Finding 1162698 (2024-002)

Finding Number: 2024-002 Closing Process (Significant Deficiency) Information on Federal Program: U.S. Department of Health and Human Services Federal Assistance Listing Number (ALN) Number: 93.676 ALN Name: Unaccompanied Children Program Contract Period: July 1, 2023 through June 30, 2024 Criteria: The Uniform Guidance §200.303 requires entities to establish and maintain effective internal controls to provide reasonable assurance that entities are in compliance with Federal statutes, regulations, and terms and conditions of the Federal Award. Additionally, these internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations (COSO). Condition: During our audit, we noted issues related to the timeliness of the financial statement close process, additional entries to finalize the trial balance and a lack of segregation of duties which led to journal entries being prepared, reviewed and posted by the same person in the general ledger system. These issues were driven by the Organization experiencing employee turnover. Questioned Costs: None noted. Context: This is a condition identified during the audit of Lincoln Hall’s June 30, 2024 financial statements. Effect or Potential Effect: The findings identified impact the risks of fraud and management override. Due to the volume of transactions throughout the year there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected and corrected on a timely basis. Repeat Finding: This is a repeat finding from prior year. See Finding No. 2023-002 on the Summary Schedule of Prior Audit Findings. Cause: The findings noted surrounding controls for the financial statement closing process is mainly due to the turnover at Lincoln Hall. Recommendation: Untimely recording of journal entries along with inadequate segregation of duties, increases the risk of fraud and management override of controls. We recommend that management implement controls to ensure that the preparation, review and posting of journal entries are performed by separate individuals and that journal entries are timely recorded throughout the year. This will allow management to prevent, detect, and correct any misstatements on a timely basis. Views of Responsible Officials: Lincoln Hall agrees with the finding. Lincoln Hall continues to take steps to improve this process. See Lincoln Hall's further response to this finding as described in the accompanying management’s planned corrective actions, Appendix A.