Finding 2024-001 – Material Weakness – Accounting Discipline and Recordkeeping Condition During the audit of the fiscal year ending June 30, 2024, Impact Services Corporation and Affiliates‘ (the “Corporation's”) management was unable to provide timely year-end trial balances in accordance with U.S....
Finding 2024-001 – Material Weakness – Accounting Discipline and Recordkeeping Condition During the audit of the fiscal year ending June 30, 2024, Impact Services Corporation and Affiliates‘ (the “Corporation's”) management was unable to provide timely year-end trial balances in accordance with U.S. GAAP. An accurate year-end trial balance was not provided in a timely manner, and management continued to make a significant number of adjustments after the year-end trial balance had been provided to the auditors, resulting in significant time by management and the auditors to complete the audit. As a result, the fiscal year 2024 financial statements were not finalized in time to meet the deadlines noted in 2 CFR Section 200.512(a)(1). In addition, during the audit it was discovered that certain account balances and transactions were not properly recorded in the prior year, resulting in a prior period adjustment to correct the beginning balances as of July 1, 2023. While reconciling accounts payable and accrued expenses as of June 30, 2024, management discovered that the accounts payable balance was incorrect dating back to 2023. The Corporation changed accounting software packages during the year ended June 30, 2023 and during the transition of accounting packages, an accounts payable balance totaling $390,229 transferred into the new software. The invoices representing this balance were also entered into the accounts payable module and transferred into the general ledger module, resulting in a double recording of the accounts payable balance and overstatement of expenses by $390,229 in fiscal year 2023. Recommendation We recommend that management continue to review and update the Corporation's policies and procedures to ensure that the trial balance is accurate throughout the year. Account reconciliations and supporting schedules should be prepared and reviewed on a monthly basis. The accounting books and records should be closed timely at year end and thoroughly reviewed. Management’s Corrective Action Plan In February 2025, a new Chief Financial Officer was hired and immediately launched a full evaluation of the Accounting and Finance department. Her efforts have included restructuring staff, restarting the fiscal year 2024 audit, implementing new financial policies, and launching a credit card purchasing system with embedded controls. Within six months, she has established new internal controls, enhanced financial reporting, and introduced staff training protocols. To remediate the material weakness, the Corporation has implemented the following initiatives: • Month-End Close Process: July 2025 marked the first successful month-end close, anticipated to be completed on August 22, 2025. This included key reconciliations, journal entries, and revenue-expense reporting. • Department Structure and Documentation: We are refining processes and documentation using technology and talent to promote transparency and accountability. • Leveraging Technology: o Ramp: Enables real-time spend controls, customizable virtual cards, and automated receipt matching. It enforces policy compliance, prevents unauthorized purchases, and supports audit readiness. o NetSuite ERP: Streamlines operations and decision-making through automated, real-time reporting, ensuring consistent and accurate insights across departments. We affirm our alignment with the auditor's recommendations to ensure trial balance accuracy, monthly account reconciliations, and timely year end closings. These practices are now embedded in our financial operations and supported by enhanced review protocols. The Corporation is confident that these corrective actions will fully address the material weakness and position the Corporation for sustained financial health, transparency, and compliance. Contact Person: Richonda Pelzer, Chief Financial Officer Anticipated Completion Date: March 31, 2026