Criteria or Specific Requirement – A key principal of internal control is ensuring that no one single individual has control over physical assets and the related accounting records. Proper segregation of duties should be maintained to prevent or detect and correct misstatements of the financial statements. Conditions – In 2024, the Organization did not have proper segregation of duties. The Accountant performed, or had access to, all major functions. This individual processed deposits, recorded receipts in the accounting system and reconciled the bank accounts. We did not see evidence of formal review of the bank reconciliations by someone other than the Accountant. This individual also approved expenses and processed payments of expenses. We did not see any evidence of the review of approval of expenditures on the invoices. The Accountant did not sign checks, but there is no evidence that the check signer reviewed the supporting documentation and the Organization’s policies do not indicate the check signer needed to review the supporting documentation. In 2024, journal entries made to the accounting records were made by the Accountant and were not reviewed by a second individual. Context – All major functions of the accounting system could be performed by the Accountant. Revenue in 2023 was approximately $2,800,000 compared to revenue of approximately $12,500,000 in 2024. This substantial increase in activity would have made it more difficult to identify improper activity which may have made the board of director’s monthly financial statement review less effective. Cause – The fast growth of the Organization during 2024 increased the need for a more structured accounting environment. Management did not identify this deficiency and make appropriate changes until 2025. Effect or Potential Effect – The lack of segregation of duties could allow for theft of assets or improper use of funds and concealment of these activities in the accounting records. Recommendation – While we recognize the challenges that smaller organizations such as the Boys and Girls Clubs of Western Nevada may face in fully segregating duties, we recommend taking steps to reduce control gaps wherever feasible.Views of Responsible Officials and Planned Corrective Actions – Management acknowledges the audit findings and agrees that the organization’s rapid and significant growth during 2024 placed increased demands on existing accounting systems, staffing capacity, and internal controls. While financial operations remained functional during this period of expansion, appropriate measures and controls were not fully scaled to match the organization’s growth and increasing complexity. Management views this as a capacity and controls issue driven by unprecedented growth, rather than a lack of commitment to financial accountability or compliance. Leadership recognizes the importance of strengthening internal controls to ensure accurate financial reporting, safeguard assets, and maintain strong governance practices moving forward. To address these findings, management will utilize the SAS 115 letter issued by the auditor as a roadmap for corrective action. Specific planned actions include implementing enhanced internal control procedures, segregating duties where feasible, and improving documentation of accounting processes. In addition, management will increase the Finance Committee's role and oversight to provide regular review and governance of financial operations, policies, and controls. The organization will also implement control sampling and periodic reviews to validate the accuracy and consistency of accounting functions, identify potential weaknesses early, and ensure corrective actions are effective. These measures, combined with ongoing monitoring and committee oversight, will strengthen financial management practices and position the organization to responsibly support continued growth. Management is committed to the timely implementation of these corrective actions and to maintaining strong fiscal stewardship consistent with the organization’s mission and fiduciary responsibilities.
Criteria or Specific Requirement – 2 CFR Section 200.318 requires recipients of federal grants to maintain and use documented procedures for procurement transactions under a Federal award. Conditions – During 2024, the Organization did not have a written procurement policy. Context – The Organization exceeded the single audit threshold for the first time in 2024, primarily due to a one-time coronavirus grant. We looked up selected vendors on the SAM.gov website and verified they were not suspended or debarred. Cause – Management was not aware of the requirement to have a written procurement policy. Effect or Potential Effect – Not having a written procurement policy could result in inappropriate expenditure of Federal grant proceeds. Recommendation – We recommend that the Organization develop and implement a written procurement policy. Views of Responsible Officials and Planned Corrective Actions – Management acknowledges the finding and appreciates the auditor’s recommendation. The Organization exceeded the Single Audit threshold for the first time in 2024 due to a one-time coronavirus-related grant. As a result, management was not fully aware of the federal procurement documentation requirements applicable to these funds. To address this matter, management has implemented procedures to ensure that procurement documentation supporting compliance with federal regulations is maintained for all federal expenditures. These procedures include staff training on federal grant compliance requirements, enhanced oversight of procurement activities, and the use of standardized documentation and retention practices. Management believes these corrective actions will mitigate the risk of future noncompliance and strengthen overall federal grant administration.
Criteria or Specific Requirement – 2CFR Section 200.318(i) requires an Organization to maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type, contractor selection or rejection, and the basis for the contract price. Conditions – During 2024, the Organization did not maintain documentation related to how they chose a contractor for construction projects such as how they chose contractors to get bids from, how many bids were obtained, detailed bid information, and what factors they considered in choosing a contractor. No documentation exists showing considerations of price, contingencies, length of contract, and perceived risks. Context – The Organization exceeded the single audit threshold for the first time in 2024, primarily due to a one-time coronavirus grant. Cause – Management was not aware of the requirement to maintain procurement documentation. Effect or Potential Effect – The absence of procurement documentation increases the risk of non-compliance with federal regulations and limits the ability to demonstrate that federal regulations were followed. Recommendation – We recommend maintaining documentation supporting the compliance with federal regulations for all expenditures of federal funds. Views of Responsible Officials and Planned Corrective Actions – Management acknowledges the finding and appreciates the auditor’s recommendation. The Organization exceeded the Single Audit threshold for the first time in 2024 due to a one-time coronavirus-related grant. As a result, management was not fully aware of the federal procurement documentation requirements applicable to these funds. To address this matter, management has implemented procedures to ensure that procurement documentation supporting compliance with federal regulations is maintained for all federal expenditures. These procedures include staff training on federal grant compliance requirements, enhanced oversight of procurement activities, and the use of standardized documentation and retention practices. Management believes these corrective actions will mitigate the risk of future noncompliance and strengthen overall federal grant administration.