ULMS Corrective Action Plan for FY 21-22 Audit FindingsULMS faced significant challenges with the departure of its longtime CFO two months post fiscal year 2021. In addition, the third-party management company who had been responsible for the Partnership accounting, ceased the relationship abruptly...
ULMS Corrective Action Plan for FY 21-22 Audit FindingsULMS faced significant challenges with the departure of its longtime CFO two months post fiscal year 2021. In addition, the third-party management company who had been responsible for the Partnership accounting, ceased the relationship abruptly without opportunity to smoothly transition the responsibility in-house to ULMS. Our external auditor does not prepare a Management Letter typically used to communicate with the Board of Directors and Governance issues that may not elevate to a finding. As such, significant findings are reflected in Section III ? Federal Award Findings and Questioned Costs.FY 2021 was the organization?s first single audit reporting requirement. ULMS engaged a third-party CPA to review past audit and current documents needed to commence the FY 2022 audit. However, due to an emergency there was limited independent review of documents prior to being submitted to the auditor due to time constraints. ULMS continues to strengthen its accounting team and has hired a new Controller in July 2023. The new Controller is a licensed CPA with over 30 years accounting experience and over 10 years? experience as an independent auditor for a range of organizations including non-profits. The Controller will collaborate with the CFO to ensure there is accuracy in reporting, especially for major federal programs. Finding #: 2022-001Contact Person: Mansour Camara? It is important to note that this error had no impact on the Urban League Village at Coleman School LP?s (?Partnership?) standalone financials or their audit, nor does it affect ULMS?s standalone financials. The error only affects the consolidating financials for the entities, mainly because ULMS and ULV at Colman School LP have different fiscal year periods. The total impact of the additional 6 months of operating activities recorded within the consolidating financials for FY 2022 was less than 1% of operating activities. The error was corrected and not reflected in the audited financial statements for FY 2022.The interim financial statements provided to the Board of Directors during FY 2022 for decision making did not include consolidated financial statements. Interim financial statements provided to the Board only included standalone financial statements. Consequently, there were no inaccurate financial statements provided to the Board for decision making.Actions to be taken: The error in preparing consolidated financials was corrected and not reflected in the audited financial statements for FY 2022. Management will perform quarterly analytics of financial data for the partnership and close its books in alignment with the consolidated financials.Finding #: 2022-001Contact Person: Mansour Camara? The $704,017 was recorded in temp restricted net assets based on a proposed adjusting journal entry from the auditors during FY 2021 audit. $388,728 was refunded to the grantor and should have been recorded as accounts payable at year end FY 2021 and the remainder $304,177 should be classified as deferred revenue as the grantor extended the time period for earning the revenue. $11,112 was earned and the expenses were accrued during the period of performance of the contract in FY 2021 and should not have been included in the auditor?s total of $704,017. The practice of ULMS was to record forward funded contracts in revenue and record an adjustment at year end to temporary restricted funds. Net spendings for each program was communicated to the grantor and appropriate actions taken based on grantor?s instruction. The grantor was informed of the underspent funds prior to the commencement of the audit and management refunded the underspent funds as requested by the funder in compliance with contract terms.It is Management?s position that these Findings should be withdrawn. The longstanding practice of the organization was to record revenue upon receipt of funds and at year end prepare an adjustment to net asset with donor restriction. Consistency in accounting presentation is an essential concept to financial statement preparation. The accounting staff followed the recommendation of the auditor in FY 2021 audit by recording AJE 23. Now the organization is being critiqued in FY 2022 for recording the proposed adjustment and following the recommendation of the auditor.Actions to be taken: The organization?s policy has changed to record all unearned revenue as deferred revenue. ULMS hired a professional CPA with over 10 years? experience in nonprofit auditing as the new Financial Controller.? Management disagrees with auditors? recommendation to impound the funds of Black Lives Matter Seattle King County (BLMSKC) received through the fiscal sponsorship agreement. However, ULMS executed the auditor?s recommendation.Actions to be taken: ULMS will hold the funds of BLMSKC until the organization receives documentation allowing the legal release of the funds.