Condition Found: During our search for unrecorded liabilities, we noted that the cost of numerous services performed during the year ended June 30, 2023, were not recorded in accounts payable. In addition, there was a credit card overpayment that was improperly netted with expenditures made during the period. Further, prior year accruals were not properly reversed. Criteria: Internal controls around the cutoff of payables are critical for the accuracy of the accrual basis of accounting. Under the accrual basis of accounting, expenses are recorded when then they occur or transferred to the buyer, rather than at the time when expenses are paid. Cause: Management overlooked the service periods associated with certain invoices at year-end. Possible Asserted Effect: Due to inappropriate cutoff procedures established at year-end, the School did not record accruals for utilities services totaling $11,621. In addition, the School did not book healthcare services in the correct period and the accruals for payable was decreased by $12,987. Overall, accounts payable was adjusted by $93,504 on a net basis. Future years will likely experience similar errors if proper internal controls are not designed and implemented. Repeat Finding: See Finding 2022-001 for a similar finding in the current year. Recommendation: We recommend that the School prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specify the positions/staff responsible for performing such procedures and controls. Management Response: Contributing to the discrepancies with these accrual entries is the timing of the audit. Preliminary audit field work began before the end of the fiscal year and official on-campus fieldwork was completed on August 4 and we had not yet closed our July financial statements. The School made the required adjustments to their accounting records. The School will prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specify the positions/staff responsible for performing such procedures and controls. This will be completed in time to improve the cutoff procedures for the year ending June 30, 2024 (FY 2024).
Condition Found: During our testing, we noted that a true bank reconciliation was not prepared for certain bank accounts. Reconciliations were prepared using the bank balance and the check register balance. The School rolled forward each month’s ending check register balance to the beginning balance on the following month’s bank reconciliation and netted monthly bank activity and outstanding transactions from the check register to arrive at the ending balance. Criteria: The School should reconcile cash accounts accurately and on a timely basis using the bank balance and the balance per the general ledger instead of the check register balance. Reconciliations should be reviewed by a member of management who is knowledgeable in such matters. Cause: The accounting software the School uses did not have a bank reconciliation module. Therefore, management resorted using an alternative solution. Management used the check register balance, which is a transaction detail report, to reconcile to the bank statement without observing and reviewing the ending cash balance in the general ledger. Possible Asserted Effect: This resulted in cash being understated by $98,800 at year-end. In addition, there could potentially be future material adjustments to cash due to the improper method used to reconcile cash. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that all bank accounts be reconciled monthly and in a timely manner. The School should purse adding the bank reconciliation module to their accounting software. In addition, reconciliations should be prepared using the bank balance and the balance per the general ledger instead of the check register balance. Lastly, we suggest that a member of management review the bank reconciliations for any unusual items, investigate and fully resolve any such items, and document his or her approval. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during FY 2024.
Condition Found: During our testing, we noted that the School was not reconciling the accounts receivable subsidiary ledger to the general ledger throughout year. Criteria: The accounts receivable subsidiary ledger should be reconciled to the general ledger on a monthly basis. This practice serves as a check on the accuracy of the record-keeping process and the validity of account balances. Any differences should be investigated and resolved as soon as possible. Lastly, the reconciliation should be reviewed by a member of management who is knowledgeable in such matters. Cause: During the year, the School had significant issues with their student management system capturing all transactions associated with student accounts. In addition, management did not perform a proper reconciliation of the ending account balance within the general ledger. Possible Asserted Effect: This resulted in adjusting the receivable and corresponding tuition revenue of $58,573 as of June 30, 2023. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We strongly suggest that procedures be established to ensure that accounts receivable balances are reconciled between the general ledger and the accounts receivable subsidiary system in a consistent and timely manner to prevent further discrepancies. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during fiscal year 2024.
Condition Found: During the year, we noted that journal entries were being recorded within the general ledger without a consistent review process. Without complete separation of duties, particularly between the approval and recording of adjusting journal entries, transactions may be inaccurately recorded in the general ledger through a journal entry and not be detected. Criteria: Nonstandard journal entries should be approved on their own merit monthly, if not semi-annually, by an individual one level above the person making the journal entries to ensure their appropriateness. Cause: In the past, management has noted that its review of the financial statements is a sufficient review of the effect of journal entries posted during the year. However, this alone does not appear to be enough to prevent, detect, and correct misstatements in the financial statements, material or otherwise. Possible Asserted Effect: In the current year, there was approximately $243,000 in journal entry adjustments due to inappropriately reversing the prior year’s adjusting journal entries prepared by the auditors. There was approximately $72,000 in journal entry adjustments due to duplicate entries made during the year. In addition, there could be other potential misstatements in the financial statements in current and future years that may not be detected. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that management develop a policy that all nonstandard journal entries be numbered, reviewed, and approved by the Director of Finance or another appropriate individual other than the individual responsible for recording the journal entries in the general ledger. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during fiscal year 2024.
Federal Agency: U.S. Department of Education; Office of Federal Student Aid Pass through Entity: Not applicable Program Name: Federal Direct Student Loan Program ALN and Program Expenditures: 84.268 ($154,808) Award Number: P268K233976 Federal Award Year: July 1, 2022 to June 30, 2023 Questioned Costs: None Condition Found: A Federal Direct Loan exit interview was not completed by nor were instructions sent to the student on how to complete an exit interview when the student dropped to a less than half-time enrollment status. This omission occurred for one of the twenty-five students in our sample. Criteria: Federal Direct Loan recipients must receive exit interview counseling when the student graduates, leaves the institution, or drops below a half-time enrollment status. If in-person counseling is not completed, the school may mail written counseling materials to the student’s last known address. Cause: The financial aid office was unaware of the requirement to send an exit interview to a student who drops below half-time enrollment status. Possible Asserted Effect: The student was not aware of his or her responsibilities related to the Federal Direct Loan program, including repayment options and when repayment on the loan begins. Repeat Finding: There was not a similar finding in the prior year. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: Federal Direct Loan exit interview information should be sent to the student in question. Procedures should be improved to ensure that Federal Direct exit interviews are completed or information is sent to a student when a student drops below half-time attendance. Management Response: Federal Direct Loan exit interview information was sent to the student in question on October 27, 2023. Procedures will be improved to ensure Federal Direct Loan exit interviews are completed or information is sent to students when they drop below a half-time enrollment status at the School.
