Finding Text
Criteria: The Schools implemented an internal control system to reduce the risk of
misappropriation of assets and/or invalid payments by establishing a general policy regarding cash
disbursements via the use of Building Hope’s third-party accounting services and CharterAce
software for approvals. It is important to reconcile database ledgers or supporting schedules to the
general ledger to ensure the accuracy of financial information related to shared expenses with other
charter schools.Condition: During our audit, we noted various disbursements without supporting invoices and/or
lack of appropriate approvals on the supporting CharterAce software. In addition, we identified
instances in which invoices relating to goods received or services performed prior to the year-end
date were not recorded as payables in the proper period.
Cause: During our audit, we noted that the third-party accountant did not have access to certain
expense databases for shared expenses with other charter schools under Bold City Education, Inc.
maintained by Schools’ management. In addition, schools’ personnel did not consistently adhere
to the procedures regarding cash disbursements.
Effect: Significant adjustments were required relating to operating expenses and accounts payable,
as a result of our audit. Failure to perform procedures mentioned above could result in
misstatement of liabilities, misappropriation of assets and/or invalid payments.
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Recommendation: We recommend that the School adhere to the internal control policies and
procedures relating to cash disbursements so that all disbursements are properly approved and have
the appropriate source documentation on file. In addition, we recommend that a policy be
implemented where all database ledgers and/or supporting schedules are reconciled monthly to the
general ledger. Invoices received subsequent to year-end should also be reviewed in order to
determine if any unrecorded liabilities exist at year-end, and if necessary, an accrual should be
recorded for those items identified as relating to the prior period.