Finding Text
Criteria: An effective system of internal control over financial reporting requires that material balance sheet accounts be reconciled in a timely manner, reviewed by qualified personnel, and appropriately documented to ensure the accuracy, completeness, and validity of amounts reported in the financial statements. Additionally, for federal awards, controls must ensure compliance with applicable requirements, including accurate and timely financial reporting in accordance with Uniform Guidance (2 CFR 200.303). Condition: Wesleyan College did not consistently prepare and review reconciliations for certain material balance sheet accounts on a timely basis. Specifically, multiple reconciliations were not completed within reasonable monthly and annual close timelines, and in some cases were prepared several months after period-end. Additionally, reviews were often not evidenced or were performed significantly after reconciliation preparation. Cause: The primary causes include insufficiently designed controls around reconciliation timeliness, and enforcement of existing close and review procedures. Contributing factors included resource constraints within the accounting function and significant turnover in staffing to identify and remediate delayed reconciliations. Effect or Potential Effect: Because reconciliations were not performed and reviewed timely, errors or irregularities within material account balances may not have been identified and corrected within the appropriate reporting period. As a result, management lacked reasonable assurance that material misstatements in the affected accounts would be prevented or detected on a timely basis. Additionally, financial reports submitted for federal programs may be inaccurate or not prepared in accordance with applicable requirements. Recommendation: Wesleyan College should ensure their preparation and review of material balance sheet account reconciliations are performed and reviewed in a timely manner. Views of Responsible Officials: Management is developing and implementing remediation actions, including strengthening reconciliation policies, assigning clear ownership and escalation procedures, and implementing monitoring controls to ensure reconciliations are prepared and reviewed timely. These actions are expected to improve the effectiveness of controls over material account balance reconciliations. Auditor’s Evaluation of the Views of Responsible Officials: Wesleyan College’s response is appropriate to ensure their preparation and review of material balance sheet account reconciliations are performed in a timely manner.