June 28, 2024
Corrective Action Plan
We are providing this letter in connection with the management comments regarding the audit of our financial statements as of the year end September 30, 2023.
2023-001
Criteria of Specific Requirement – Management is responsible for establishing and maintaining ...
June 28, 2024
Corrective Action Plan
We are providing this letter in connection with the management comments regarding the audit of our financial statements as of the year end September 30, 2023.
2023-001
Criteria of Specific Requirement – Management is responsible for establishing and maintaining effective internal control over financial reporting.
Condition – Certain individuals perform or have the ability to perform duties in the cash disbursement cycle and payroll cycle that are incompatible from a control perspective. In the cash disbursements cycle, certain personnel, including the personnel in the accounts payable department, perform or have the ability to perform incompatible access, recording and monitoring functions. This includes the ability to authorize and record a disbursement of funds. In the payroll cycle, certain personnel, including the payroll manager and accounts payable manager, perform or have the ability to perform incompatible access, recording and monitoring functions. This includes the ability to change payroll information after it has been reviewed, initiate a payroll payment as well as recording the payment and reconciling the bank statement.
Cause – Duties in the cash disbursement cycle and payroll cycle are not adequately segregated.
Management/Organizational Response – Management notes that segregation of duties within the accounting and finance-adjacent departments has been an issue raised in the past. Fiscal year 2024 includes the addition of new staff and an initiative to restructure the responsibilities of employees to reduce the prevalence of incompatible functions. This includes the reconciliation of bank accounts being overseen more closely by other finance team members. It is DKH’s goal to minimize this incompatible overlap of duties. As it relates to the payroll manager duties, we have certain procedures in place to partially mitigate the conflicting duties. The issue of complete segregation of duties remains a challenge given the low number of staff resources available. The balance between efficiency and segregation of duties is constantly being reviewed and worked on. Sheena Farner, Director of Budget & Financial Reporting, and the finance team are working on implementing these changes for the year-ended September 30, 2024.
2023-002
Criteria of Specific Requirement – Management is responsible for establishing and maintaining effective internal control over financial reporting.
Condition – The Organization’s consolidated financial statements required an adjusting journal entry to be in conformity with the accounting principles generally accepted in the United States of America (GAAP). An adjustment was proposed related to the amount owed for the Connecticut state tax liabilities. With this change, an audit adjustment was recorded to increase the amount owed to the State of Connecticut.
Cause – The Organization’s year-end procedures did not identify an adjustment for Connecticut state tax liabilities to present the financial statements in accordance with GAAP.
Management/Organizational Response – Management agrees and in fiscal year 2024 has started to record monthly an estimate for the penalties and interest on unpaid provider taxes. Any relief from these penalties and interest will be recorded in the period such relief is formally granted. The adjustment recorded after the initial close for fiscal year 2023 was due to the timing of discussions with the State on a potential long term repayment plan. Paul Beaudoin, Chief Financial Officer, and Sheena Farner, Director of Budget & Financial Reporting, will review these balances for the year-ended September 30, 2024.
2023-003
Criteria of Specific Requirement – Management is responsible for establishing and maintaining effective internal control over financial reporting.
Condition – The Organization’s consolidated financial statements required an adjusting journal entry to be in conformity with the accounting principles generally accepted in the United States of America (GAAP). An adjustment was proposed related to the valuation of certain inventory accounts. With this change, an audit adjustment was recorded to increase the amount of inventory recorded in the consolidated financial statements as of September 30, 2023.
Cause – The Organization’s year-end procedures did not identify an adjustment for certain inventory accounts to present the financial statements in accordance with GAAP.
Management/Organizational Response - Management understands the importance of proper inventory valuation. During fiscal year 2024, the vendor associated with the items that required price adjustments was able to provide a significantly more comprehensive updated price listing. Efforts were made in prior years to get updated pricing but we were unsuccessful. Management is confident that this process will be able to be followed in subsequent years. This will result in timely and accurate price updates on at least an annual basis. Financial statement adjustments are being reviewed by Sheena Farner, Director of Budget & Financial Reporting, for the fiscal year September 30, 2024, to work to correct these entries.
2023-004
Criteria of Specific Requirement – Reporting
Condition - The Organization is required to prepare and submit the period 4 provider relief fund reporting. The report is to be prepared using accurate financial information and submitted by the deadline established.
Cause - The Organization's internal controls did not properly identify certain reporting requirements for the Provider Relief Fund and American Rescue (ARP) Rural Distributions.
Management/Organizational Response - Management acknowledges errors were made regarding the submission of lost revenue amounts within the provider reporting submission and that these errors were administrative in nature. Management's corrective action plan includes implementing an additional level of review and scrutiny prior to finalize submission. Management attest that sufficient lost revenues greater than provider relief funds received still existed. Paul Beaudoin, Chief Financial Officer, will review these reports for the year-ended September 30, 2024.