Condition Found: During our search for unrecorded liabilities, we noted that the cost of numerous services performed during the year ended June 30, 2023, were not recorded in accounts payable. In addition, there was a credit card overpayment that was improperly netted with expenditures made during the period. Further, prior year accruals were not properly reversed. Criteria: Internal controls around the cutoff of payables are critical for the accuracy of the accrual basis of accounting. Under the accrual basis of accounting, expenses are recorded when then they occur or transferred to the buyer, rather than at the time when expenses are paid. Cause: Management overlooked the service periods associated with certain invoices at year-end. Possible Asserted Effect: Due to inappropriate cutoff procedures established at year-end, the School did not record accruals for utilities services totaling $11,621. In addition, the School did not book healthcare services in the correct period and the accruals for payable was decreased by $12,987. Overall, accounts payable was adjusted by $93,504 on a net basis. Future years will likely experience similar errors if proper internal controls are not designed and implemented. Repeat Finding: See Finding 2022-001 for a similar finding in the current year. Recommendation: We recommend that the School prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specify the positions/staff responsible for performing such procedures and controls. Management Response: Contributing to the discrepancies with these accrual entries is the timing of the audit. Preliminary audit field work began before the end of the fiscal year and official on-campus fieldwork was completed on August 4 and we had not yet closed our July financial statements. The School made the required adjustments to their accounting records. The School will prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specify the positions/staff responsible for performing such procedures and controls. This will be completed in time to improve the cutoff procedures for the year ending June 30, 2024 (FY 2024).
Condition Found: During our testing, we noted that a true bank reconciliation was not prepared for certain bank accounts. Reconciliations were prepared using the bank balance and the check register balance. The School rolled forward each month’s ending check register balance to the beginning balance on the following month’s bank reconciliation and netted monthly bank activity and outstanding transactions from the check register to arrive at the ending balance. Criteria: The School should reconcile cash accounts accurately and on a timely basis using the bank balance and the balance per the general ledger instead of the check register balance. Reconciliations should be reviewed by a member of management who is knowledgeable in such matters. Cause: The accounting software the School uses did not have a bank reconciliation module. Therefore, management resorted using an alternative solution. Management used the check register balance, which is a transaction detail report, to reconcile to the bank statement without observing and reviewing the ending cash balance in the general ledger. Possible Asserted Effect: This resulted in cash being understated by $98,800 at year-end. In addition, there could potentially be future material adjustments to cash due to the improper method used to reconcile cash. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that all bank accounts be reconciled monthly and in a timely manner. The School should purse adding the bank reconciliation module to their accounting software. In addition, reconciliations should be prepared using the bank balance and the balance per the general ledger instead of the check register balance. Lastly, we suggest that a member of management review the bank reconciliations for any unusual items, investigate and fully resolve any such items, and document his or her approval. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during FY 2024.
Condition Found: During our testing, we noted that the School was not reconciling the accounts receivable subsidiary ledger to the general ledger throughout year. Criteria: The accounts receivable subsidiary ledger should be reconciled to the general ledger on a monthly basis. This practice serves as a check on the accuracy of the record-keeping process and the validity of account balances. Any differences should be investigated and resolved as soon as possible. Lastly, the reconciliation should be reviewed by a member of management who is knowledgeable in such matters. Cause: During the year, the School had significant issues with their student management system capturing all transactions associated with student accounts. In addition, management did not perform a proper reconciliation of the ending account balance within the general ledger. Possible Asserted Effect: This resulted in adjusting the receivable and corresponding tuition revenue of $58,573 as of June 30, 2023. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We strongly suggest that procedures be established to ensure that accounts receivable balances are reconciled between the general ledger and the accounts receivable subsidiary system in a consistent and timely manner to prevent further discrepancies. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during fiscal year 2024.
Condition Found: During the year, we noted that journal entries were being recorded within the general ledger without a consistent review process. Without complete separation of duties, particularly between the approval and recording of adjusting journal entries, transactions may be inaccurately recorded in the general ledger through a journal entry and not be detected. Criteria: Nonstandard journal entries should be approved on their own merit monthly, if not semi-annually, by an individual one level above the person making the journal entries to ensure their appropriateness. Cause: In the past, management has noted that its review of the financial statements is a sufficient review of the effect of journal entries posted during the year. However, this alone does not appear to be enough to prevent, detect, and correct misstatements in the financial statements, material or otherwise. Possible Asserted Effect: In the current year, there was approximately $243,000 in journal entry adjustments due to inappropriately reversing the prior year’s adjusting journal entries prepared by the auditors. There was approximately $72,000 in journal entry adjustments due to duplicate entries made during the year. In addition, there could be other potential misstatements in the financial statements in current and future years that may not be detected. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that management develop a policy that all nonstandard journal entries be numbered, reviewed, and approved by the Director of Finance or another appropriate individual other than the individual responsible for recording the journal entries in the general ledger. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during fiscal year 2024.
Federal Agency: U.S. Department of Education; Office of Federal Student Aid Pass through Entity: Not applicable Program Name: Federal Pell Grant and Federal Work Study ALN and Program Expenditures: 84.063 ($557,058) and 84.033 ($ 12,366) Award Number: P268K223976 and P033A226456 Federal Award Year: July 1, 2022 to June 30, 2023 Questioned Costs: $542 (ALN 84.033) Condition Found: There was an overaward of $542 for one of the twenty-five students in our sample. Criteria: The total amount of aid a student receives cannot be greater than his or her cost of attendance. Cause: The School made adjustments to its new tuition scholarship offered last fall which prohibited the scholarship funds from being reduced. Possible Asserted Effect: The student in question received $542 of Federal Work Study funds that the student was ineligible to receive. Repeat Finding: There was not a similar finding in the prior year. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: $542 of Federal Work Study funds should be returned and replaced with payroll funds from the School’s general budget. Policies and procedures should be updated to ensure that institutional and federal aid do not exceed a student’s need. Management Response: Management agrees with the auditors’ finding. Federal Pell Grant funds are entitlement funds and cannot be returned. The student in question also worked the hours in which Federal Work Study funds were awarded. Going forward, the School has made changes to the provisions of the institutional scholarship to avoid overawards. All state and federal aid and endowed scholarships are applied first and then the scholarship covers the remaining tuition cost.
Federal Agency: U.S. Department of Education; Office of Federal Student Aid Pass through Entity: Not applicable Program Name: Federal Pell Grant and Federal Supplemental Educational Opportunity Grant ALN and Program Expenditures: 84.063 ($557,058) and 84.007 ($ 9,616) Award Number: P063P223976 and P007A226456 Federal Award Year: July 1, 2022 to June 30, 2023 Questioned Costs: None Condition Found: For two of the twenty-five students in our sample, the School held Title IV credit balances for longer than fourteen days without written authorization. Criteria: An institution may not hold a credit balance, which is caused by federal student financial aid funds, on a student’s account for more than fourteen days without written authorization from the student. Cause: With the changing of the schedule during the holiday/final weeks on campus, the need for the return of funds was missed. Possible Asserted Effect: The Title IV credit balance was not returned timely to the student. Repeat Finding: See Finding 2022-006 for a similar finding in the prior year. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: The credit balances were returned to the students in question before the end of the academic year. Communication should be improved between the offices involved in the disbursement process to ensure that credit balances are refunded timely. Management Response: The credit balances were returned to the students in question before the end of the academic year. The financial aid office will follow-up with the cashier to ensure that, in the absence of a signed authorization to hold credit balances, the credit balance refunds are processed timely.
