Finding Text
2024 – 001 Financial Reporting
Type of Finding: Significant Deficiency in Internal Control over Financial Reporting
Condition: The board and management share the ultimate responsibility for the Organization's internal control system. While it is acceptable to outsource various accounting functions, the responsibility for internal control cannot be outsourced. The Organization was unable to provide documentation that the performance of internal control reviews over certain reconciliations and journal entries were completed.
Criteria or specific requirement: In an ideal control setting, the Organization would have a comprehensive control procedure to ensure that the financial statements, including disclosures are complete and accurate. Such review procedures should be performed by an individual possessing a thorough understanding of applicable U.S. GAAP.
Effect: Lack of supporting documentation for the year end closing process and lack of rigorous account analysis throughout the year could result in management’s reliance on inaccurate information for decision making, missing of reporting deadlines to funders, and misstatements, fraud, or errors occurring and not being detected and corrected on a timely basis.
Cause: Staff transitions and significant changes made to the financial closing reporting process contributed to the gaps in the documentation of the performance of certain controls during the year.
Repeat Finding: No.
Recommendation: We recommend that the Organization review the internal controls that are in place and performed throughout the year to enable an efficient year end closing process, including obtaining and retaining documentation of the performance of internal reviews over reconciliations and journal entries.
Views of responsible officials and planned corrective actions: There is no disagreement with the audit finding.