Finding Text
#2024-003 – Material Weakness: Independent Review and Approval
This is a repeat of prior year finding #2023-004.
Criteria/Condition: Independent reviews and approvals are not performed for all significant accounting activities. A procedure should be in place for independent reviews and approvals of significant accounting activities. For all activities, no one individual should have access that allows initiating, recording, authorizing, and reconciling a transaction.
Cause/Context: The following transactions are performed without independent review and approval:
• Journal entries are posted without review or approval documented.
• Formal review of payroll registers is not documented.
• Invoices are not regularly reviewed and approved by appropriate department directors. Two invoices out of forty tested for non-payroll expenditures for the Crime Victim Assistance Program were paid without department approvals, one relating to November 2023 and one relating to the period of July through September 2024.
• One invoice out of forty nonpayroll expenditures was entered into the general ledger with no independent review of the entry by the Director of Finance.
• Performance reports are submitted without proper documented review. We noted during testing of ten different required performance reports for the Crime Victim Assistance program that the performance reports tested did not contain documentation of review.
• The preparer of the financial status report is not reviewing that expenses presented for reimbursement have already been paid or ensuring that expenses are paid shortly after grant funds are received in order to properly monitor cash management.
Effect: Unauthorized, erroneous, or inappropriate transactions could occur and go unnoticed.
Recommendation: The Organization should establish review procedures such that all transactions and reports have proper documented approval. In addition, the Organization should establish procedures and incorporate controls to review that expenditures are paid prior to submitting requests for reimbursement of federal awards.
Views of Responsible Officials and Planned Corrective Actions:
The YWCA will implement the following changes in its accounting procedures:
1. Journal entries will be drafted by finance staff and reviewed by the CFO prior to being posted to the general ledger. CFO will post journal entry transactions in the accounting system after documentation is reviewed.
2. Payroll registers will be reviewed by the CFO each payroll. The end-of-month payroll entry (which encompasses all the payroll entries for the month) will be reviewed by the CFO prior to being uploaded to the MIP accounting software.
3. All invoices will be approved by the appropriate program director and account distribution will be reviewed by the CFO or Director of Grants/Compliance prior to entry into the accounts payable system.
4. Percentages used to allocate expenses across grants will be reviewed and updated annually at the beginning of the fiscal year. The allocation will be approved by the CEO.
5. Matching amounts for grants will be tracked and documented with supporting documentation saved in the appropriate folder within the Finance SharePoint folder.