Finding Text
Audit adjustments and Oversight of Financial Reporting Process (Repeated Finding). Criteria – in accordance with generally accepted accounting principles in the United States of America (GAAP) and best practices for nonprofit organizations, internal controls over financial reporting should be designed to ensure that transactions are recorded in the proper period and properly classified and that the closing process identifies any necessary adjustments. Condition – the closing processes did not identify material audit adjustments that were required to accurately reflect grants receivable and related government grant/contribution revenue account, refundable advances and related government grant revenue account, and payroll and payroll taxes expenses. Context – Management is responsible for the recording, processing, summarizing, and review of accounting data (i.e., maintaining books and records) and for making necessary adjustments to those books and records before the audit and preparation of financial statements. Cause – There were a number of staffing transitions during the year during the year, also an increase of limited finance team workload. Effect – errors in recording transactions to the proper period and general ledger accounts could result in a misstatement of the financial statements. Because of the unadjusted entries not being reconciled on a timely basis, there was a significant amount of audit adjustments and additional procedures done internally to the financial information prior to submission to the auditors. Recommendation – We continue to recommend that the Organization management implement controls over the financial closing process to ensure all necessary adjustments at fiscal year-end are recorded and reviewed, so the financial statements are free from material misstatements. View of Responsible Officials and Corrective Action Plan – The Organization recognizes the financial statement finding identified and we have taken corrective actions to ensure the accuracy of our financial controls and procedures moving forward. After the fiscal year ended in 2024, there has been a change in leadership within our financial department. With this transition, adjustments have been made to the financial procedures and controls to address potential lapses in the closing process. The Organization has revised the way it records, reconciles, and review financial entries. These changes were necessary to ensure proper U.S. GAAP practices were in place. These updates include accurately accruing accounts payable and accounts receivable, to ensure revenue and expenses are recognized in the proper period. We have also implemented a proper review process of the financial statements and any adjustments that are required to finalize them. The Organization believes it have fully addressed and corrected all procedures that led to this finding.