Finding Text
MATERIAL WEAKNESS IN INTERNAL CONTROLS OVER FINANCIAL
REPORTING
Criteria: Management is responsible for maintaining a system of internal controls over the
preparation of the financial statements and all required footnotes that are free of material errors
and are in accordance with generally accepted accounting principles (GAAP). This includes
preparing and/or thoroughly reviewing the GAAP based financial statements to ensure they are
free of material misstatement, retaining documentation of entries made, and maintaining proper
internal controls to ensure reconciliations are completed, maintained and accurate.
As described in Section III – FEDERAL PROGRAM AUDIT FINDINGS (Section III), testing during
the audit identified that management did not track grant specific expenses in separate ledgers
within the accounting system as well as salary and benefits charged to certain federal programs
were based solely on budget. There were no records able to be provided of actual time spent on
each grant by employee, and therefore, management was unable to provide documentation of a
review of actual time charged to each program to determine it was accurate, allowable and
properly allocated. Further details regarding the criteria, condition, cause, and other finding
elements may be found in Section III.
Condition: The Organization’s year end close procedures did not adequately address the
completeness, existence, and accuracy of the financial statements. Material audit adjustments
Cause: The Organization’s internal control procedures were not designed to adequately detect
material misstatements.
Effect: A material audit adjusting journal entry related to revenues and receivables.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that as part of its internal controls over the preparation of
financial statements, the Organization should implement a more effective and comprehensive,
and documented financial statement close and review process, to ensure that the financial
statements are complete and accurate.
Views of Responsible Officials and Corrective Action Plan: See corrective action plan
attached to financial statements. Criteria: Management did not track grant specific expenses in separate ledgers within the
accounting system. Tracking expenses within separate ledgers provides assurance that grant
expenses are being allocated properly and duplicate submissions under multiple grants is
avoided.
Title 2, Subtitle A, Chapter 200, Subpart E, § 200.430 of the Code of Federal Regulations states
that “Charges to Federal awards for salaries and wages must be based on records that accurately
reflect the work performed. These records must: (i) Be supported by a system of internal control
that provides reasonable assurance that the charges are accurate, allowable and properly
allocated” and “(vii) Budget estimated (meaning, estimates determined before the services are
performed) alone do not qualify as support for charges to Federal awards, but may be used for
interim accounting purposes, provided that: (A) The system for establishing the estimates
produces reasonable approximations of the activity performed;” and “(C) The recipient’s or
subrecipient’s system of internal controls includes processes to perform periodic after-the-fact
reviews of interim charges made to a Federal award based on budget estimates. All necessary
adjustments must be made so that the final amount charged to the Federal award is accurate,
allowable and properly allocated.”
Condition: Testing over Assistance Listing #21.027 - Coronavirus State and Local Fiscal
Recovery Funds indicated grant expenses were not recorded within separate ledgers leading to
difficulty in gaining assurance that grant expenses were billed properly to each respective grant
and that expenses were only billed to their applicable grants.
Testing over Assistance Listing #21.027 - Coronavirus State and Local Fiscal Recovery Funds
indicated that salaries charged to that Federal award were based on budgeted amount. There
was no documentation of the required periodic after-the-fact review of the budgeted amounts
applied to ALN 21.027 that management was able to provide during the audit process.
Cause: Management was unaware of grant reporting requirements leading to non-separately
reported grant data and allocation of payroll based on estimates.
Effect: Little assurance that grant allocations were being done correctly and that grant expenses
were not being billed to multiple grants.
Payroll expenses being allocated based on estimates instead of actual time spent leading to
uncertainty of validity of payroll expenses being billed to grants.
Repeat Finding: This is not a repeat finding. Recommendation: We recommend that management takes the steps necessary to understand
and implement the controls needed in order to maintain compliance for new and unusual funding.
Views of Responsible Officials and Corrective Action Plan: See corrective action plan
attached to financial statements