Finding Text
Criteria: Internal control over financial reporting requires that personnel with adequate skill, knowledge and experience in nonprofit accounting and financial reporting oversee the maintenance of an entity's general ledger accounting system, subsidiary records, and external financial reporting processes to enable the entity to meet all its reporting requirements. Condition: The organization did not have internal controls, and policies and procedures, in place to require record keeping, including allocating, recording and reporting of costs charged to federal programs, as required by Office of Management and Budget (OMB) regulations for not-for-profit organizations using the accrual basis of accounting and receiving federal funds, including the Uniform Guidance. Context: The accounting records are maintained using originally QuickBooks (QB) and changed to Blackbaud NXT general ledger accounting system. The Eviction Defense Collaborative’s Controller and other accounting staff departed, and the organization replaced them with Scrubbed.net, a professional accounting services firm, to maintain its financial accounting and reporting system. General ledger accounts were not updated for costs charged to federal programs in accordance with OMB regulations. Effect: The Eviction Defense Collaborative did not provide sufficient supporting documentation to provide an audit opinion on compliance with requirements that could have a direct and material effect on the major federal program (Community Development Block Grant/Entitlement grants cluster). The 2024 Single audit received a disclaimer of opinion on the report on Compliance for Each Major Program. Cause: The cause, in our judgment, was turnover of the accounting staff with adequate skill, knowledge and experience in nonprofit accounting and financial reporting to maintain the organization’s general ledger accounting system, reconciling the account balances on a regular basis, preparing its annual financial statements and grant financial reports, in accordance with OMB regulations. Recommendation: We recommend the Eviction Defense Collaborative reconcile all assets, liability, and net asset accounts to support schedules and documentation each month and have internal controls in place that require the allocation, recording and reporting costs charged to federal programs in accordance with OMB regulations. The Eviction Defense Collaborative hired a new professional accounting firm and Controller to improve this process. Views of Responsible Officials and Corrective Actions: The Eviction Defense Collaborative has hired a new controller, Daniel Poore, and has replaced Scrubbed.net with a new professional services firm YPTC to implement this recommendation