Federal Agency: U.S. Department of Education; Office of Federal Student Aid Pass through Entity: Not applicable Program Name: Federal Pell Grant Program ALN and Program Expenditure: 84.063 ($557,058) Award Number: P063P223976 Federal Award Year: July 1, 2022 to June 30, 2023 Questioned Costs:$2,585.50 Condition Found: For one of the twenty-five students in our sample, Federal Pell Grant funds were disbursed when the student did not begin attendance. Cause: The student was enrolled in on-line courses and the financial aid office did not realize the student never began attending the courses. Possible Asserted Effect: $2,585.50 needs to be returned to the Department of Education. Communication between offices should be improved to ensure that the financial aid office is informed when students make changes to their enrollment status. Repeat Finding: There was not a similar finding in the prior year. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: The School should return $2,585.50 of Federal Pell Grant funds to the Department of Education. Communication between the offices should be improved so that the financial aid office is promptly made aware of changes in a student’s enrollment status. The financial aid office should verify that the student completed an academic activity in an on-line class before disbursing aid. Management Response: The School returned the $2,585.50 in question to the Department of Education on September 6, 2023. Communication will be improved between the various offices on campus. Policies and procedures are being reviewed and updated, as needed, for the students participating in on-line courses.
Condition Found: During our search for unrecorded liabilities, we noted that the cost of numerous services performed during the year ended June 30, 2023, were not recorded in accounts payable. In addition, there was a credit card overpayment that was improperly netted with expenditures made during the period. Further, prior year accruals were not properly reversed. Criteria: Internal controls around the cutoff of payables are critical for the accuracy of the accrual basis of accounting. Under the accrual basis of accounting, expenses are recorded when then they occur or transferred to the buyer, rather than at the time when expenses are paid. Cause: Management overlooked the service periods associated with certain invoices at year-end. Possible Asserted Effect: Due to inappropriate cutoff procedures established at year-end, the School did not record accruals for utilities services totaling $11,621. In addition, the School did not book healthcare services in the correct period and the accruals for payable was decreased by $12,987. Overall, accounts payable was adjusted by $93,504 on a net basis. Future years will likely experience similar errors if proper internal controls are not designed and implemented. Repeat Finding: See Finding 2022-001 for a similar finding in the current year. Recommendation: We recommend that the School prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specify the positions/staff responsible for performing such procedures and controls. Management Response: Contributing to the discrepancies with these accrual entries is the timing of the audit. Preliminary audit field work began before the end of the fiscal year and official on-campus fieldwork was completed on August 4 and we had not yet closed our July financial statements. The School made the required adjustments to their accounting records. The School will prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specify the positions/staff responsible for performing such procedures and controls. This will be completed in time to improve the cutoff procedures for the year ending June 30, 2024 (FY 2024).
Condition Found: During our testing, we noted that a true bank reconciliation was not prepared for certain bank accounts. Reconciliations were prepared using the bank balance and the check register balance. The School rolled forward each month’s ending check register balance to the beginning balance on the following month’s bank reconciliation and netted monthly bank activity and outstanding transactions from the check register to arrive at the ending balance. Criteria: The School should reconcile cash accounts accurately and on a timely basis using the bank balance and the balance per the general ledger instead of the check register balance. Reconciliations should be reviewed by a member of management who is knowledgeable in such matters. Cause: The accounting software the School uses did not have a bank reconciliation module. Therefore, management resorted using an alternative solution. Management used the check register balance, which is a transaction detail report, to reconcile to the bank statement without observing and reviewing the ending cash balance in the general ledger. Possible Asserted Effect: This resulted in cash being understated by $98,800 at year-end. In addition, there could potentially be future material adjustments to cash due to the improper method used to reconcile cash. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that all bank accounts be reconciled monthly and in a timely manner. The School should purse adding the bank reconciliation module to their accounting software. In addition, reconciliations should be prepared using the bank balance and the balance per the general ledger instead of the check register balance. Lastly, we suggest that a member of management review the bank reconciliations for any unusual items, investigate and fully resolve any such items, and document his or her approval. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during FY 2024.
Condition Found: During our testing, we noted that the School was not reconciling the accounts receivable subsidiary ledger to the general ledger throughout year. Criteria: The accounts receivable subsidiary ledger should be reconciled to the general ledger on a monthly basis. This practice serves as a check on the accuracy of the record-keeping process and the validity of account balances. Any differences should be investigated and resolved as soon as possible. Lastly, the reconciliation should be reviewed by a member of management who is knowledgeable in such matters. Cause: During the year, the School had significant issues with their student management system capturing all transactions associated with student accounts. In addition, management did not perform a proper reconciliation of the ending account balance within the general ledger. Possible Asserted Effect: This resulted in adjusting the receivable and corresponding tuition revenue of $58,573 as of June 30, 2023. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We strongly suggest that procedures be established to ensure that accounts receivable balances are reconciled between the general ledger and the accounts receivable subsidiary system in a consistent and timely manner to prevent further discrepancies. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during fiscal year 2024.
Condition Found: During the year, we noted that journal entries were being recorded within the general ledger without a consistent review process. Without complete separation of duties, particularly between the approval and recording of adjusting journal entries, transactions may be inaccurately recorded in the general ledger through a journal entry and not be detected. Criteria: Nonstandard journal entries should be approved on their own merit monthly, if not semi-annually, by an individual one level above the person making the journal entries to ensure their appropriateness. Cause: In the past, management has noted that its review of the financial statements is a sufficient review of the effect of journal entries posted during the year. However, this alone does not appear to be enough to prevent, detect, and correct misstatements in the financial statements, material or otherwise. Possible Asserted Effect: In the current year, there was approximately $243,000 in journal entry adjustments due to inappropriately reversing the prior year’s adjusting journal entries prepared by the auditors. There was approximately $72,000 in journal entry adjustments due to duplicate entries made during the year. In addition, there could be other potential misstatements in the financial statements in current and future years that may not be detected. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that management develop a policy that all nonstandard journal entries be numbered, reviewed, and approved by the Director of Finance or another appropriate individual other than the individual responsible for recording the journal entries in the general ledger. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during fiscal year 2024.
Federal Agency: U.S. Department of Education; Office of Federal Student Aid Pass through Entity: Not applicable Program Name: Federal Pell Grant and Federal Supplemental Educational Opportunity Grant ALN and Program Expenditures: 84.063 ($557,058) and 84.007 ($ 9,616) Award Number: P063P223976 and P007A226456 Federal Award Year: July 1, 2022 to June 30, 2023 Questioned Costs: None Condition Found: For two of the twenty-five students in our sample, the School held Title IV credit balances for longer than fourteen days without written authorization. Criteria: An institution may not hold a credit balance, which is caused by federal student financial aid funds, on a student’s account for more than fourteen days without written authorization from the student. Cause: With the changing of the schedule during the holiday/final weeks on campus, the need for the return of funds was missed. Possible Asserted Effect: The Title IV credit balance was not returned timely to the student. Repeat Finding: See Finding 2022-006 for a similar finding in the prior year. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: The credit balances were returned to the students in question before the end of the academic year. Communication should be improved between the offices involved in the disbursement process to ensure that credit balances are refunded timely. Management Response: The credit balances were returned to the students in question before the end of the academic year. The financial aid office will follow-up with the cashier to ensure that, in the absence of a signed authorization to hold credit balances, the credit balance refunds are processed timely.
