Criteria Management should design and implement internal control such that key duties within the accounting cycle, custody of assets, authorization of transactions, recording of transactions, and independent review are appropriately segregated to reduce the risk of error or fraud and to support the preparation of financial statements that are free from material misstatement. Conditions Found During the audit, we noted that a single employee currently holds primary responsibility for custody of assets, authorization of transactions, and recording within the Organization’s accounting function. Although the Organization made improvements during 2025 to segregate duties, certain incompatible responsibilities remained concentrated with one individual. Cause The Organization has limited staffing and resources within the accounting function, and formal compensating controls were not consistently implemented to mitigate the lack of full segregation (for example, documented independent review and approval of key transactions and reconciliations by an individual without recording/custody responsibilities). Effect The concentration of duties reduces the effectiveness of internal control and increases the risk that errors, unauthorized transactions, or other misstatements in the financial statements could occur and not be prevented or detected on a timely basis. This condition increases the risk of material misstatement due to error or fraud. Context During the audit, we noted that one employee had primary responsibility for key accounting functions, including custody of assets, authorization of transactions, and recording of transactions. While the Organization made improvements during 2025 to segregate certain duties, the concentration of these responsibilities remained present during the audit period. The finding relates to the design and operation of internal control over financial reporting and was identified through the audit procedures performed over the Organization’s accounting and financial reporting processes. Repeat Finding Yes Questioned Costs None noted Recommendation Management should continue strengthening segregation of duties by assigning custody, authorization, recording, and review responsibilities to separate individuals where practicable. Where staffing limitations prevent full segregation, management should implement and document effective compensating controls, such as: • Independent review and approval of disbursements and journal entries, including appropriate supporting documentation; • Documented supervisory review of bank reconciliations and key account reconciliations; • Approval thresholds and dual-authorization for higher-risk or non-routine transactions; and • Periodic independent review of vendor setup/changes, payroll changes, and other key master file maintenance, where applicable. Views of Responsible Officials Management recognizes the importance of adequate segregation of duties and has taken steps to address the issue. Going into 2026, the Organization has engaged an outside accounting firm to assist with segregating accounting responsibilities and implementing enhanced internal controls. Management expects these changes to reduce the concentration of duties and strengthen the overall control environment. Management anticipates implementing the corrective actions during fiscal year 2026 and will document the revised control procedures and oversight responsibilities.
Criteria Management is responsible for designing, implementing, and maintaining effective internal control over financial reporting to provide reasonable assurance that transactions are properly recorded, account balances are complete and accurate, reconciliations are prepared and reviewed timely, and financial statements are prepared in accordance with the applicable financial reporting framework. Conditions Found During the audit, we noted that certain key accounting functions, including account analysis and account reconciliations, were performed without appropriate supervisory oversight. We also noted that the Organization does not appear to have formalized month-end close procedures that clearly define the required close activities, timing, preparer responsibilities, reviewer responsibilities, and documentation standards. Audit procedures further identified that intracompany/intercompany account balances did not consistently net to zero. This condition indicates that inter-entity transactions and related balances were not being regularly reviewed, reconciled, and resolved as part of the financial close process. In addition, we observed that the Organization does not have a formal capitalization policy in place, or that the existing capitalization policy is not being consistently adhered to. As a result, fixed asset capitalization and tracking may not be applied consistently across reporting periods. Management has informed us that the Organization has engaged a third-party accounting firm to assist with the financial close process and to assist with fixed asset capitalization and tracking. Cause The conditions noted appear to be the result of an insufficiently formalized financial close and review process, including the absence of documented month-end close procedures and clearly defined supervisory review controls. In addition, the Organization’s capitalization practices have not been fully documented or consistently monitored to ensure uniform application. The Organization has taken steps to supplement its accounting resources by engaging a third-party accounting firm; however, formal policies, procedures, review controls, and monitoring activities should be established and implemented to ensure the improvements are sustained and consistently applied. Effect The absence of appropriate supervisory oversight and formal month-end close procedures increases the risk that account analyses, reconciliations, intercompany balances, and fixed asset activity may not be complete, accurate, timely, or properly supported. Context During the audit, certain areas of the financial reporting process had not been fully reconciled and closed as of year-end. As a result, additional audit procedures were necessary to identify and evaluate the appropriate year-end balances, which resulted in adjusting journal entries being proposed and recorded. The adjustments primarily related to completing year-end reconciliations and ensuring that financial activity was appropriately reflected in the financial statements. Repeat Finding Yes Questioned Costs None noted Recommendation We recommend that management strengthen internal control over financial reporting by implementing a formalized financial close and review process. • Develop and implement formal month-end close procedures • Enhance supervisory review controls • Implement regular intercompany reconciliation procedures • Adopt and consistently apply a formal capitalization policy Views of Responsible Officials Management acknowledges the need to further strengthen controls over the financial close process, account reconciliations, intercompany activity, and fixed asset capitalization and tracking. Management has engaged a third-party accounting firm to assist with the financial close process and to support fixed asset capitalization and tracking. Management believes this engagement will improve the timeliness, accuracy, and consistency of the Organization’s financial reporting processes. Management will also work to formalize month-end close procedures, enhance supervisory review of key reconciliations and analyses, and develop or update written capitalization policies to ensure consistent application.