controls to oversee the time reporting process and ensure compliance with federal requirements. Views of Responsible Officials: The Organization will develop and implement a standardized timesheet template (Gusto) that captures employee name, pay period, hours worked by funding source, and supervisory approval. Provide mandatory training for all staff whose salaries are charged in whole or in part to grants on documentation and time allocation requirements. Require monthly reconciliation of time sheets to payroll records before submission to grants. The Organization will conduct quarterly internal reviews to ensure compliance and adjust as needed.

Finding 2024-003 Insufficient Documentation of Other Direct Expenses Type of Finding: Noncompliance and Material Weakness in Internal Control over Compliance Condition: During testing of direct costs charged to the federal program, the Organization did not maintain sufficient documentation to fully support all expenditures claimed. In one instance, a receipt supporting a claimed expense was missing. In three additional cases, although the expenditures were generally supported, the documentation did not clearly reflect how the amounts allocated to the major federal program were determined. While these issues were isolated and the known and likely questioned costs were immaterial, the lack of complete documentation represents noncompliance with federal requirements for allowable costs. Criteria: According to Uniform Guidance 2 CFR §200.302(b)(3), the Organization's financial management system must maintain records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. All records must be supported by source documentation. Additionally, 2 CFR §200.403(g) requires that all costs charged to federal awards must be adequately documented. Cause: These exceptions appear to result from informal documentation practices and a lack of consistent application of procedures. Management is heavily involved in the Organization’s financial processes, including allocation of costs, which can limit opportunities for independent oversight or review. The absence of a standardized and consistently enforced process for documenting cost allocations contributes to inconsistent recordkeeping. Possible of Known Effect: Although the overall financial impact of these exceptions was not material, the missing documentation prevents the Organization from fully demonstrating compliance with 2 CFR 200.403 and 200.302. Overreliance on a single individual for documentation and procedural execution without accompanying review or monitoring controls can increase the risk of errors, omissions, or audit findings, even when expenditures are reasonable and allowable. Questioned Costs: Known questioned costs of $2,742 were identified. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization implement a standardized procedure for documenting all direct and indirect cost allocations charged to federal programs, ensuring that each claim includes full supporting documentation such as receipts and annotated allocation details with consistent allocation methods. To strengthen internal controls, the Organization should consider establishing a review process for claims preparation that includes someone other than the individual preparing or allocating the expenditures. This will enhance accountability and help ensure compliance with federal documentation requirements. Views of Responsible Officials: The Organization will develop written guidelines specifying the required supporting documentation for each type of direct expense. Set up vendors in QuickBooks. We will hire and train Finance Manager to manage and track revenue and expenses, QuickBooks, grant reporting etc. All receipts and expenses will be scanned in and kept electronically. The Organization will provide training on documentation requirements, proper record submission, and compliance expectations.

Finding 2024-004 Insufficient Documentation Supporting Eligibility Determination Type of Finding: Noncompliance and Significant Deficiency in Internal Control over Compliance Condition: The Organization uses a database to collect and store documentation related to eligibility determinations for program participants. While this tool was used consistently throughout the year, the audit identified a lack of documented review procedures to verify that eligibility criteria were appropriately assessed and that all required documentation was obtained and retained. There is no established process to review or confirm the completeness and accuracy of eligibility documentation within the database. As a result, three of the sixty transactions tested did not include sufficient documentation to support eligibility determinations, representing instances of noncompliance with the eligibility requirements under the federal program. Criteria: According to Uniform Guidance 2 CFR §200.303(a), the Organization is required to establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Further, per the federal grant award document, the eligibility documentation files must be maintained until three years has elapsed from the las payment under the grant. Cause: The deficiency appears to stem from an underdeveloped system of internal control surrounding the eligibility determination process. Although the Organization adopted a digital solution to facilitate documentation, it did not implement corresponding review or monitoring controls to ensure compliance. In addition, the absence of documented policies or assigned responsibilities contributed to gaps in oversight and follow-through. Possible of Known Effect: Due to the lack of review procedures and internal control mechanisms, the Organization did not retain adequate documentation to support eligibility determinations in 3 out of 60 transactions tested. This resulted in known compliance findings under the eligibility requirements of the federal program. In the auditor’s judgment, the combination of the control deficiencies and noncompliant transactions indicates that the Organization did not have a system of internal control in place capable of providing reasonable assurance of compliance with federal eligibility requirements, as required under 2 CFR 200.303 and the applicable program-specific provisions. Questioned Costs: Known questioned costs of $270 were identified. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization enhance its internal control structure over eligibility determination by implementing a formal review process to verify that all required documentation is obtained, reviewed, and retained in the system. Responsibilities for eligibility review should be clearly assigned, and staff should be trained to ensure that documentation standards are consistently met. Periodic quality checks or file reviews may help reinforce compliance and identify any gaps before claims are submitted or services are rendered. Views of Responsible Officials: The Organization will transition to Pantry Soft, a new CRM to centralize client records, eligibility documentation and service dates. We will include mandatory eligibility fields and document upload requirements before service can be recorded. We will develop a standardized eligibility checklist to be completed for all new and returning participants. Staff will be trained on Pantry Soft usage, eligibility requirements and document retention stands.