Condition Found: During our search for unrecorded liabilities, we noted that the cost of numerous services performed during the year ended June 30, 2023, were not recorded in accounts payable. In addition, there was a credit card overpayment that was improperly netted with expenditures made during the period. Further, prior year accruals were not properly reversed. Criteria: Internal controls around the cutoff of payables are critical for the accuracy of the accrual basis of accounting. Under the accrual basis of accounting, expenses are recorded when then they occur or transferred to the buyer, rather than at the time when expenses are paid. Cause: Management overlooked the service periods associated with certain invoices at year-end. Possible Asserted Effect: Due to inappropriate cutoff procedures established at year-end, the School did not record accruals for utilities services totaling $11,621. In addition, the School did not book healthcare services in the correct period and the accruals for payable was decreased by $12,987. Overall, accounts payable was adjusted by $93,504 on a net basis. Future years will likely experience similar errors if proper internal controls are not designed and implemented. Repeat Finding: See Finding 2022-001 for a similar finding in the current year. Recommendation: We recommend that the School prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specify the positions/staff responsible for performing such procedures and controls. Management Response: Contributing to the discrepancies with these accrual entries is the timing of the audit. Preliminary audit field work began before the end of the fiscal year and official on-campus fieldwork was completed on August 4 and we had not yet closed our July financial statements. The School made the required adjustments to their accounting records. The School will prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specify the positions/staff responsible for performing such procedures and controls. This will be completed in time to improve the cutoff procedures for the year ending June 30, 2024 (FY 2024).
Condition Found: During our testing, we noted that a true bank reconciliation was not prepared for certain bank accounts. Reconciliations were prepared using the bank balance and the check register balance. The School rolled forward each month’s ending check register balance to the beginning balance on the following month’s bank reconciliation and netted monthly bank activity and outstanding transactions from the check register to arrive at the ending balance. Criteria: The School should reconcile cash accounts accurately and on a timely basis using the bank balance and the balance per the general ledger instead of the check register balance. Reconciliations should be reviewed by a member of management who is knowledgeable in such matters. Cause: The accounting software the School uses did not have a bank reconciliation module. Therefore, management resorted using an alternative solution. Management used the check register balance, which is a transaction detail report, to reconcile to the bank statement without observing and reviewing the ending cash balance in the general ledger. Possible Asserted Effect: This resulted in cash being understated by $98,800 at year-end. In addition, there could potentially be future material adjustments to cash due to the improper method used to reconcile cash. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that all bank accounts be reconciled monthly and in a timely manner. The School should purse adding the bank reconciliation module to their accounting software. In addition, reconciliations should be prepared using the bank balance and the balance per the general ledger instead of the check register balance. Lastly, we suggest that a member of management review the bank reconciliations for any unusual items, investigate and fully resolve any such items, and document his or her approval. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during FY 2024.
Condition Found: During our testing, we noted that the School was not reconciling the accounts receivable subsidiary ledger to the general ledger throughout year. Criteria: The accounts receivable subsidiary ledger should be reconciled to the general ledger on a monthly basis. This practice serves as a check on the accuracy of the record-keeping process and the validity of account balances. Any differences should be investigated and resolved as soon as possible. Lastly, the reconciliation should be reviewed by a member of management who is knowledgeable in such matters. Cause: During the year, the School had significant issues with their student management system capturing all transactions associated with student accounts. In addition, management did not perform a proper reconciliation of the ending account balance within the general ledger. Possible Asserted Effect: This resulted in adjusting the receivable and corresponding tuition revenue of $58,573 as of June 30, 2023. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We strongly suggest that procedures be established to ensure that accounts receivable balances are reconciled between the general ledger and the accounts receivable subsidiary system in a consistent and timely manner to prevent further discrepancies. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during fiscal year 2024.
Condition Found: During the year, we noted that journal entries were being recorded within the general ledger without a consistent review process. Without complete separation of duties, particularly between the approval and recording of adjusting journal entries, transactions may be inaccurately recorded in the general ledger through a journal entry and not be detected. Criteria: Nonstandard journal entries should be approved on their own merit monthly, if not semi-annually, by an individual one level above the person making the journal entries to ensure their appropriateness. Cause: In the past, management has noted that its review of the financial statements is a sufficient review of the effect of journal entries posted during the year. However, this alone does not appear to be enough to prevent, detect, and correct misstatements in the financial statements, material or otherwise. Possible Asserted Effect: In the current year, there was approximately $243,000 in journal entry adjustments due to inappropriately reversing the prior year’s adjusting journal entries prepared by the auditors. There was approximately $72,000 in journal entry adjustments due to duplicate entries made during the year. In addition, there could be other potential misstatements in the financial statements in current and future years that may not be detected. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that management develop a policy that all nonstandard journal entries be numbered, reviewed, and approved by the Director of Finance or another appropriate individual other than the individual responsible for recording the journal entries in the general ledger. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during fiscal year 2024.
Federal Agency: U.S. Department of Education; Office of Federal Student Aid Pass through Entity: Not applicable Program Name: Federal Pell Grant and Federal Work Study ALN and Program Expenditures: 84.063 ($557,058) and 84.033 ($ 12,366) Award Number: P268K223976 and P033A226456 Federal Award Year: July 1, 2022 to June 30, 2023 Questioned Costs: $542 (ALN 84.033) Condition Found: There was an overaward of $542 for one of the twenty-five students in our sample. Criteria: The total amount of aid a student receives cannot be greater than his or her cost of attendance. Cause: The School made adjustments to its new tuition scholarship offered last fall which prohibited the scholarship funds from being reduced. Possible Asserted Effect: The student in question received $542 of Federal Work Study funds that the student was ineligible to receive. Repeat Finding: There was not a similar finding in the prior year. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: $542 of Federal Work Study funds should be returned and replaced with payroll funds from the School’s general budget. Policies and procedures should be updated to ensure that institutional and federal aid do not exceed a student’s need. Management Response: Management agrees with the auditors’ finding. Federal Pell Grant funds are entitlement funds and cannot be returned. The student in question also worked the hours in which Federal Work Study funds were awarded. Going forward, the School has made changes to the provisions of the institutional scholarship to avoid overawards. All state and federal aid and endowed scholarships are applied first and then the scholarship covers the remaining tuition cost.
