Finding Text
Reference Number 2024-002: Delays in Financial and Single Audit Reporting Repeat Finding: Yes Evaluation of Finding: Material Weakness and Material Noncompliance Condition: The Council experienced delays and issues in its financial reporting and year-end close process, including delays in completing reconciliations, reviewing accounting records, and providing information necessary to support the audit and external financial reporting. As a result, the reporting package associated with the audit was not completed on a timely basis. Criteria: Management is responsible for maintaining complete and accurate accounting records, performing timely year-end closing procedures, and providing the information necessary to support external financial reporting. For entities subject to a Single Audit, federal regulations require submission of the reporting package and data collection form to the Federal Audit Clearinghouse within 30 calendar days after receipt of the auditor’s report or nine months after fiscal year-end, whichever is earlier, in accordance with 2 CFR 200.512(a)(1). Cause of Condition: The delay appears to have resulted from turnover in key finance personnel, limited documented procedures, and insufficient resources to complete year-end reconciliations, review accounting records, and provide timely audit support during the external financial reporting process. Effect or Potential Effect of Condition: Delays in the year-end close and financial reporting support process increase the risk that required regulatory deadlines will not be met and that financial information provided to oversight bodies, grantors, and other users will be delayed. Recommendation: We recommend that the Council implement a formal year-end closing and reporting calendar, assign responsibility for key reconciliations and reporting support deliverables, document review procedures, and monitor progress against deadlines to support timely completion of the year-end close and required regulatory submissions. Management Response and Corrective Action: Management concurs with the finding and acknowledges that this is a repeat finding classified as a material weakness and material noncompliance. The delays identified in the completion of StanCOG's financial statements and Single Audit reporting were the result of significant deficiencies in historical financial reporting processes that developed over multiple fiscal years. During the period under audit, StanCOG experienced complete turnover within its Finance Department, resulting in the loss of institutional knowledge and limited continuity in accounting operations. In addition, documented financial procedures were either incomplete or not consistently followed, resulting in delayed reconciliations, incomplete accounting records, and the inability to provide timely support for the external audit process. These conditions were further compounded by the extensive effort required to reconstruct multiple years of financial records, resolve historical accounting discrepancies, and complete outstanding reconciliations before the audit could proceed. As a result, the financial statement audit and Single Audit reporting package could not be completed within the required regulatory timeframe. Because the audit itself was significantly delayed, this finding is reported as a repeat finding. SECTION II - FINANCIAL STATEMENT FINDINGS (CONTINUED) StanCOG has recently hired a new Finance Director and new Executive Director to lead the organization's financial recovery efforts and strengthen its internal control environment. Management has begun evaluating existing financial processes and is implementing corrective actions designed to improve the timeliness and accuracy of financial reporting and ensure compliance with applicable federal reporting requirements. Management is implementing, or plans to implement, the following corrective actions: • Develop and maintain a formal month-end and year-end financial closing calendar with clearly defined deadlines and assigned responsibilities. • Develop and document standardized financial close procedures and workflows for key accounting and reporting activities. • Perform recurring reconciliations of all significant balance sheet accounts throughout the fiscal year to minimize year-end adjustments and facilitate a timely close. • Establish documented management review procedures to monitor the timely completion of reconciliations, financial reporting, and audit support activities. • Improve coordination and communication with external auditors by identifying required schedules and supporting documentation earlier in the audit process. • Strengthen management oversight of the financial reporting process by regularly monitoring progress toward key reporting deadlines and addressing issues as they arise. • Continue rebuilding the Finance Department by establishing sustainable processes, cross-training staff, and improving documentation to promote continuity and long-term compliance. Management recognizes the importance of timely financial reporting and compliance with federal Single Audit requirements. While this finding reflects historical conditions that developed over multiple fiscal years, StanCOG is committed to implementing sustainable financial management practices and strengthening its internal control environment. Management believes these corrective actions will improve the timeliness, accuracy, and reliability of future financial reporting and help ensure compliance with all applicable regulatory requirements.