Schedule of Findings and Responses Financial Statements June 30, 2025 Comment #2025-001 CONTROLS OVER FINANCIAL STATEMENT PREPARATION SHOULD BE IMPROVED GENERAL Condition: As part of our auditing procedures, we assisted management in the preparation of the financial statements and related disclosures of the Organization in accordance with generally accepted accounting principles (GAAP) and related notes to the financial statements and the schedule of expenditures of federal awards and other financial assistance (SEFA). While we noted that management made significant efforts and improvement in its staffing, there was still a need for adjustments proposed by management during the audit process for the Organization to properly state various asset, liabilities, revenue and expense accounts. The current accounting information system, the design and programming to produce financial statements on an interim and annual basis are not adequate. The system appears to be designed to only account for grant and contract expenditures for the overall Organization and not for each type of funding and function of the Organization (i.e., federal, state, local, etc.). Currently, the Organization relies on an outside consultant to maintain and report to the board of directors the interim and annual financial statements. We further understand that the Organization has formalized an accounting policies and procedures manual; however, it does not adequately address certain key financial areas (i.e. inventory management and financial reporting, the allocation of expenses in an equitable manner to the various grants and contracts, study of bad debt for the medicaid program, reconciliation of purchased meals to those delivered during each month, formal approval of journal entries, etc.). Accurate and timely reporting of the financial information by sources are critical to the Organization. Backup procedures are performed by the third party with no backup maintained on site. Management should be thoroughly familiar with the accounting system and have controls in place to limit access to the system. Backup files should be verified and maintained by the CEO. Cyber attacks are on the rise for small entities. It is also essential for the Organization to properly track each federal, state and local program separately in the reporting system and ensure that the methodology used to allocate common direct and indirect cost is fair and equitable and follow generally accepted accounting principles and best practices. The required matching of federal funds should be adequately calculated, recorded and reporting in accordance with the applicable contractual agreement (s). Context: Review of the internal control structure of the Organization in accordance with Government Auditing Standards. Criteria: Controls should be in place to ensure that financial statements are prepared in accordance with GAAP. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The auditee must also prepare a schedule of expenditures of federal awards for the period covered by the auditee's financial statements which must include the total federal awards expended as determined in accordance with Section 200.502, basis for determining federal awards expended. [2 CFR §200.510(a) and (b)] Effect: Management may not be able to obtain complete and accurate financial statements on an interim or fiscal year basis to be used for internal or external reporting purposes on a timely basis. Significant adjustments have to be made due to inaccurate programming and design. Whether the Organization is subject to a single audit pursuant to the Uniform Guidance is difficult to determine under the existing financial reporting model. (Continued) Cause: Significant turnover has been noted in key financial positions and a shortage of internal staff trained in accounting. An outside consultant with knowledge, skills, and experience in the preparation of financial statements was hired late into the fiscal year. The design of the accounting system (software utilized to process and maintain financial critical data in the general ledger and information system) is not adequate to report expenditures by source or funding type. Recommendation: The degree to which the auditors are assisting in preparation of the financial statements and related disclosures is a control deficiency and is determined by the knowledge and expertise of those in the Organization who are charged with the responsibility of its financial reporting. The accounting system should be designed to track and report revenue and expenditures by funding source and by type (federal, state, local, other, etc.). As a result, it is our recommendation that key personnel that have a role in assuring the accuracy of individual account balances obtain training to ensure that reporting, reconciliations (including cut-off procedures) and necessary supporting schedules are prepared accurately and in a timely manner. The general ledger should be maintained by departments (or by classes) to accurately report the revenue and expenditures in a manner consistent with that of the schedule of expenditures of federal awards (SEFA). The methodology used to allocated expenses should be studied to determine a more equitable means of allocating expenses (i.e. based on the number of units served for each program). Views of Responsible Officials and Planned Corrective Actions: We concur with this finding. The Organization has contracted with a seasoned outside accounting professional to assure that the financial system is designed to properly report financial activity by funding source and statements are completed and prepared timely. In addition, the Organization has committed to upgrading our accounting system software along with appropriate