Audit 411413

Material Audit Adjustments Condition: The audit firm proposed, and the Organization approved corrections of certain misstatements. Criteria The Organization should have controls in place to prevent and detect a material misstatement in the financial statements in a timely manner. Management is responsible for the accuracy and completeness of all financial records and related information. Their responsibility includes adjusting the financial statements to correct material misstatements. Cause: The Organization has not established controls to ensure that all accounts are adjusted to their appropriate year-end balances in accordance with GAAP. Effect: The design of internal control over completeness and accuracy of financial records could adversely affect the Organization’s ability to detect misstatements in amounts that would be material in relation to the financial statements in a timely period by employees in the normal course of performing their assigned functions. Recommendation: The Organization should continue to evaluate its internal controls processes to determine if additional internal control procedures should be implemented to ensure that accounts are adjusted to their appropriate year end balances in accordance with GAAP.

Preparation of financial statements and related footnotes Condition: The Organization does not have an internal control system designed to provide for the preparation of the financial statements being audited. Organization personnel do prepare periodic financial statements and other financial information for internal use that meets the needs of management and the Board. However, the Organization does not have the internal resources to prepare full-disclosure financial statements required by GAAP for external reporting. As auditors, we were requested to draft the financial statements and accompanying footnotes. Criteria: Internal controls over financial reporting include those related to the actual preparation and review of the audited financial statements. In order to prepare a complete set of financial statements in conformity with GAAP, the preparer must have the necessary expertise. Cause: The Organization does not have the resources to compile their own financial statements. Effect: This control deficiency could result in a misstatement to the financial statements that would not be prevented or detected. Recommendation: This control deficiency is not unusual in a small organization. However, it is the responsibility of management and the Board to decide whether to accept the degree of risk associated with this condition based on the cost of correction and other considerations. Response: The Organization is aware of the control deficiency, which is an unavoidable consequence of the financial restrictions of small organizations. Management recognizes that it is not economically feasible to fully correct this finding. However, we are aware of the deficiency and will rely on oversight by management and the Board to monitor the deficiency. The Organization will also explore options and cost-effective feasibility of training existing personnel to adequately prepare the annual financial reports.

Segregation of Duties Condition: The Organization has a limited number of office personnel and accordingly, does not have adequate internal controls in certain areas because of a lack of segregation of duties. An effective internal control structure provides an adequate segregation of duties so that no one individual handles a transaction from its inception to its completion. Criteria: Internal controls should be in place that provides reasonable assurance that proper segregation of duties is achieved. Cause: The Organization has a limited number of office personnel and inadequate internal controls. Effect: The failure to properly segregate duties increase the risk that misstatements may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Recommendation: While it is recognized that the Organization’s office staff may not be large enough to permit an adequate segregation of duties in all respects for an effective internal control structure, it is important that the Organization be aware of this situation. Response: The Board has already taken measures to attempt to comply even though the Organization is relatively small and the number of clerical/bookkeeping staff they can employ is limited. The Board has addressed this circumstance by active participation in the Organization’s affairs. This includes approval of disbursements, regular review of financial reports, regular review of bank reconciliations and budget comparisons.