Audit 400359

Criteria: An effective system of internal control over financial reporting requires that material balance sheet accounts be reconciled in a timely manner, reviewed by qualified personnel, and appropriately documented to ensure the accuracy, completeness, and validity of amounts reported in the financial statements. Additionally, for federal awards, controls must ensure compliance with applicable requirements, including accurate and timely financial reporting in accordance with Uniform Guidance (2 CFR 200.303). Condition: Wesleyan College did not consistently prepare and review reconciliations for certain material balance sheet accounts on a timely basis. Specifically, multiple reconciliations were not completed within reasonable monthly and annual close timelines, and in some cases were prepared several months after period-end. Additionally, reviews were often not evidenced or were performed significantly after reconciliation preparation. Cause: The primary causes include insufficiently designed controls around reconciliation timeliness, and enforcement of existing close and review procedures. Contributing factors included resource constraints within the accounting function and significant turnover in staffing to identify and remediate delayed reconciliations. Effect or Potential Effect: Because reconciliations were not performed and reviewed timely, errors or irregularities within material account balances may not have been identified and corrected within the appropriate reporting period. As a result, management lacked reasonable assurance that material misstatements in the affected accounts would be prevented or detected on a timely basis. Additionally, financial reports submitted for federal programs may be inaccurate or not prepared in accordance with applicable requirements. Recommendation: Wesleyan College should ensure their preparation and review of material balance sheet account reconciliations are performed and reviewed in a timely manner. Views of Responsible Officials: Management is developing and implementing remediation actions, including strengthening reconciliation policies, assigning clear ownership and escalation procedures, and implementing monitoring controls to ensure reconciliations are prepared and reviewed timely. These actions are expected to improve the effectiveness of controls over material account balance reconciliations. Auditor’s Evaluation of the Views of Responsible Officials: Wesleyan College’s response is appropriate to ensure their preparation and review of material balance sheet account reconciliations are performed in a timely manner.

Criteria: An effective system of internal control over financial reporting requires that donor-restricted contributions be tracked accurately and that donor restrictions be released in income timely when the related purpose or time conditions have been satisfied, in accordance with applicable accounting standards and organizational policies. Additionally, for federal awards and other restricted funding sources, controls must ensure expenditures and related releases are recorded in accordance with applicable requirements and reflected accurately in financial reporting. Condition: Wesleyan College did not consistently record the release of donor restrictions in a timely manner upon satisfaction of donor-imposed purpose or time restrictions. In several instances, releases were recorded in periods subsequent to when the underlying conditions were met, and supporting documentation for the timing of releases was not always contemporaneous. Cause: The deficiency resulted from insufficiently formalized procedures for monitoring the satisfaction of donor restrictions and initiating timely releases. Additionally, coordination gaps between departments, and significant staffing turnover contributed to delays in communicating when restriction conditions had been fulfilled and recording releases timely for financial reporting purposes. Effect or Potential Effect: As a result, restricted and unrestricted net asset balances may not have been presented accurately between reporting periods, and management’s ability to rely on interim financial information related to donor-restricted activity was reduced. This condition also increases the risk that expenditures charged to restricted funding sources, including federal awards, may not be matched with the appropriate release of restrictions in the correct period. While no material misstatements were identified, the potential for misclassification errors exists. Recommendation: Wesleyan College should ensure the monitoring and recording of donor restrictions in a timely manner upon satisfaction of donor-imposed purpose or time restrictions. Views of Responsible Officials: Management plans to enhance controls over donor restriction tracking by implementing clearer procedures for identifying restriction satisfaction, improving cross-department communication, and strengthening review controls to ensure timely and accurate recording of donor restriction releases. Auditor’s Evaluation of the Views of Responsible Officials: Wesleyan College’s response is appropriate to ensure that donor-restricted contributions be tracked accurately and that donor restrictions be released in income timely when the related purpose or time conditions have been satisfied.

Criteria: Title 2 CFR §200.512(a) requires non-federal entities that expend $750,000 or more in federal awards during a fiscal year to submit the reporting package, including the audit report, data collection form (SF-SAC), and financial statements, to the Federal Audit Clearinghouse (FAC) within the earlier of 30 calendar days after receipt of the auditor’s report or nine months after the end of the audit period. Condition: Wesleyan College did not submit the Fiscal Year 2025 Uniform Guidance reporting package to the FAC within the required timeframe. The reporting package was submitted approximately 30 days after the applicable deadline. Cause: The delay was caused by significant staffing turnover during and subsequent to Fiscal Year 2025 resulting in delays in the timing of the annual audit and preparation of the Uniform Guidance reposting package. Effect or Potential Effect: Failure to submit the Uniform Guidance reporting package by the required deadline resulted in noncompliance with Uniform Guidance reporting requirements. Late submission may subject Wesleyan College to potential increased oversight, delayed future funding, or designation as high-risk from federal awarding agencies. Recommendation: Wesleyan College establish and document formal procedures to monitor Single Audit submission requirements, including assigning clear responsibility, implementing a compliance calendar with key deadlines, and performing management review to ensure timely submission to the FAC. Views of Responsible Officials: Management concurs with the finding. The auditee has taken corrective action by assigning responsibility for FAC submissions to a designated individual within the finance department and implementing a standardized compliance checklist to track Single Audit deadlines. Management expects these actions to prevent recurrence in future reporting periods.