Condition Found: During our search for unrecorded liabilities, we noted that the cost of numerous services performed during the year ended June 30, 2023, were not recorded in accounts payable. In addition, there was a credit card overpayment that was improperly netted with expenditures made during the period. Further, prior year accruals were not properly reversed. Criteria: Internal controls around the cutoff of payables are critical for the accuracy of the accrual basis of accounting. Under the accrual basis of accounting, expenses are recorded when then they occur or transferred to the buyer, rather than at the time when expenses are paid. Cause: Management overlooked the service periods associated with certain invoices at year-end. Possible Asserted Effect: Due to inappropriate cutoff procedures established at year-end, the School did not record accruals for utilities services totaling $11,621. In addition, the School did not book healthcare services in the correct period and the accruals for payable was decreased by $12,987. Overall, accounts payable was adjusted by $93,504 on a net basis. Future years will likely experience similar errors if proper internal controls are not designed and implemented. Repeat Finding: See Finding 2022-001 for a similar finding in the current year. Recommendation: We recommend that the School prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specify the positions/staff responsible for performing such procedures and controls. Management Response: Contributing to the discrepancies with these accrual entries is the timing of the audit. Preliminary audit field work began before the end of the fiscal year and official on-campus fieldwork was completed on August 4 and we had not yet closed our July financial statements. The School made the required adjustments to their accounting records. The School will prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specify the positions/staff responsible for performing such procedures and controls. This will be completed in time to improve the cutoff procedures for the year ending June 30, 2024 (FY 2024).
Condition Found: During our testing, we noted that a true bank reconciliation was not prepared for certain bank accounts. Reconciliations were prepared using the bank balance and the check register balance. The School rolled forward each month’s ending check register balance to the beginning balance on the following month’s bank reconciliation and netted monthly bank activity and outstanding transactions from the check register to arrive at the ending balance. Criteria: The School should reconcile cash accounts accurately and on a timely basis using the bank balance and the balance per the general ledger instead of the check register balance. Reconciliations should be reviewed by a member of management who is knowledgeable in such matters. Cause: The accounting software the School uses did not have a bank reconciliation module. Therefore, management resorted using an alternative solution. Management used the check register balance, which is a transaction detail report, to reconcile to the bank statement without observing and reviewing the ending cash balance in the general ledger. Possible Asserted Effect: This resulted in cash being understated by $98,800 at year-end. In addition, there could potentially be future material adjustments to cash due to the improper method used to reconcile cash. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that all bank accounts be reconciled monthly and in a timely manner. The School should purse adding the bank reconciliation module to their accounting software. In addition, reconciliations should be prepared using the bank balance and the balance per the general ledger instead of the check register balance. Lastly, we suggest that a member of management review the bank reconciliations for any unusual items, investigate and fully resolve any such items, and document his or her approval. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during FY 2024.
Condition Found: During our testing, we noted that the School was not reconciling the accounts receivable subsidiary ledger to the general ledger throughout year. Criteria: The accounts receivable subsidiary ledger should be reconciled to the general ledger on a monthly basis. This practice serves as a check on the accuracy of the record-keeping process and the validity of account balances. Any differences should be investigated and resolved as soon as possible. Lastly, the reconciliation should be reviewed by a member of management who is knowledgeable in such matters. Cause: During the year, the School had significant issues with their student management system capturing all transactions associated with student accounts. In addition, management did not perform a proper reconciliation of the ending account balance within the general ledger. Possible Asserted Effect: This resulted in adjusting the receivable and corresponding tuition revenue of $58,573 as of June 30, 2023. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We strongly suggest that procedures be established to ensure that accounts receivable balances are reconciled between the general ledger and the accounts receivable subsidiary system in a consistent and timely manner to prevent further discrepancies. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during fiscal year 2024.
Condition Found: During the year, we noted that journal entries were being recorded within the general ledger without a consistent review process. Without complete separation of duties, particularly between the approval and recording of adjusting journal entries, transactions may be inaccurately recorded in the general ledger through a journal entry and not be detected. Criteria: Nonstandard journal entries should be approved on their own merit monthly, if not semi-annually, by an individual one level above the person making the journal entries to ensure their appropriateness. Cause: In the past, management has noted that its review of the financial statements is a sufficient review of the effect of journal entries posted during the year. However, this alone does not appear to be enough to prevent, detect, and correct misstatements in the financial statements, material or otherwise. Possible Asserted Effect: In the current year, there was approximately $243,000 in journal entry adjustments due to inappropriately reversing the prior year’s adjusting journal entries prepared by the auditors. There was approximately $72,000 in journal entry adjustments due to duplicate entries made during the year. In addition, there could be other potential misstatements in the financial statements in current and future years that may not be detected. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that management develop a policy that all nonstandard journal entries be numbered, reviewed, and approved by the Director of Finance or another appropriate individual other than the individual responsible for recording the journal entries in the general ledger. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during fiscal year 2024.
Federal Agency: U.S. Department of Education; Office of Federal Student Aid Pass through Entity: Not applicable Program Name: Federal Direct Student Loan Program ALN and Program Expenditures: 84.268 ($154,808) Award Number: P268K233976 Federal Award Year: July 1, 2022 to June 30, 2023 Questioned Costs: None Condition Found: A Federal Direct Loan exit interview was not completed by nor were instructions sent to the student on how to complete an exit interview when the student dropped to a less than half-time enrollment status. This omission occurred for one of the twenty-five students in our sample. Criteria: Federal Direct Loan recipients must receive exit interview counseling when the student graduates, leaves the institution, or drops below a half-time enrollment status. If in-person counseling is not completed, the school may mail written counseling materials to the student’s last known address. Cause: The financial aid office was unaware of the requirement to send an exit interview to a student who drops below half-time enrollment status. Possible Asserted Effect: The student was not aware of his or her responsibilities related to the Federal Direct Loan program, including repayment options and when repayment on the loan begins. Repeat Finding: There was not a similar finding in the prior year. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: Federal Direct Loan exit interview information should be sent to the student in question. Procedures should be improved to ensure that Federal Direct exit interviews are completed or information is sent to a student when a student drops below half-time attendance. Management Response: Federal Direct Loan exit interview information was sent to the student in question on October 27, 2023. Procedures will be improved to ensure Federal Direct Loan exit interviews are completed or information is sent to students when they drop below a half-time enrollment status at the School.
