Audit 407242

Criteria: The Governing Board and management are responsible for establishing and maintaining internal controls over financial reporting to prevent misstatements in their financial reporting. Condition: During our audit, we noted that many of the accounting functions are performed by a few individuals, including opening the mail, recording receipts, recording vendors invoices, transporting the bank deposit, preparing checks, and mailing the checks. These same individuals have the ability to record journal entries and reconcile accounts. Cause: Limited staff is available to properly segregate duties. Effect: Because of the lack of segregation of duties, unauthorized transactions or misstatements as a result of errors could occur. Recommendation: The Organization is not large enough to make the employment of additional persons for the purpose of segregation of duties practical from a financial standpoint. Therefore, the Governing Board should rely on its direct knowledge of the Organization’s operations and thoroughly review financial reports to control and safeguard assets and insure accurate financial reporting. Management’s Response: The Organization’s Governing Board will continue to rely on its direct knowledge of daily operations and direct contact with employees to control and safeguard assets.

Criteria: Management is responsible for establishing and maintaining internal controls and for the fair presentation of the financial position, change in net assets, and disclosures in the financial statements, in conformity with U.S. Generally Accepted Accounting Principles (GAAP). Condition: During our audit, we noted that although the Organization’s employees are capable of recording cash receipts and disbursements, there is not the expertise to convert year-end balances to accrual and to prepare the annual audited financial statements and the related disclosures in accordance with GAAP. Cause: The Organization’s employees do not have the training to prepare the financial statements and notes to the financial statements in accordance with GAAP. Effect: Consequently, during our audit we prepared the Organization’s financial statements. Although the auditors are preparing the financial statements and related footnotes and schedule of expenditures of federal and state awards, the Organization’s management thoroughly reviews them and accepts responsibility for their completeness and accuracy. Recommendation: We recommend that management continue to make this decision on a cost/benefit basis. Management’s Response: The Organization will continue to rely on the outside assistance of its auditors in this area because it is the most cost-effective solution.

Criteria: The Organization should prepare the schedule of expenditures of federal and state awards. Condition: The Organization was unable to provide us with a schedule of expenditures of federal and state awards with the appropriate allocation of funds by Assistance Listing Number and funding source. Cause: The Organization felt that they did not have the internal expertise to prepare the schedule. Effect: The Organization requested its auditors to prepare this schedule. Recommendation: The Organization should assign an individual internally that is qualified to prepare this schedule. Management’s Response: The Organization will continue to rely on outside assistance of its auditors in this area because it is the most cost-effective solution.