Finding Text
Books and Records Criteria: Management is responsible for designing and maintaining effective internal controls to ensure transactions are recorded appropriately, account balances are reconciled in a timely manner, and complete and accurate financial information is available for internal and external reporting. The Foundation is required to file with the Federal Audit Clearinghouse within nine months of year end. Condition: The Foundation experienced delays in completing certain aspects of its financial close process during the year. Certain account reconciliations were not consistently prepared or reviewed within the expected closing timetable, which resulted in audit and post-closing adjustments. In addition, the timing of the close process contributed to delays in meeting external reporting deadlines, including the filing with the Federal Audit Clearinghouse. Context: In response to U.S. Government funding cuts, the Foundation implemented restructuring changes that reduced financial management capacity, resulting in delays in closing its books and records and a late filing with the Federal Audit Clearinghouse. Effect: As a result, the Foundation’s consolidated financial statements were not fully complete and accurate prior to the audit, certain adjustments were identified during the audit process, and required external reporting deadlines were not met. Cause: These matters were primarily attributable to turnover and related capacity constraints that resulted, following the U.S. Government funding cuts. NEF was forced to make deep staff cuts and subsequently lost additional staff. As a result, available personnel were required to balance training new team members with ongoing financial responsibilities, which impacted the timing of certain close and reconciliation activities. Recommendation: We recommend that management continue its efforts to strengthen the financial close process by establishing and maintaining a structured closing timeline, ensuring timely preparation and review of key account reconciliations, and evaluating staffing levels and resources within the finance function to support timely and accurate financial reporting. Views of management and planned corrective action: Management acknowledges the impact of recent U.S. Government funding reductions on staffing and operational capacity and is actively implementing measures to stabilize the finance function. These actions include engaging outsourced accounting support to address backlog reconciliations, enhancing close procedures, and reassessing resource allocation to improve the timeliness and efficiency of the financial close process. Management is committed to restoring compliance with reporting deadlines and strengthening internal controls in the current funding environment.