Audit 401734

IImprove Controls over Accounting Records Statement of Condition: ESAC did not have procedures in place to monitor and properly maintain internal control over transactions and accounting records. Bank reconciliations were not timely and reconciliations of accounts payable and grants receivable to accounting records had been incorrectly prepared. Criteria: Internal controls must be monitored to ensure that they are operating as intended. A process of monitoring internal control will ensure that controls are operating consistently, and thus, effectively. Internal control over accounting records requires timely reconciliations. Prompt reconciliation of accounts will reduce the risk that errors and irregularities, intentional or unintentional, will go undetected. To ensure that reconciliations are being prepared effectively, the control must be monitored, and necessary corrective action must be taken based on regular assessment. Cause: ESAC’s unexpected management and staff transitions put a strain on the new staff’s ability to complete their responsibilities. Effect: Accounting records for the fiscal year ended June 30, 2024, contained several undetected and uncorrected errors. At year-end, cash balances were not properly reconciled, and accounts payable and grants receivable did not reconcile to the corresponding revenue and expenditure general ledger account totals. Recommendation: Monthly reconciliations should be performed. Management should review the reconciliations on a monthly basis and make appropriate corrections to accounting records, if necessary. Management should also monitor internal control to assess the quality of controls, and take corrective action if controls are not operating effectively. Management Response: Management is in agreement with the recommendation and has updated their policy and review process subsequent to year-end.

Improve Controls over the Preparation of the Schedule of Expenditures of Federal of Awards Statement of Condition: During our audit, we noted that ESAC’s Schedule of Expenditures of Federal Awards (SEFA) was not completed properly. Criteria: Title 2 U.S. Code of Federal Regulations Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires that management prepare a SEFA and the auditor to perform procedures to determine whether the schedule is presented fairly, in all material respects, in relation to the financial statements as a whole. Cause: ESAC’s unexpected management and staff transitions put a strain on the new staff’s ability to complete their responsibilities. Effect: Management may not properly initiate, authorize, record, process, and report financial data reliably in accordance with the requirements of Uniform Guidance. Recommendation: We recommend that ESAC develop and document a formal written policy to ensure that adequate procedures and controls are in place to determine that the SEFA is complete and accurate. These controls should include requiring the reconciliation of federal expenditures to the appropriate supporting documentation. Management Response: Management is in agreement with the recommendation and has updated their policy subsequent to year-end.

Filing of Data Collection Form and Reporting Package Statement of Condition: The June 30, 2024, audited financial statements and data collection form for ESAC were not filed within the time required by Uniform Guidance. Criteria: Uniform Guidance requires that non-federal entities that expend more than $750,000 or more in a year in federal awards shall have a single audit conducted and Section .320 requires that the audit shall be completed, and the data collection form and reporting package shall be submitted within the earlier of 30 days after receipt of the auditors’ report or nine months after the end of the audit period. Cause: ESAC’s filing process to ensure timely filing of the data collection form of the financial statements was attributed to the delay of the audit due to the turnover of staff, thus causing a delay in the submission of the required reports. Effect: Late filing of the data collection forms and reporting packages will cause an auditee to be determined a “high-risk auditee” and could affect future federal grant funding. Recommendation: We recommend ESAC improve its year-end closing processes in order to meet all filing requirements. Management Response: ESAC has implemented new procedures to ensure the reporting will be done timely in future periods.