amendments to the formal accounting policy and procedures manual to cover the proper internal controls for accurately reporting financial activities for each grant and or contract. The Organization will maintain a backup copy of all financial data on-site. The software update process will be completed by June 30, 2026. The Organization is also engaged to have training on common software and cybersecurity awareness. Date to be implemented: On-going and completed by June 30, 2026. Persons responsible: CEO and financial consultant. Schedule of Findings and Responses Financial Statements June 30, 2025 Comment #2025-002 POLICIES AND PROCEDURES AND INTERNAL CONTROLS OVER DISBURSEMENTS AND PAYROLL PROCESSING SHOULD BE IMPROVED GENERAL Condition: We noted during our audit that the Organization’s purchasing policies and procedures and the internal controls over such procedures have not been updated to reflect the increase and diversity of funding and the compliance requirements that may affect the way the programs are carried out and accounted for. We also noted that the internal controls over the payroll processing should be improved. With the Organization receiving an increase in federal funding, management and the board of directors must be cognizant of the internal control requirements and the compliance requirement that are required when receiving such funds. The following are a summary of weaknesses and exceptions found during our audit procedures: 1. When meals are ordered for the various delivery sites, staff receives the meals each day with a corresponding ticket or voucher that identifies the type of meal and the quantities requested. The meals are purchased from one vendor. Each month, the vendor will submit an invoice for the meals delivered or sold to the Organization. We noted during our audit that there is no system in place to document the cumulative number of meals received each day and each month to authenticate the invoice (i.e., using Excel or some other accounting system). The risk exist that the number of meals invoiced may not agree with the number of meals received or delivered for the month and subsequently paid for. We also noted that there are no formal procedures in place to track and account for meals delivered by the various drivers and those not delivered (what happens to undelivered meals?). Consequently, the Organization is not able to adequately evaluate all accounts receivables by program and or properly record and value inventory at the end of each month (i.e. meals maintained in freezers). 2. The accounting for in-kind services and facilities are not properly evaluated and approved before entering into the general ledger as journal entries. Matching and in-kind are not reported by each grant as required by such grant agreements. 3. The payroll action forms are not always updated and used when there is a change in the pay rate (or salary amount) for employees. There were various reimbursements for miscellaneous expenses recorded in the payroll accounts ($10,722). Other payroll documents are either not in the file or not updated. The Organization’s has a 403 (b) Plan; however, it appears that this plan is not reviewed by the board of directors annually. Context: We reviewed and examined several transactions, based on our risk assessment and professional judgment, in each audit area for test of expenses to determine the Organization’s compliance with internal policies and procedures and other compliance requirements. Criteria: Generally accepted auditing standards and Governmental Auditing Standards. Internal controls should be designed to reduce the risk of transactions not being properly approved and executed in accordance with written policies and procedures that are approved by the board of directors. Such policies and procedures should be those determined to be best practices for not-for-profit organizations and are designed in a manner to meet the COSO framework. (Continued) Effect: Policies and procedures that are not properly designed and executed can result in the risk of assets not properly safe guarded and can lead to errors, misappropriation of assets and potentially abuse. Transactions not properly approved, could be an indirect violation of state and federal laws and other contractual requirements. Cause: Changes in senior management, the lost of staff due to the pandemic and lack of adequate monitoring activities. Also, the Organization has not established a committee or group of responsible individuals to oversee the polices and procedures and goals of the Organization. Recommendation: The Organization should immediately establish a committee of responsible individuals to author and oversee policies and procedures and internal controls over purchasing (procurement) and payroll processing procedures. Journal entries should be approved by a responsible person other than the person that initiated the journal entry. Supporting documentation should be attached to each journal entry that is not a recurring entry approved by the CEO. The 403 (b) Plan should be a regular agenda item for the board to discuss at least annually. Views of Responsible Officials and Planned Corrective Actions: We concur with this finding. The Organization will immediately assign a committee to take the lead in establishing policies and procedures and internal controls over the procurement process and the payroll procedures. The Organization has engaged a third party to help establish values of in-kind contributions. The board will discuss the 403 (b) Plan at least once annually reviewing the Plan document and the summary annual report. Date to be implemented: On-going and completed by June 30, 2026. Persons responsible: CEO and the board of directors with the outside consultant.