Audit 8163

Criteria: United Way of Monterey County (“UWMC”) must establish and maintain effective internal controls over agencies receiving subawards of Federal funding passed through UWMC. This includes proper documentation and tracking of subrecipient agency expenditures and the resulting accruals for the amounts due to subrecipient agencies. Condition: Accounting for UWMC’s prior year audit accruals for subrecipient agency expenditures was not properly adjusted, based on the prior year audit adjustments. Accruals for the current year’s agency expenditures were not reconciled prior to the audit and required significant auditor assistance in the calculations to accurately state the accruals. Cause: During the single audit for the fiscal year ended June 30, 2022, audit adjustments were made to accrue for agency expenditures based on reconciliations with the agencies’ general ledgers. During that time UWMC had turnover in the finance department, so the details behind those adjustments and the subsequent year’s effects were not properly transitioned. During the fiscal year ended June 30, 2023, year end reconciliations and accruals were not done with the subrecipient agencies prior to the audit. Effect: Fiscal year 2023 expenditures were understated by approximately $213,000 as a result of the fiscal year 2022 accruals not being properly recorded. This resulted in amounts payable to subrecipient agencies and amounts receivable from Monterey County being understated by approximately $754,000. Additional audit adjustments were made to true up agency expenditures for the year ended June 30, 2023. These adjustments increased expenditures, agency payables and related Monterey County receivables by approximately $144,000. Recommendation: We recommend UWMC maintain cumulative reports of agency activities to agree each fiscal year’s expenditures to the finalized audit balances. This would ensure that proper documentation is in place for any transition of UWMC management. It is recommended that UWMC also perform a final reconciliation with the subrecipient agencies general ledger prior to issuing the final payment during the close of the program in fiscal year 2024. Management’s Response: We have been reconciling to subgrantee agency general ledgers each month before payment. But given prior period adjustments occasionally made on the agency side, we will make it a cumulative reconciliation going forward for monthly payment. UWMC will perform a final reconciliation with the subrecipient agencies general ledger during the close of the program in fiscal Year 2024. The finance department is keeping records of all adjustments and accruals that are reconciled monthly and during the close of the program in fiscal Year 2024.

Criteria: United Way of Monterey County (“UWMC”) must establish and maintain effective internal controls over agencies receiving subawards of Federal funding passed through UWMC. This includes proper documentation and tracking of subrecipient agency expenditures and the resulting accruals for the amounts due to subrecipient agencies. Condition: Accounting for UWMC’s prior year audit accruals for subrecipient agency expenditures was not properly adjusted, based on the prior year audit adjustments. Accruals for the current year’s agency expenditures were not reconciled prior to the audit and required significant auditor assistance in the calculations to accurately state the accruals. Cause: During the single audit for the fiscal year ended June 30, 2022, audit adjustments were made to accrue for agency expenditures based on reconciliations with the agencies’ general ledgers. During that time UWMC had turnover in the finance department, so the details behind those adjustments and the subsequent year’s effects were not properly transitioned. During the fiscal year ended June 30, 2023, year end reconciliations and accruals were not done with the subrecipient agencies prior to the audit. Effect: Fiscal year 2023 expenditures were understated by approximately $213,000 as a result of the fiscal year 2022 accruals not being properly recorded. This resulted in amounts payable to subrecipient agencies and amounts receivable from Monterey County being understated by approximately $754,000. Additional audit adjustments were made to true up agency expenditures for the year ended June 30, 2023. These adjustments increased expenditures, agency payables and related Monterey County receivables by approximately $144,000. Recommendation: We recommend UWMC maintain cumulative reports of agency activities to agree each fiscal year’s expenditures to the finalized audit balances. This would ensure that proper documentation is in place for any transition of UWMC management. It is recommended that UWMC also perform a final reconciliation with the subrecipient agencies general ledger prior to issuing the final payment during the close of the program in fiscal year 2024. Management’s Response: We have been reconciling to subgrantee agency general ledgers each month before payment. But given prior period adjustments occasionally made on the agency side, we will make it a cumulative reconciliation going forward for monthly payment. UWMC will perform a final reconciliation with the subrecipient agencies general ledger during the close of the program in fiscal Year 2024. The finance department is keeping records of all adjustments and accruals that are reconciled monthly and during the close of the program in fiscal Year 2024.