Although the accounting records are maintained using an integrated accounting system and transactions are substantially recorded on a daily basis by fund, the accounting function is not maintained sufficiently current to ensure that all necessary adjusting entries, classifications, reconciliations, and closing procedures are completed on a timely basis throughout the fiscal year. As a result, interim and annual financial closings are not completed within a reasonable period after year-end, and the accounting records are not fully adjusted and reconciled for audit purposes until several months after fiscal year-end. This condition delays the preparation and availability of reliable financial information and significantly prolongs the annual audit process. The delays in completing the accounting close increase the complexity of the audit engagement, require substantial post year-end adjustments and reconciliations, and hinder timely compliance with financial reporting requirements applicable to governmental entities receiving federal financial assistance. In addition, due to the limited staffing within the finance and accounting department, a substantial portion of the accounting, reconciliation, financial reporting, and oversight responsibilities rests with a single individual. This concentration of responsibilities may create incompatibility of duties and increases the risk of errors, omissions, or conflicts in internal control functions. It is noted, however, that the Company ultimately records and properly classifies expenditures and transactions within the accounting records and adequately segregates and identifies transactions by the applicable funds and grants. Furthermore, the accounting software utilized by the Company is considered robust and capable of supporting a timely and effective accounting and financial reporting process.
Need for Formalization and Documentation of Grant-Specific Policies, Procedures, and Internal Controls. The Company maintains general internal controls and operational, administrative, and accounting procedures for the reasonable management of its operations, including controls applicable to restricted funding programs. However, during the audit procedures performed to evaluate and verify the establishment and implementation of policies, procedures, and internal controls required for the administration of the FEMA Public Assistance Program (ALN 97.036 – PA-4339), we noted that certain grant-specific policies, procedures, and internal controls had not yet been fully formalized and documented in accordance with the applicable grant agreement, federal regulations, and FEMA guidance. During our audit procedures, we noted that documentation evidencing the formal communication, implementation, and training of personnel responsible for grant administration and compliance functions was initially limited. As a result, certain policies and procedures applicable to the administration of the grant had not yet been formally customized or documented to specifically address all FEMA Public Assistance compliance requirements. These areas included, but were not limited to, the following: Financial Policies and Procedures, Policies and Procedures for Property and Equipment, Policies and Procedures for Allowability of Costs, Policies and Procedures for Disbursements, Policies and Procedures for Cash Management and Cash Advances. However, based on the audit procedures performed, we were able to corroborate that management had substantially developed and formalized the policies, procedures, controls, systems, and compliance documentation necessary for the administration of the federal award. Certain policies and procedures that had not yet been fully finalized at the time of our audit procedures were in process of completion and/or had been scheduled by management for completion and implementation. Additionally, no questioned costs resulted from this matter, as the Company ultimately maintained supporting documentation for the transactions tested and adequately identified and documented grant-related expenditures.
The Single Audit Report for the fiscal year ended June 30, 2024 was not issued and submitted to the Federal Audit Clearinghouse (FAC) within the required deadline of nine (9) months after the end of the audit period. As a result, the reporting package, including the audited financial statements, SEFA, auditor’s reports, and related compliance reporting, was not submitted by the applicable federal due date established under Uniform Guidance requirements. Based on discussions with management and our audit procedures, the delay in the completion and submission of the Single Audit report was substantially associated with the extended financial closing process, timing of reconciliations and adjustments, limited accounting and administrative resources, and the additional time required to finalize supporting documentation and grant-related information necessary for the audit. Although the Single Audit reporting package was subsequently completed and will be submitted to the Federal Audit Clearinghouse, the filing was not completed within the timeframe required by federal regulations.