Condition Found: During our search for unrecorded liabilities, we noted that the cost of numerous services performed during the year ended June 30, 2023, were not recorded in accounts payable. In addition, there was a credit card overpayment that was improperly netted with expenditures made during the period. Further, prior year accruals were not properly reversed. Criteria: Internal controls around the cutoff of payables are critical for the accuracy of the accrual basis of accounting. Under the accrual basis of accounting, expenses are recorded when then they occur or transferred to the buyer, rather than at the time when expenses are paid. Cause: Management overlooked the service periods associated with certain invoices at year-end. Possible Asserted Effect: Due to inappropriate cutoff procedures established at year-end, the School did not record accruals for utilities services totaling $11,621. In addition, the School did not book healthcare services in the correct period and the accruals for payable was decreased by $12,987. Overall, accounts payable was adjusted by $93,504 on a net basis. Future years will likely experience similar errors if proper internal controls are not designed and implemented. Repeat Finding: See Finding 2022-001 for a similar finding in the current year. Recommendation: We recommend that the School prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specify the positions/staff responsible for performing such procedures and controls. Management Response: Contributing to the discrepancies with these accrual entries is the timing of the audit. Preliminary audit field work began before the end of the fiscal year and official on-campus fieldwork was completed on August 4 and we had not yet closed our July financial statements. The School made the required adjustments to their accounting records. The School will prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specify the positions/staff responsible for performing such procedures and controls. This will be completed in time to improve the cutoff procedures for the year ending June 30, 2024 (FY 2024).
Condition Found: During our testing, we noted that a true bank reconciliation was not prepared for certain bank accounts. Reconciliations were prepared using the bank balance and the check register balance. The School rolled forward each month’s ending check register balance to the beginning balance on the following month’s bank reconciliation and netted monthly bank activity and outstanding transactions from the check register to arrive at the ending balance. Criteria: The School should reconcile cash accounts accurately and on a timely basis using the bank balance and the balance per the general ledger instead of the check register balance. Reconciliations should be reviewed by a member of management who is knowledgeable in such matters. Cause: The accounting software the School uses did not have a bank reconciliation module. Therefore, management resorted using an alternative solution. Management used the check register balance, which is a transaction detail report, to reconcile to the bank statement without observing and reviewing the ending cash balance in the general ledger. Possible Asserted Effect: This resulted in cash being understated by $98,800 at year-end. In addition, there could potentially be future material adjustments to cash due to the improper method used to reconcile cash. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that all bank accounts be reconciled monthly and in a timely manner. The School should purse adding the bank reconciliation module to their accounting software. In addition, reconciliations should be prepared using the bank balance and the balance per the general ledger instead of the check register balance. Lastly, we suggest that a member of management review the bank reconciliations for any unusual items, investigate and fully resolve any such items, and document his or her approval. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during FY 2024.
Condition Found: During our testing, we noted that the School was not reconciling the accounts receivable subsidiary ledger to the general ledger throughout year. Criteria: The accounts receivable subsidiary ledger should be reconciled to the general ledger on a monthly basis. This practice serves as a check on the accuracy of the record-keeping process and the validity of account balances. Any differences should be investigated and resolved as soon as possible. Lastly, the reconciliation should be reviewed by a member of management who is knowledgeable in such matters. Cause: During the year, the School had significant issues with their student management system capturing all transactions associated with student accounts. In addition, management did not perform a proper reconciliation of the ending account balance within the general ledger. Possible Asserted Effect: This resulted in adjusting the receivable and corresponding tuition revenue of $58,573 as of June 30, 2023. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We strongly suggest that procedures be established to ensure that accounts receivable balances are reconciled between the general ledger and the accounts receivable subsidiary system in a consistent and timely manner to prevent further discrepancies. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during fiscal year 2024.
Condition Found: During the year, we noted that journal entries were being recorded within the general ledger without a consistent review process. Without complete separation of duties, particularly between the approval and recording of adjusting journal entries, transactions may be inaccurately recorded in the general ledger through a journal entry and not be detected. Criteria: Nonstandard journal entries should be approved on their own merit monthly, if not semi-annually, by an individual one level above the person making the journal entries to ensure their appropriateness. Cause: In the past, management has noted that its review of the financial statements is a sufficient review of the effect of journal entries posted during the year. However, this alone does not appear to be enough to prevent, detect, and correct misstatements in the financial statements, material or otherwise. Possible Asserted Effect: In the current year, there was approximately $243,000 in journal entry adjustments due to inappropriately reversing the prior year’s adjusting journal entries prepared by the auditors. There was approximately $72,000 in journal entry adjustments due to duplicate entries made during the year. In addition, there could be other potential misstatements in the financial statements in current and future years that may not be detected. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that management develop a policy that all nonstandard journal entries be numbered, reviewed, and approved by the Director of Finance or another appropriate individual other than the individual responsible for recording the journal entries in the general ledger. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during fiscal year 2024.
Federal Agency: U.S. Department of Education; Office of Federal Student Aid Pass through Entity: Not applicable Program Name: Federal Pell Grant and Federal Work Study ALN and Program Expenditures: 84.063 ($557,058) and 84.033 ($ 12,366) Award Number: P268K223976 and P033A226456 Federal Award Year: July 1, 2022 to June 30, 2023 Questioned Costs: $542 (ALN 84.033) Condition Found: There was an overaward of $542 for one of the twenty-five students in our sample. Criteria: The total amount of aid a student receives cannot be greater than his or her cost of attendance. Cause: The School made adjustments to its new tuition scholarship offered last fall which prohibited the scholarship funds from being reduced. Possible Asserted Effect: The student in question received $542 of Federal Work Study funds that the student was ineligible to receive. Repeat Finding: There was not a similar finding in the prior year. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: $542 of Federal Work Study funds should be returned and replaced with payroll funds from the School’s general budget. Policies and procedures should be updated to ensure that institutional and federal aid do not exceed a student’s need. Management Response: Management agrees with the auditors’ finding. Federal Pell Grant funds are entitlement funds and cannot be returned. The student in question also worked the hours in which Federal Work Study funds were awarded. Going forward, the School has made changes to the provisions of the institutional scholarship to avoid overawards. All state and federal aid and endowed scholarships are applied first and then the scholarship covers the remaining tuition cost.
Federal Agency: U.S. Department of Education; Office of Federal Student Aid Pass through Entity: Not applicable Program Name: Federal Pell Grant and Federal Supplemental Educational Opportunity Grant ALN and Program Expenditures: 84.063 ($557,058) and 84.007 ($ 9,616) Award Number: P063P223976 and P007A226456 Federal Award Year: July 1, 2022 to June 30, 2023 Questioned Costs: None Condition Found: For two of the twenty-five students in our sample, the School held Title IV credit balances for longer than fourteen days without written authorization. Criteria: An institution may not hold a credit balance, which is caused by federal student financial aid funds, on a student’s account for more than fourteen days without written authorization from the student. Cause: With the changing of the schedule during the holiday/final weeks on campus, the need for the return of funds was missed. Possible Asserted Effect: The Title IV credit balance was not returned timely to the student. Repeat Finding: See Finding 2022-006 for a similar finding in the prior year. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: The credit balances were returned to the students in question before the end of the academic year. Communication should be improved between the offices involved in the disbursement process to ensure that credit balances are refunded timely. Management Response: The credit balances were returned to the students in question before the end of the academic year. The financial aid office will follow-up with the cashier to ensure that, in the absence of a signed authorization to hold credit balances, the credit balance refunds are processed timely.
