Audit 407307

Criteria: Management is responsible for establishing and maintaining internal controls and for the fair presentation of financial position, change in net assets, and disclosures in the financial statements and the schedule of expenditures of federal and state awards, in conformity with U.S. Generally Accepted Accounting Principles (GAAP). Cause: 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 accrue proper amounts and to prepare the annual audited financial statements and the related disclosures and the schedule of expenditures of federal and state awards in accordance with GAAP. Condition: Management requested that KerberRose SC assist in preparing a draft of the audited financial statements, including the related footnote disclosures and the schedule of expenditures of federal and state awards. The outsourcing is a result of management’s cost/benefit decision to use our accounting expertise rather than incurring this internal resource cost. Effect: Although the auditors are proposing the necessary adjustments to convert the general ledger to accrual and also preparing the financial statements and related footnotes and the schedule of expenditures of federal and state awards, management of the Organization 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 their auditors in this area because it is the most cost-effective solution.

#2025-003 - Lack of Authorization for Expenses Criteria: Uniform Guidance 2 CFR 200.403 requires costs to be necessary, reasonable, and adequately documented to be allowable under Federal awards. Additionally, the Organization’s internal policies mandate written prior approval before incurring federal expenditures. Cause: Program staff bypassed standard procurement workflows to expedite payments. Additionally, the finance department processed the grant reimbursement requests without verifying that the supporting packages contained the required signatures. Condition: We identified federal grant expenditures that were charged to the program without documented evidence of prior review, approval, or formal authorization by the designated individual. We tested a sample of 20 non-payroll disbursements charged to the federal program. Of these, 2 transactions lacked documented approval. The total population of non-payroll disbursements for this award was $487,816. Effect: The Organization is out of compliance with federal documentation standards. Failure to approve costs pre-disbursement can result in unallowable expenses being charged to the federal award, leading to potential claw backs of funds by the granting agency. Recommendation: Management should reinforce existing policies and require documentation for all approvals. Management’s Response: The Organization is implementing a new approval process.