Audit 407844

Criteria Internal control systems should include procedures to separate duties so that no one individual controls assets and performs the related record keeping. Condition The size of the Organization is such that its accounting staff is not large enough to provide segregation of duties that would be ideal. Cause Due to limited staff, management is unable to properly segregate duties. Effect Due to the lack of segregation of duties, unauthorized transactions could occur within the Organization. Recommendation We recognize that the Organization is not large enough to make the employment of additional persons for the purpose of segregating duties practical from a financial standpoint. We recommend that the Organization continue to have the Executive Director and Board of Directors review the financial information. Management’s Response The Organization is aware of the lack of segregation of duties caused by the limited size of its staff and therefore, agrees with the finding. The Organization will continue to improve segregation of duties as they are able and continue to have the Board of Directors involved as much as possible.

Criteria One of the components of internal control over financial reporting is that the employees of the organization be sufficiently knowledgeable to record the entity’s financial transactions in accordance with generally accepted accounting principles (GAAP) and to prepare the organization’s financial statements and the schedule of expenditures of federal awards in accordance with those accounting principles. Condition The Organization’s Chief Financial Officer does not have the necessary training to prepare the financial statements, including related notes and schedule of expenditures of federal awards, in accordance with generally accepted accounting principles. 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 awards in accordance with GAAP. Effect Consequently, during our audit we prepared the Organization’s financial statements and schedule of expenditures of federal awards. Although the auditors are preparing the financial statements and related footnotes and schedule of expenditures of federal awards, the Organization’s management thoroughly reviews them and accepts responsibility for their completeness and accuracy. Recommendation Preparation of the year end financial statements by the auditor is common in most small organizations since they do not have the resources to devote to this area of internal control. We recommend that the Organization continue to rely on the external auditors to prepare the financial statements and related notes and schedule of expenditures of federal awards in accordance with generally accepted accounting principles. Management’s Response The Organization accepts this finding. The decision by the Board and management to outsource the preparation of the financial statements, the schedule of expenditures of federal awards, and related notes has been made on a cost/benefit basis.