Federal Agency: U.S. Department of Education; Office of Federal Student Aid Pass through Entity: Not applicable Program Name: Federal Pell Grant Program ALN and Program Expenditure: 84.063 ($557,058) Award Number: P063P223976 Federal Award Year: July 1, 2022 to June 30, 2023 Questioned Costs:$2,585.50 Condition Found: For one of the twenty-five students in our sample, Federal Pell Grant funds were disbursed when the student did not begin attendance. Cause: The student was enrolled in on-line courses and the financial aid office did not realize the student never began attending the courses. Possible Asserted Effect: $2,585.50 needs to be returned to the Department of Education. Communication between offices should be improved to ensure that the financial aid office is informed when students make changes to their enrollment status. Repeat Finding: There was not a similar finding in the prior year. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: The School should return $2,585.50 of Federal Pell Grant funds to the Department of Education. Communication between the offices should be improved so that the financial aid office is promptly made aware of changes in a student’s enrollment status. The financial aid office should verify that the student completed an academic activity in an on-line class before disbursing aid. Management Response: The School returned the $2,585.50 in question to the Department of Education on September 6, 2023. Communication will be improved between the various offices on campus. Policies and procedures are being reviewed and updated, as needed, for the students participating in on-line courses.
Condition Found: During our search for unrecorded liabilities, we noted that the cost of numerous services performed during the year ended June 30, 2023, were not recorded in accounts payable. In addition, there was a credit card overpayment that was improperly netted with expenditures made during the period. Further, prior year accruals were not properly reversed. Criteria: Internal controls around the cutoff of payables are critical for the accuracy of the accrual basis of accounting. Under the accrual basis of accounting, expenses are recorded when then they occur or transferred to the buyer, rather than at the time when expenses are paid. Cause: Management overlooked the service periods associated with certain invoices at year-end. Possible Asserted Effect: Due to inappropriate cutoff procedures established at year-end, the School did not record accruals for utilities services totaling $11,621. In addition, the School did not book healthcare services in the correct period and the accruals for payable was decreased by $12,987. Overall, accounts payable was adjusted by $93,504 on a net basis. Future years will likely experience similar errors if proper internal controls are not designed and implemented. Repeat Finding: See Finding 2022-001 for a similar finding in the current year. Recommendation: We recommend that the School prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specify the positions/staff responsible for performing such procedures and controls. Management Response: Contributing to the discrepancies with these accrual entries is the timing of the audit. Preliminary audit field work began before the end of the fiscal year and official on-campus fieldwork was completed on August 4 and we had not yet closed our July financial statements. The School made the required adjustments to their accounting records. The School will prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specify the positions/staff responsible for performing such procedures and controls. This will be completed in time to improve the cutoff procedures for the year ending June 30, 2024 (FY 2024).
Condition Found: During our testing, we noted that a true bank reconciliation was not prepared for certain bank accounts. Reconciliations were prepared using the bank balance and the check register balance. The School rolled forward each month’s ending check register balance to the beginning balance on the following month’s bank reconciliation and netted monthly bank activity and outstanding transactions from the check register to arrive at the ending balance. Criteria: The School should reconcile cash accounts accurately and on a timely basis using the bank balance and the balance per the general ledger instead of the check register balance. Reconciliations should be reviewed by a member of management who is knowledgeable in such matters. Cause: The accounting software the School uses did not have a bank reconciliation module. Therefore, management resorted using an alternative solution. Management used the check register balance, which is a transaction detail report, to reconcile to the bank statement without observing and reviewing the ending cash balance in the general ledger. Possible Asserted Effect: This resulted in cash being understated by $98,800 at year-end. In addition, there could potentially be future material adjustments to cash due to the improper method used to reconcile cash. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that all bank accounts be reconciled monthly and in a timely manner. The School should purse adding the bank reconciliation module to their accounting software. In addition, reconciliations should be prepared using the bank balance and the balance per the general ledger instead of the check register balance. Lastly, we suggest that a member of management review the bank reconciliations for any unusual items, investigate and fully resolve any such items, and document his or her approval. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during FY 2024.
Condition Found: During our testing, we noted that the School was not reconciling the accounts receivable subsidiary ledger to the general ledger throughout year. Criteria: The accounts receivable subsidiary ledger should be reconciled to the general ledger on a monthly basis. This practice serves as a check on the accuracy of the record-keeping process and the validity of account balances. Any differences should be investigated and resolved as soon as possible. Lastly, the reconciliation should be reviewed by a member of management who is knowledgeable in such matters. Cause: During the year, the School had significant issues with their student management system capturing all transactions associated with student accounts. In addition, management did not perform a proper reconciliation of the ending account balance within the general ledger. Possible Asserted Effect: This resulted in adjusting the receivable and corresponding tuition revenue of $58,573 as of June 30, 2023. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We strongly suggest that procedures be established to ensure that accounts receivable balances are reconciled between the general ledger and the accounts receivable subsidiary system in a consistent and timely manner to prevent further discrepancies. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during fiscal year 2024.
Condition Found: During the year, we noted that journal entries were being recorded within the general ledger without a consistent review process. Without complete separation of duties, particularly between the approval and recording of adjusting journal entries, transactions may be inaccurately recorded in the general ledger through a journal entry and not be detected. Criteria: Nonstandard journal entries should be approved on their own merit monthly, if not semi-annually, by an individual one level above the person making the journal entries to ensure their appropriateness. Cause: In the past, management has noted that its review of the financial statements is a sufficient review of the effect of journal entries posted during the year. However, this alone does not appear to be enough to prevent, detect, and correct misstatements in the financial statements, material or otherwise. Possible Asserted Effect: In the current year, there was approximately $243,000 in journal entry adjustments due to inappropriately reversing the prior year’s adjusting journal entries prepared by the auditors. There was approximately $72,000 in journal entry adjustments due to duplicate entries made during the year. In addition, there could be other potential misstatements in the financial statements in current and future years that may not be detected. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that management develop a policy that all nonstandard journal entries be numbered, reviewed, and approved by the Director of Finance or another appropriate individual other than the individual responsible for recording the journal entries in the general ledger. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during fiscal year 2024.
Federal Agency: U.S. Department of Education; Office of Federal Student Aid Pass through Entity: Not applicable Program Name: Federal Pell Grant and Federal Supplemental Educational Opportunity Grant ALN and Program Expenditures: 84.063 ($557,058) and 84.007 ($ 9,616) Award Number: P063P223976 and P007A226456 Federal Award Year: July 1, 2022 to June 30, 2023 Questioned Costs: None Condition Found: For two of the twenty-five students in our sample, the School held Title IV credit balances for longer than fourteen days without written authorization. Criteria: An institution may not hold a credit balance, which is caused by federal student financial aid funds, on a student’s account for more than fourteen days without written authorization from the student. Cause: With the changing of the schedule during the holiday/final weeks on campus, the need for the return of funds was missed. Possible Asserted Effect: The Title IV credit balance was not returned timely to the student. Repeat Finding: See Finding 2022-006 for a similar finding in the prior year. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: The credit balances were returned to the students in question before the end of the academic year. Communication should be improved between the offices involved in the disbursement process to ensure that credit balances are refunded timely. Management Response: The credit balances were returned to the students in question before the end of the academic year. The financial aid office will follow-up with the cashier to ensure that, in the absence of a signed authorization to hold credit balances, the credit balance refunds are processed timely.
