Finding #2024-001 – Material Weakness – Accounting Recordkeeping All Programs Other Criteria Accounting tasks such as timely monthly analysis, reconciliations and review of accounts play a key role in providing the accuracy of accounting data and information included in the interim and year-end financial statements. Trial balances should be maintained for the Organization continuously, in accordance with U.S. GAAP. Detailed supporting schedules should be maintained for all significant asset, liability, revenue and expense accounts. Reconciling items should be investigated and resolved in a timely manner. All of the forementioned items are essential to ensure that financial statements and data collection forms are submitted in conformance with 2 CFR Section 200.512(a)(1). Condition During the year ended June 30, 2024, management was unable to provide timely year-end trial balances in accordance with U.S. GAAP without significant adjusting journal entries required to accurately reflect the underlying accounting transactions. Cause The significant delay was caused primarily due to significant turnover in personnel within the accounting/finance department and efforts related to the merger between HopePHL and Youth Service, Inc. in prior year, which resulted in a backlog of recording transactions, and in reconciliations not being performed timely. Effects Not performing timely and complete monthly and year-end account reconciliations and closing procedures leads to a continually and growing backlog of transactions and journal entries that are not posted to the accounting system, which renders the accounting information ineffective for making well-informed business decisions. This has led to the expenditure of significant time and effort by many to complete the required reconciliation procedures and prevented the timely delivery of financial statements to management, board members and funders. In addition, this led to the Organization to be noncompliant with required deadlines for Uniform Guidance and Data Collection Form submission. Questions Costs None. Perspective This audit finding is systematic. Statistical Sample A statistical sample is not applicable to this finding. Repeat Finding This audit finding is a repeat finding of prior year. Recommendation We recommend that individuals overseeing the accounting and finance function continue to review the Organization's current accounting policies and update existing policies or implement new policies, as necessary, to ensure that accounting records are accurately maintained throughout the year. In addition, we recommend the Organization develop and document formal year-end closing procedures, including detailed closing checklists, assignment of responsibilities, and timelines for the preparation and review of reconciliations, trial balances, and supporting schedules. Monthly and quarterly account reconciliations, as appropriate, should be completed and reviewed timely throughout the year to facilitate an efficient year-end close process and ensure that complete and accurate trial balances and related supporting documentation are prepared and reviewed on a timely basis after year-end. Views of Responsible Officials Management concurs with this finding. The delays in maintaining timely accounting records, completing reconciliations, and preparing year-end financial statements were primarily the result of significant turnover within the Accounting and Finance Department during the fiscal year, combined with the operational demands associated with the merger of HopePHL and Youth Service, Inc. These circumstances created a backlog of transaction processing and account reconciliations that ultimately delayed the preparation of accurate trial balances and required year-end adjustments to ensure compliance with U.S. GAAP. Since the conclusion of the audit period, management has implemented several corrective actions to strengthen the organization’s financial reporting processes and internal controls. These actions include: • Rebuilding and stabilizing the Accounting and Finance Department through the recruitment and retention of qualified personnel. • Establishing defined month-end closing procedures, including assigned responsibilities and timelines for completing reconciliations and reviewing financial activity. • Implementing a monthly close calendar with management oversight to ensure timely completion of accounting tasks and identification of outstanding issues. • Strengthening supervisory review of account reconciliations, journal entries, and financial reporting to improve the accuracy and completeness of accounting records throughout the year. • Monitoring compliance with financial reporting deadlines through regular meetings between Finance leadership and executive management. Management believes these corrective actions have substantially addressed the conditions that led to this finding and will help ensure that accounting records are maintained in accordance with U.S. GAAP, financial statements are prepared on a timely basis, and future reporting requirements, including those under 2 CFR §200.512(a)(1), are met. Responsible Official: Vice President of Finance Estimated Completion Date: Corrective actions have been implemented and will continue to be monitored as an ongoing process.
Finding #2024-002 – Material Weakness – Activities Allowed or Unallowed, Allowable Cost Principles 93.667 Social Services Block Grant - HAP - Bridge Housing and Case Management Payroll Approval Criteria Under the Uniform Guidance (2 CFR 200), entities are required to maintain effective internal controls to ensure the proper stewardship of federal funds, including appropriate oversight of payroll expenditures. Specifically, payroll transactions should be reviewed and approved by management prior to payment to ensure accuracy, completeness, and compliance with relevant policies. Condition During our audit of the Organization for compliance with Uniform Guidance requirements, we noted that the client was unable to provide sufficient evidence that the amount being requested for reimbursement was based on actual effort of employees during reimbursement period. In total 40 payroll samples were selected for testing and the lack of support for time spent by employees occurred for all items tested. Cause It appears that the client has not enforced sufficient procedures to document the review of time reporting by employees. This may be due to turnover in the Accounting/Finance Department which resulted in these procedures not being properly documented and maintained. Effects Without proper review of time reporting, there is an increased risk of inaccuracies, fraud, or noncompliance with federal and organizational requirements. Failure to detect errors in a timely manner could lead to unauthorized or incorrect payroll disbursements, potentially resulting in questioned costs or disallowed expenditures. Payroll costs were verified through additional supporting documentation including payroll registers and time cards. Questions Costs None. Perspective This audit finding is systematic. Statistical Sample The sample was a statistically valid sample. Repeat Finding This audit finding is not a repeat finding. Recommendation We recommend that the Organization establish and enforce formal procedures requiring documented management review and approval of all payroll transactions including review of employees level of effort before they are processed. The review process should be supported by evidence, such as approval signatures, electronic audit trails, or other verifiable records. In addition, management should perform regular reconciliations of payroll to ensure compliance with federal and organizational policies. Views of Responsible Officials Management concurs with this finding. During the fiscal year, the Organization experienced significant turnover within the Accounting and Finance Department, which impacted the consistent execution and documentation of established payroll review and approval procedures. Although payroll was reviewed prior to processing, management acknowledges that documentation evidencing the review and approval was not consistently maintained to demonstrate compliance with internal control requirements. The Organization recognizes the importance of documented management review as a key internal control over payroll expenditures, particularly for ensuring the appropriate stewardship of federal funds. To address this finding, management has implemented the following corrective actions: • Formalized written payroll processing procedures that require documented review and approval of each payroll register prior to transmission for processing. • Established a standardized payroll approval checklist to document management’s review of payroll changes, employee additions and terminations, pay rate changes, deductions, and payroll totals before each payroll is processed. • Clearly defined segregation of duties between Human Resources, Payroll, and Finance to ensure appropriate authorization and oversight throughout the payroll process. • Implemented a centralized electronic retention process for payroll registers, approval documentation, and supporting reports to ensure records are complete and readily available for audit. • Conducted training with Human Resources and Finance personnel on payroll approval requirements and documentation standards. • Included periodic supervisory reviews of payroll documentation as part of the Finance Department’s internal monitoring process to ensure ongoing compliance. Management believes these corrective actions have strengthened internal controls over payroll processing and approval and will ensure that payroll transactions are consistently reviewed, approved, and appropriately documented prior to payment. Responsible Official: Vice President of Finance Estimated Completion Date: Corrective actions have been implemented and are being monitored as an ongoing operational control.