Finding Text
Criteria: In accordance with 2 CFR §200.303, the auditee must establish and maintain effective internal control over federal awards to provide reasonable assurance that expenditures are properly recorded and reported in compliance with applicable laws, regulations, and the terms and conditions of the award. Condition: During testing of allowability, we identified instances in which expenditures were coded to incorrect accounts within the general ledger. Cause: Based on inquiry with management, the errors occurred due to the implementation of new accounting software during the year under audit, which resulted in inconsistencies in account mapping and user understanding of the updated chart of accounts. Effect: Improper coding of expenditures increases the risk that costs may be misclassified or reported incorrectly on financial reports and federal schedules, including the SEFA. This could lead to noncompliance with federal reporting requirements and reduce the reliability of financial information used for decision-making. Recommendation: We recommend that management strengthen internal controls over financial reporting by (1) providing additional training to personnel on the updated accounting system and chart of accounts, (2) implementing a review process to verify proper coding of expenditures, particularly following system changes, and (3) performing periodic reconciliations and monitoring procedures to detect and correct misclassifications in a timely manner. Foundation Response: Management agrees with the finding.