Finding Text
Finding #2024-001 – Material Weakness – Accounting Recordkeeping All Programs Other Criteria Accounting tasks such as timely monthly analysis, reconciliations and review of accounts play a key role in providing the accuracy of accounting data and information included in the interim and year-end financial statements. Trial balances should be maintained for the Organization continuously, in accordance with U.S. GAAP. Detailed supporting schedules should be maintained for all significant asset, liability, revenue and expense accounts. Reconciling items should be investigated and resolved in a timely manner. All of the forementioned items are essential to ensure that financial statements and data collection forms are submitted in conformance with 2 CFR Section 200.512(a)(1). Condition During the year ended June 30, 2024, management was unable to provide timely year-end trial balances in accordance with U.S. GAAP without significant adjusting journal entries required to accurately reflect the underlying accounting transactions. Cause The significant delay was caused primarily due to significant turnover in personnel within the accounting/finance department and efforts related to the merger between HopePHL and Youth Service, Inc. in prior year, which resulted in a backlog of recording transactions, and in reconciliations not being performed timely. Effects Not performing timely and complete monthly and year-end account reconciliations and closing procedures leads to a continually and growing backlog of transactions and journal entries that are not posted to the accounting system, which renders the accounting information ineffective for making well-informed business decisions. This has led to the expenditure of significant time and effort by many to complete the required reconciliation procedures and prevented the timely delivery of financial statements to management, board members and funders. In addition, this led to the Organization to be noncompliant with required deadlines for Uniform Guidance and Data Collection Form submission. Questions Costs None. Perspective This audit finding is systematic. Statistical Sample A statistical sample is not applicable to this finding. Repeat Finding This audit finding is a repeat finding of prior year. Recommendation We recommend that individuals overseeing the accounting and finance function continue to review the Organization's current accounting policies and update existing policies or implement new policies, as necessary, to ensure that accounting records are accurately maintained throughout the year. In addition, we recommend the Organization develop and document formal year-end closing procedures, including detailed closing checklists, assignment of responsibilities, and timelines for the preparation and review of reconciliations, trial balances, and supporting schedules. Monthly and quarterly account reconciliations, as appropriate, should be completed and reviewed timely throughout the year to facilitate an efficient year-end close process and ensure that complete and accurate trial balances and related supporting documentation are prepared and reviewed on a timely basis after year-end. Views of Responsible Officials Management concurs with this finding. The delays in maintaining timely accounting records, completing reconciliations, and preparing year-end financial statements were primarily the result of significant turnover within the Accounting and Finance Department during the fiscal year, combined with the operational demands associated with the merger of HopePHL and Youth Service, Inc. These circumstances created a backlog of transaction processing and account reconciliations that ultimately delayed the preparation of accurate trial balances and required year-end adjustments to ensure compliance with U.S. GAAP. Since the conclusion of the audit period, management has implemented several corrective actions to strengthen the organization’s financial reporting processes and internal controls. These actions include: • Rebuilding and stabilizing the Accounting and Finance Department through the recruitment and retention of qualified personnel. • Establishing defined month-end closing procedures, including assigned responsibilities and timelines for completing reconciliations and reviewing financial activity. • Implementing a monthly close calendar with management oversight to ensure timely completion of accounting tasks and identification of outstanding issues. • Strengthening supervisory review of account reconciliations, journal entries, and financial reporting to improve the accuracy and completeness of accounting records throughout the year. • Monitoring compliance with financial reporting deadlines through regular meetings between Finance leadership and executive management. Management believes these corrective actions have substantially addressed the conditions that led to this finding and will help ensure that accounting records are maintained in accordance with U.S. GAAP, financial statements are prepared on a timely basis, and future reporting requirements, including those under 2 CFR §200.512(a)(1), are met. Responsible Official: Vice President of Finance Estimated Completion Date: Corrective actions have been implemented and will continue to be monitored as an ongoing process.