Guilford College (GC) Corrective Action Plan May 31, 2022 Audit 22-001 Limitations of the College?s Software to Provide a Trial Balance ? Material Weakness Auditor?s Findings and Recommendation Condition: During the planning of the audit and throughout the audit process, it was difficult for Managem...
Guilford College (GC) Corrective Action Plan May 31, 2022 Audit 22-001 Limitations of the College?s Software to Provide a Trial Balance ? Material Weakness Auditor?s Findings and Recommendation Condition: During the planning of the audit and throughout the audit process, it was difficult for Management to obtain complete and accurate information in order to provide a trial balance that could be audited. Although the transactions for the year were present in the system, the reports to extract the data proved to be very challenging. Management was ultimately able to provide a working trial balance. Criteria: Adequate internal control over the financial reporting process. Cause: Turnover in staffing and issues with the College?s current software program. Effect: Delays in completing the audit due to multiple reports provided by Management. Recommendation: We recommend replacing the College?s current software and we understand that this decision has been made. The College is moving forward with a new software. View of Responsible Officials and Planned Corrective Action: Management agrees with the finding. See Corrective Action Plan. Management?s Response Guilford College disagrees with the finding that this a material weakness. 1. During the pre-audit conferences on April 20th and June 7th the timetable for the delivery of the audit report was established. It was identified in the pre-audit meeting that the entire accounting team was new and had not been through the audit process at Guilford and required additional support and collaboration from the auditors. It was known that the access reports were non-functioning and a system generated report was to be delivered by ledger account via Banner or the Argos reporting tool. The auditors were provided early in the audit process (July 7th) from the system a working trial balance. The auditors struggled to translate the format change into their system, although the report provided the required information by ledger account. The Guilford accounting team had to take extra time to develop a report to map the data from the system that was basically an ordering and grouping format change to prior reports submitted. Also, the accounting team had to continue to ask for clarification on requests, work papers or examples of requested data which created frustration and delays. The majority of the audit list items, reports, and supporting documentation were provided electronically in July to facilitate and allow for a more efficient audit process to meet the established timeline. -48- John Wilkinson, MBA CFO / Vice President A&F Phone: 336-316-2422 Fax: 336-316-2956 jwilkinson@guilford.edu The audit team delayed auditing key items that data was provided to them electronically in July, delayed addressing the general ledger issue and were frustrated when it was addressed, late in the audit process and close to the delivery deadline. These issues should have been identified and resolved in July or at the front end of the audit process. This indicates a lack of planning and managing of the delivery schedule which is the basis for the material weakness comment. If the audit had been planned and supervised properly, this material weakness comment would not have been made. This is supported by a delivery of the audit report late Thursday evening before the required delivery date, Friday the next day. 2. A material weakness is present when there is a reasonable possibility that a material misstatement of the financial statements can occur and not be prevented or detected in a timely basis. The Guilford accounting staff understood the extraction of data was different this year and has successfully and accurately provided management and the board finance council with monthly financial data during the audit year. The auditors did not early in the audit process gain a full understanding of the new process of extracting data. The auditors waited until time pressure for audit delivery were significant before gaining an understanding of the new process. The auditor?s mismanagement of the audit process created the impression of a material weakness. The CFO and Controller have taken the following steps to remediate the findings: Complete list of all year-end journals, closing entries, calculations, reports and deliverables. Argos report Trial Balance As part of the Workday system conversion and implementation, the Chart of Accounts is being updated and streamlined to support financial reporting by fund, organization, ledger account, and program. This update to the backbone of the financial structure will provide accurate, timely and core financial reporting for the college and end users. Reporting Needs and Requirements are being identified and if canned system reports do not meet needs, then custom reports will be developed as part of the implementation deliverables. 22-002 Cash Accounts Not Reconciled ? Significant Deficiency Auditor?s Findings and Recommendation Condition: During our audit, we noted that several cash accounts had not been reconciled. Monthly bank account reconciliations are the primary internal control procedure relating to the College's cash accounts. During May 31, 2022, bank account reconciliations were prepared; however, the accounts were not completely reconciled. -49- John Wilkinson, MBA CFO / Vice President A&F Phone: 336-316-2422 Fax: 336-316-2956 jwilkinson@guilford.edu As May 31, 2022, there was an unreconciled amount of $177,466 in various cash accounts. Criteria: Adequate internal control over the financial reporting process. Cause: Turnover in staffing and issues with the College?s current software program. Effect: Although this amount may appear not to be material to the overall financial position of the College, it may obscure significant but offsetting items (such as bank errors or improperly recorded transactions) that would be a cause for investigation if the items were apparent. Unreconciled amounts should be investigated and not be allowed to carry over from month to month. Recommendation: We recommend replacing the College?s current software and we understand that this decision has been made and the College is moving forward with a new software and the cash accounts are being reconciled. View of Responsible Officials and Planned Corrective Action: GC Management?s Response: Guilford College disagrees with the finding that this is a significant deficiency. 1. The $177,466 bank accounts unreconciled amounts are immaterial to the financial statements. Any comment related to the bank account should be made as an observation to management (management letter) and should not be considered a significant deficiency. 2. A comment to the Board is unnecessary. This is a management issue and not a significant deficiency since the issue was known by the Controller?s office, but was considered a lower priority matter. A detailed list of the unreconciled items was completed and under investigation to reconcile, however due to limited staff, manual systems, and higher priorities they were noted as unreconciled. The cause explanation indicates this is clearly a workload matter given the limited accounting staff available and manual system processes. The moving forward and not finding the reconciling differences is a time management matter. Comment should be to management and indicate the accounting staff and improved manual processes should be addressed to manage the work necessary to prepare monthly bank reconciliations. The Controller has taken the following steps to remediate the findings: - Improve the monthly reconciliation policies and procedures to ensure reconciliations are completed accurately and timely. - Established a checklist of all bank accounts for reconciliation with an owner and established due dates. -50- John Wilkinson, MBA CFO / Vice President A&F Phone: 336-316-2422 Fax: 336-316-2956 jwilkinson@guilford.edu - Bank reconciliation workload is re-distributed among accounting team - A standard reconciliation form with preparer and a supervisory review and approval process. - Improved communications and procedures with Controller?s Office and Student Accounts on bank deposits, ACH, and cash transactions. - Update all incoming web receipts for gift processing from the operating account to the advancement account. To be completed by January 1, 2023. - The Sr. Accountant and the Workday Team are in the process to design a system to fully automate the cash receipt and reconciliation process in the ERP. Document the key controls in the automated system which will remediate the findings identified. Additionally, reoccurring reconciling items should be clearly identified to ensure system is designed to recognize them and minimize these types of items. - The Controller will update the cash management and reconciliations standards or policies and key controls that ensure policies are in place and effective based on new workflows and processes. Corrective Action Plan for Federal Funds 22-003 Higher Education Stabilization Fund (HEERF) Reporting Auditor?s Findings and Recommendation Condition: HEERF reporting was not always done accurately or timely. During the audit it was noted that College did not continue to update their website with the HEERF reporting requirements as listed in their grant agreements. The first and second quarterly reports for institutional funds (quarters ended September 30, 2021 and December 31, 2021) was not completed for HEERF II. Criteria: 2 CFR 200.329, 86 FR 26213 the College was required to post the Institutional Quarterly Report to their website within 10 days of the end of quarter in which the funds were spent. Cause: Turnover in staffing. There were multiple rounds of HEERF funding released, each with different requirements, which led to a gap in understanding of the requirements of the HEERF reporting. Effect: The College was not in compliance with the r