Finding Text
Finding 2024-0011 LSC Financial Guide § 3.2.5 Petty Cash Grantor: Legal Services Corporation Program Name: Legal Services Corporation Basic Field Grant CFDA No.: 09.952000 Award No.: Basic Field Grant Award Year: 2024 Repeat Finding From Prior Audit? No Finding Type: Significant deficiency Criteria: Per LSC Financial Guide § 3.2.5 Petty Cash, The policy must address the following: • Identify the employees responsible for custody, disbursement, approval, and reconciliation with proper segregation of duties • Require monthly reconciliation of all petty cash funds (including confirming actual cash balance against records) and outline proper documentation • Describe allowable uses of petty cash (e.g., transaction limit, types of expenses) • Describe the documentation necessary to support each petty cash disbursement • Outline procedures to follow in the event there is an overage or shortage in the fund Condition: MLSC’s petty cash policy did not include the required elements outlined in the LSC Financial Guide §3.2.5, such as segregation of duties, monthly reconciliation procedures, allowable uses, supporting documentation, and procedures for overages or shortages. Additionally, MLSC failed to provide documentation of monthly reconciliations and cash counts, and the only recorded cash count lacked proper verification details. The theft of $400 in petty cash in May 2024 remained unresolved, with no recovery or clearance. Cause: MLSC did not update or establish a petty cash policy that meets the requirements of LSC Financial Guide §3.2.5, leading to inadequate controls and oversight over petty cash transactions. Finding 2024-0011 LSC Financial Guide § 3.2.5 Petty Cash, continued Effect: MLSC's failure to comply with the established policies and procedures increases the risk of misappropriation, unaccounted petty cash, and weak internal controls, as evidenced by the unresolved theft and lack of proper reconciliation documentation. Recommendation: MLSC should develop and implement a comprehensive petty cash policy aligned with LSC Financial Guide §3.2.5 requirements. The policy should include segregation of duties, monthly reconciliation procedures with proper documentation and approval, clear allowable uses, and procedures for addressing overages or shortages. Regular monitoring and proper recordkeeping will strengthen internal controls and prevent future loss or mismanagement of petty cash. Management’s Response and Corrective Action Plan: MLSC management acknowledges the finding and concurs with the auditor’s recommendation. Management would like to note that MSLC has an existing Petty Cash Policy, which was recently updated and approved by the Board of Directors to ensure full compliance with LSC Financial Guide §3.2.5 that address the following: • Segregation of duties • Required monthly reconciliation of all petty cash funds • Allowable use of petty cash • Documentation necessary to support each petty cash disbursement • Procedures to follow in the event of overage or shortage in the fund Responsible person: Chief Fiscal Officer, Jocelyn Mallari Corrective action planned: The updated Petty Cash Policy is immediately implemented to strengthen internal control, ensure accountability, and prevent future loss or mismanagement. A monthly petty cash reconciliations for each office is scheduled. These corrective actions will ensure compliance with LSC requirements Anticipated completion date: Completed