Finding 1237664 (2025-001)

MATERIAL WEAKNESSES Finding Reference Number: 2025-001 (repeat of 2024-001) – Preparation of Financial Statements Criteria: Management is responsible for establishing and maintaining effective internal controls over financial reporting. Effective internal controls are an important component of a system that supports the preparation of external year-end financial statements and related note disclosures, as well as the oversight of the external financial reporting process by those charged with governance. Condition and Context: Beacon, Inc. (“Beacon”) does not currently have in place the processes and controls that would assure the preparation of external year-end financial statements and related note disclosures in accordance with the modified cash basis of accounting. Cause: Preparation of the external financial statements and related note disclosures, with a closing process to identify and correct material misstatements in the financial statements would require the in-house ability to maintain appropriate technical knowledge and to research current and changing accounting standards as well as unique industry considerations. Beacon has not allocated sufficient resources toward developing these capabilities because management believes the cost of doing so outweighs the benefits. Effect: Beacon engages the auditors to draft the year-end external financial statements and to perform the necessary steps to ensure the disclosures are complete. Once drafted, the financial statements are submitted to management for review and approval. While this practice is common and practical, it must be reported as a material weakness in internal control over financial reporting since the yearend external financial statement preparation cannot be carried out in-house. Recommendation: Beacon should review and consider enhancements to the external financial reporting procedures and controls in place to make improvements as they are practical to do so. Responsible Official’s Response: Management concurs with the reported finding. The current economics of the organization does not allow us to correct this weakness. We believe our current accounting capacity is sufficient for routine day-to-day needs. We will continue to seek outside guidance through our annual independent audit to correct minor errors that sometimes occur or to perform other accounting needs.