Finding 2024-005 Inadequate System of Internal Controls over Benefit Limitation Type of Finding: Significant Deficiency in Internal Control over Compliance Condition: The Organization is required by the federal grant award to limit eligible client families to a maximum of eleven diapering supply "package" distributions per participating child over the course of the grant agreement period. While the program design includes efforts to control this requirement, the eligibility database lacks the capability to assign or track unique participant identifiers needed to reliably enforce this limit. Additionally, there is no documentation to demonstrate that processes related to benefit limits are periodically reviewed or monitored. Due to the nature of recordkeeping in this area, testing compliance is challenging. Although no instances of noncompliance were identified in the sample tested, the Organization has not implemented an adequate system of internal controls to ensure consistent compliance with this grant criterion. Criteria: According to the federal grant award, eligible client families will receive a maximum of eleven diapering supply "package" distributions for each participating child, over the course of the grant agreement period. The Organization is required to implement a system of internal controls to ensure compliance with this criteria. Cause: This condition results from limitations within the eligibility database system, which lacks both unique participant tracking and comprehensive reporting capabilities necessary to enforce the distribution limit. Combined with the absence of formal review or monitoring procedures, these factors indicate that despite efforts to comply, the Organization has not developed or documented a sufficient internal control system to provide reasonable assurance that this federal requirement is consistently met. Possible of Known Effect: The absence of robust internal controls and reporting functionality increases the risk that families may receive benefits exceeding the maximum allowable amount during the grant period. While no noncompliance was identified during testing, these deficiencies hinder the Organization’s ability to prevent or detect potential violations, which could result in questioned costs. Questioned Costs: There were no questioned costs identified. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization improve its internal control framework by implementing methods to assign unique participant identifiers and accurately track diapering supply distributions within the eligibility system. Enhancing reporting capabilities to allow consolidation of activities across all sites and the full grant period would significantly strengthen monitoring and compliance efforts. Additionally, formalizing periodic reviews and documentation of compliance with the benefit limit, along with staff training, will help ensure adherence to federal grant requirements and reduce compliance risks. Views of Responsible Officials: The Organization will transition to Pantry Soft a new CRM to track benefit limitation and mandatory documentation. We will include mandatory eligibility fields and document upload requirements before service can be recorded. We will develop a standardized eligibility checklist to be completed for all new and returning participants. Staff will be trained on Pantry Soft usage, eligibility requirements and document retention stands.

Finding 2024-001 Financial Close Process Type of Finding: Material Weakness in Internal Control over Financial Reporting Condition: During the audit, it was noted that the Organization lacked a robust financial close and review process. This deficiency resulted in multiple material audit adjustments across key financial statement accounts, including inventory, accounts payable, fixed assets, deferred revenue, and related activity accounts. These adjustments were proposed by the auditors and subsequently recorded by management in order to fairly present the financial statements in accordance with generally accepted accounting principles. The extent and materiality of the adjustments indicate that the Organization's existing closing procedures were insufficient to identify and correct errors prior to the audit. Criteria: Management is responsible for adopting sound accounting policies and establishing and maintaining a system of internal control for the fair presentation of the basis financial statements in accordance with accounting principles generally accepted in the United States of America. Cause: The underlying cause appears to be a combination of a lack of formalized month-end and year-end close procedures and limited coordination between management and the Organization’s external contract accounting firm. Without clearly defined timelines, responsibilities, and communication protocols, important financial information may not have been shared or reviewed in a timely manner, increasing the risk of errors or omissions during the close process. Possible of Known Effect: Because of this gap in process and communication, material misstatements were present in the Organization’s financial records and required auditor-proposed adjustments to ensure the financial statements were fairly stated. While these corrections were made before issuance, the absence of a consistent and well-coordinated close process creates a risk that financial statements could be misstated in future periods if similar issues are not identified in advance. Recommendation: We recommend that the Organization develop and implement a formal financial close process that includes clear timelines, assigned responsibilities, and review steps for all key account areas. In addition, improving communication protocols between internal management and the external accounting firm—particularly around the timing and completeness of financial information—will help ensure that the financial records are accurate and complete prior to the start of the audit. Views of Responsible Officials: The Organization will develop a financial close calendar with clear deadlines. We will create a standard operating procedure for account reconciliations, journal entries, and financial reporting with assignments to specifics staff. The Organization will implement a review and sign-off process for financial reports at board meetings. The Organization plans on hiring a part-time finance manager to help us with documentation and reporting.