Finding Text
Criteria: Internal controls over financial reporting should exist to ensure that material misstatements are prevented, or detected and corrected, by management in a timely manner. COSO/Internal Control Framework defines control activities as "policies and procedures that help to ensure management's directives are carried out". Management review controls are defined as, "the activities of a person, different than the preparer, through analyzing and performing oversight activities performed, and is an integral part of any internal control structure". COSO/Internal Control Framework state that control activities must be in place for there to be adequate internal control procedures over financial reporting. Furthermore, these control activities should be performed timely to ensure financial transactions are recorded in the correct reporting period in compliance with generally accepted accounting principles ("GAAP"). Condition: The accounting records for Urban Partnerships Community Development Corporation and Affiliates were missing a material loan receivable and associated loan payable and needed to be revised and corrected. Cause: Management did not have sufficient monitoring procedures in place to ensure the accounting for Urban Partnerships Community Development Corporation and Affiliates was in accordance with generally accepted accounting principles. Effect: This condition may lead to inaccurate financial reporting and potential misstatement of the consolidated financial statements such that they are not in accordance with GAAP. In addition, the 2022 consolidated financial statements had to be restated for misstated items. Recommendation: Management should establish or undertake a review of internal controls over financial reporting and ensure that financial data is properly recorded in the books and records of the Organization to prevent misstatements from occurring in the future. View of Responsible Officials: This issue was brought on this year due to the quick acceleration of the Organization and Affiliates' activities, while management was in the process of implementing internal control policies and procedures, including the transition of third-party bookkeepers engaged by the Organization. Management will implement proper policies and procedures to ensure the Organization and Affiliates' activities are properly recognized. In addition, management will reconcile the activities of the Organization and Affiliates quarterly against the financial system and ensure activities are recognized properly at year-end.