Finding Text
2024 – 002: Interfund Activity
Type of Finding:
• Material Weakness in Internal Control Over Financial Reporting
Condition: The board and management share the ultimate responsibility for NWILCS’s internal control system. While it is acceptable to outsource various accounting functions, the responsibility for internal control cannot be outsourced. Interfund activity for Gary and East Chicago had not been reviewed on a stand-alone basis to ensure the activity was properly reflected in each school.
Criteria or specific requirement: In an ideal control setting, NWILCS would have a comprehensive control procedure to ensure that the financial statements are complete and accurate. Such review procedures should be performed by an individual possessing a thorough understanding of applicable U.S. GAAP and NWILCS’ operations.
Context: While performing audit procedures, it was noted that management did not have appropriate procedures in place to provide reasonable assurance that interfund activity is reasonable based upon operations of NWILCS.
Effect: It is possible that a misstatement of the NWILCS' financial statements could occur and not be prevented or detected by the NWILCS' internal control.
Cause: NWILCS’ controls were not able to detect the adjustments made as part of the audit. NWILCS does not have a comprehensive review process to ensure that the stand alone financial statements for both Gary and East Chicago are complete and accurate.
Repeat finding: No.
Recommendation: We recommend that management review controls related to interfund activity on a regular basis (monthly or quarterly) to ensure that total activity accurately reflects both Gary and East Chicago on a standalone basis and is reasonable.
Views of responsible officials and planned corrective actions: There is no disagreement with the audit finding.