Finding Text
Condition – During our audit, Wipfli, LLP identified several deficiencies related to Porchlight, Inc.'s internal controls and compliance over financial reporting. Wipfli noted deficiencies in both the design and the execution of the fiscal policies and procedures. Matters identified were as follows:
Management was unable to provide individual profit and loss statements for each specific grant award that could be used to verify the accuracy of the information provided on the schedule of expenditures of federal awards.
Expenses were recorded to the program expense categories identified in the Statement of Activities but management was unable to provide sufficient audit evidence to identify the specific expenses to specific grant awards.
Management was unable to provide adequate audit evidence to substantiate how indirect expenses were allocated to specific expense categories.
Proper review and approval of reconciliation's and journal entries in accordance with fiscal policies and procedures was not evident.
Essentially all significant general ledger accounts were not reconciled in a timely manner throughout the year.
Proper authorizations of cash disbursement transactions was not evident.
Financial reports provided to the Board of Directors did not provide an accurate presentation of Porchlight, Inc's financial results based on material adjustments made to signficant account balances during the audit.
Material adjusting journal entries to cash, investments, accounts receivable, allowance for credit losses, promises to give and accounts payable were proposed by the auditor and recorded by management during the audit.
The financial statements and schedule of expenditures of federal awards were prepared by Wipfli, LLP as the audit information provided did not provide an accurate presentation of Porchlight, Inc's financial results.
The primary cause of these deficiencies was the resignation of the Finance Director during the year. Porchlight, Inc. did hire an outside contractor as well as additional finance team members to reconcile accounts in preparation of the financial audit. Subsequent to fiscal year end, a new Finance Director was hired to oversee the fiscal department of Porchlight, Inc. Based on the items noted above, a material weakness exists in Porchlight, Inc.’s internal control and compliance over financial reporting.
Criteria – Proper design and execution of Internal controls are essential to ensure effective control over, and accountability for all funds, property and other assets for all programs operated by Porchlight, Inc.
Cause – During the audit year, there was turnover in Porchlight, Inc.’s business office which contributed to the lack of timely reconciliation's.Porchlight, Inc. is working on streamlining and implementing processes to address the deficiencies noted in the condition paragraph.
Effect – As a result of the financial reporting matters identified in the condition paragraph, a material weakness exists in Porchlight, Inc.'s internal control and compliance over financial reporting.
Recommendation – We recommend management and those charged with governance evaluate the operation of the business office and implement adequate and timely closing procedures to ensure that financial statement amounts are being reconciled appropriately and all reconciliation's/purchases/reports are being reviewed.
View of Responsible Officials – Management agrees with the assessment and has committed to a corrective action plan.