Audit 410819

2023-001 Internal Control Over Financial Reporting - Account Reconciliations Criteria or Specific Requirement: An accounting system and respective internal controls should provide timely and accurate information for management. The reconciliation of account balances is an integral internal control activity to determine that stated account balances are accurate and fairly reported. Management and accounting personnel should reconcile general ledger accounts to subsidiary ledgers and other supporting documents in a timely and effective manner. Condition: Neighborhoods, Inc. of Battle Creek (NIBC) did not reconcile most all asset and liability accounts on the general ledger for the year ended June 30, 2023. For cash, no reconciliations could be provided at June 30, 2023 which required us to manually create a reconciliation based on the July 2023 bank statements. Reconciliation of these accounts required auditor assistance and required extensive research and data gathering by NIBC to adjust account balances. Despite these efforts, a disclaimer of opinion was issued on the audited financial statements due to an inability to adequately reconcile grant revenue which has potential effects on grants receivable, refundable advances and net assets. Effect: Without performing adequate account reconciliations, information provided to management is inaccurate. Also, the probability that fraud or material errors will occur and go undetected increases. Additionally, the June 30, 2023 audit was not submitted within nine months after the fiscal year end as required by Uniform Guidance. Cause: Turnover in fiscal and management positions resulted in individuals not being aware of the nature of account balances and how to reconcile them. Additionally there were changes in systems which created further difficulties in locating historical information. Auditor's Recommendation: We recommend NIBC implement procedures to ensure accounts are reconciled timely and accurately. Questioned Costs: None View of Responsible Officials: Management agrees with the findings and has written a corrective action plan. Federal Program Information: Funding agency: Department of the Treasury, passed through the Battle Creek Community Foundation Title: Emergency Rental Assistance Program AL number: 21.023

2023-002 Internal Control Over Financial Reporting - Internal Control Evidence Criteria or Specific Requirement: Internal controls should be in place that provide reasonable assurance that transactions are reviewed and approved. This is critically important for grant funding to assure that expenditures incurred are allowable grant costs. Condition: During the audit, transactions tested for cash disbursements and journal entries lacked evidence of review and approval by others. Three of ten payroll transactions selected for testing did not have evidence of timesheet approval. Additionally, no documentation was available to substantiate reviews of other processes such as payroll registers and bank reconciliations. Although management represents these items were reviewed, the documentation we observed did not have evidence of review. Effect: A material weakness in internal control over financial reporting exists due to the lack of documentation of internal control processes. Cause: NIBC transitioned their accounting function from an outsourced model to utilizing inhouse staffing which resulted in the loss off approval documentation maintained by the outsourced accountant. In-house staffing did not implement process that provided for evidence of review. Auditor's Recommendation: We recommend NIBC implement procedures to ensure documentation of approvals is retained. Questioned Costs: None View of Responsible Officials: Management agrees with the findings and has written a corrective action plan. Federal Program Information: Funding agency: Department of the Treasury, passed through the Battle Creek Community Foundation Title: Emergency Rental Assistance Program AL number: 21.023

2023-003 Participant Eligibility Federal Program Information: Funding agency: Department of the Treasury, passed through the Battle Creek Community Foundation Title: Emergency Rental Assistance Program AL number: 21.023 Criteria or Specific Requirement: In order to support audits in accordance with Uniform Guidance, auditee's must maintain control over documentation to support program eligibility determinations. Condition: In our sample of 40 client files selected for eligibility testing, we were not able to obtain sufficient documentation to verify eligibility was properly determined for six of the files. NIBC represented that all client files were turned over to another nonprofit organization and are therefore no longer available. For context, NIBC provided the client files for audit before the files were turned over but did not include eligibility information at the time. Audit procedures did not occur to identify the missing information until after the files were turned over. Questioned Costs: None Effect: NIBC is not able to support eligibility determinations for client files that were turned over to another agency. As a result, the opinion on compliance is modified and a material weakness in internal control over compliance exists. Cause: The Emergency Rental Assistance Program had ended and NIBC no longer had a need to retain the files. Repeat: No Auditor's Recommendation: We recommend NIBC copy participant eligibility information for their own records to have available for audits or ensure the successor entity is able to provide eligibility information to NIBC auditors. View of Responsible Officials: Management agrees with the finding and has written a corrective action plan.