Condition Found: During our search for unrecorded liabilities, we noted that the cost of numerous services performed during the year ended June 30, 2023, were not recorded in accounts payable. In addition, there was a credit card overpayment that was improperly netted with expenditures made during the period. Further, prior year accruals were not properly reversed. Criteria: Internal controls around the cutoff of payables are critical for the accuracy of the accrual basis of accounting. Under the accrual basis of accounting, expenses are recorded when then they occur or transferred to the buyer, rather than at the time when expenses are paid. Cause: Management overlooked the service periods associated with certain invoices at year-end. Possible Asserted Effect: Due to inappropriate cutoff procedures established at year-end, the School did not record accruals for utilities services totaling $11,621. In addition, the School did not book healthcare services in the correct period and the accruals for payable was decreased by $12,987. Overall, accounts payable was adjusted by $93,504 on a net basis. Future years will likely experience similar errors if proper internal controls are not designed and implemented. Repeat Finding: See Finding 2022-001 for a similar finding in the current year. Recommendation: We recommend that the School prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specify the positions/staff responsible for performing such procedures and controls. Management Response: Contributing to the discrepancies with these accrual entries is the timing of the audit. Preliminary audit field work began before the end of the fiscal year and official on-campus fieldwork was completed on August 4 and we had not yet closed our July financial statements. The School made the required adjustments to their accounting records. The School will prepare written instructions to be included in the School’s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specify the positions/staff responsible for performing such procedures and controls. This will be completed in time to improve the cutoff procedures for the year ending June 30, 2024 (FY 2024).
Condition Found: During our testing, we noted that a true bank reconciliation was not prepared for certain bank accounts. Reconciliations were prepared using the bank balance and the check register balance. The School rolled forward each month’s ending check register balance to the beginning balance on the following month’s bank reconciliation and netted monthly bank activity and outstanding transactions from the check register to arrive at the ending balance. Criteria: The School should reconcile cash accounts accurately and on a timely basis using the bank balance and the balance per the general ledger instead of the check register balance. Reconciliations should be reviewed by a member of management who is knowledgeable in such matters. Cause: The accounting software the School uses did not have a bank reconciliation module. Therefore, management resorted using an alternative solution. Management used the check register balance, which is a transaction detail report, to reconcile to the bank statement without observing and reviewing the ending cash balance in the general ledger. Possible Asserted Effect: This resulted in cash being understated by $98,800 at year-end. In addition, there could potentially be future material adjustments to cash due to the improper method used to reconcile cash. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that all bank accounts be reconciled monthly and in a timely manner. The School should purse adding the bank reconciliation module to their accounting software. In addition, reconciliations should be prepared using the bank balance and the balance per the general ledger instead of the check register balance. Lastly, we suggest that a member of management review the bank reconciliations for any unusual items, investigate and fully resolve any such items, and document his or her approval. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during FY 2024.
Condition Found: During our testing, we noted that the School was not reconciling the accounts receivable subsidiary ledger to the general ledger throughout year. Criteria: The accounts receivable subsidiary ledger should be reconciled to the general ledger on a monthly basis. This practice serves as a check on the accuracy of the record-keeping process and the validity of account balances. Any differences should be investigated and resolved as soon as possible. Lastly, the reconciliation should be reviewed by a member of management who is knowledgeable in such matters. Cause: During the year, the School had significant issues with their student management system capturing all transactions associated with student accounts. In addition, management did not perform a proper reconciliation of the ending account balance within the general ledger. Possible Asserted Effect: This resulted in adjusting the receivable and corresponding tuition revenue of $58,573 as of June 30, 2023. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We strongly suggest that procedures be established to ensure that accounts receivable balances are reconciled between the general ledger and the accounts receivable subsidiary system in a consistent and timely manner to prevent further discrepancies. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during fiscal year 2024.
Condition Found: During the year, we noted that journal entries were being recorded within the general ledger without a consistent review process. Without complete separation of duties, particularly between the approval and recording of adjusting journal entries, transactions may be inaccurately recorded in the general ledger through a journal entry and not be detected. Criteria: Nonstandard journal entries should be approved on their own merit monthly, if not semi-annually, by an individual one level above the person making the journal entries to ensure their appropriateness. Cause: In the past, management has noted that its review of the financial statements is a sufficient review of the effect of journal entries posted during the year. However, this alone does not appear to be enough to prevent, detect, and correct misstatements in the financial statements, material or otherwise. Possible Asserted Effect: In the current year, there was approximately $243,000 in journal entry adjustments due to inappropriately reversing the prior year’s adjusting journal entries prepared by the auditors. There was approximately $72,000 in journal entry adjustments due to duplicate entries made during the year. In addition, there could be other potential misstatements in the financial statements in current and future years that may not be detected. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that management develop a policy that all nonstandard journal entries be numbered, reviewed, and approved by the Director of Finance or another appropriate individual other than the individual responsible for recording the journal entries in the general ledger. Management Response: The School made the required adjustments to its accounting records. The School is reviewing its accounting policies and procedures and the recommendations above. The School will update its procedures during fiscal year 2024.
Federal Agency: U.S. Department of Education; Office of Federal Student Aid Pass through Entity: Not applicable Program Name: Federal Pell Grant and Federal Work Study ALN and Program Expenditures: 84.063 ($557,058) and 84.033 ($ 12,366) Award Number: P268K223976 and P033A226456 Federal Award Year: July 1, 2022 to June 30, 2023 Questioned Costs: $542 (ALN 84.033) Condition Found: There was an overaward of $542 for one of the twenty-five students in our sample. Criteria: The total amount of aid a student receives cannot be greater than his or her cost of attendance. Cause: The School made adjustments to its new tuition scholarship offered last fall which prohibited the scholarship funds from being reduced. Possible Asserted Effect: The student in question received $542 of Federal Work Study funds that the student was ineligible to receive. Repeat Finding: There was not a similar finding in the prior year. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: $542 of Federal Work Study funds should be returned and replaced with payroll funds from the School’s general budget. Policies and procedures should be updated to ensure that institutional and federal aid do not exceed a student’s need. Management Response: Management agrees with the auditors’ finding. Federal Pell Grant funds are entitlement funds and cannot be returned. The student in question also worked the hours in which Federal Work Study funds were awarded. Going forward, the School has made changes to the provisions of the institutional scholarship to avoid overawards. All state and federal aid and endowed scholarships are applied first and then the scholarship covers the remaining tuition cost.