Finding Text
2023-001 Audit Adjustments
Condition: Several audit adjustments were made to the financial statements during the audit process that were not initially identified by the Center’s internal control. The majority of entries identified during the audit process were due to improper revenue cutoff and incorrect calculations for year-end accruals.
Criteria: Internal controls should be in place that provide reasonable assurance that all significant transactions are recorded in the proper period and significant accruals are calculated correctly. Material adjustments should be identified by the Center’s internal control in the normal course of employees performing their assigned functions.
Cause: Revenue transactions are being recorded on a cash basis. Year-end accruals are not being reviewed for accuracy. The Center’s internal control process did not identify certain adjustments prior to the audit process.
Effect: The entries identified during the audit process increased total assets by $37,413, decreased total liabilities by $118,918, increased beginning and ending net assets by $39,082 and $195,413, respectively, and increased net income by $117,249.
Recommendation: Procedures should be implemented requiring transactions to be recorded based on accrual accounting. Significant accounts and transactions should be reviewed by an individual with sufficient experience in accrual accounting to be able to identify misstatements.
View of Responsible Officials and Planned Corrective Actions: The Center agrees with the finding. The Center hired a consultant during 2023 to assist with the accounting function. The consultant will assist with implementing these recommendations.