Finding Text
Finding No. 2025-001: Lack of Formal Financial Reporting Policies, Procedures, and Internal Controls Type of Finding Material Weakness in Internal Control over Financial Reporting Criteria Management is responsible for establishing and maintaining effective internal control over financial reporting, including policies and procedures designed to ensure the accurate, complete, and timely preparation of financial statements. Effective controls include documented review and approval procedures, timely account reconciliations, and oversight of financial reporting activities. Condition During our audit, we noted that IRIS continues to lack formalized accounting and financial reporting processes designed to ensure the accuracy, completeness, and timely preparation of its financial statements. Specifically, there is no formal documentation evidencing the review and approval of journal entries, account reconciliations, or independent oversight of financial reporting activities. Additionally, existing accounting and financial reporting policies have not been updated to reflect current operations and practices. Context Written finance department policies for all significant transaction classes are out of date and do not reflect either the current procedures or the current personnel who prepares, approves, or reviews. Effect The lack of formal financial reporting policies, procedures, and internal controls increases the risk that material misstatements may not be prevented, detected, or corrected on a timely basis. In addition, the absence of standardized financial reporting procedures contributed to delays in the completion of the audit for the year ended December 31, 2025. Cause IRIS has relied on informal processes and institutional knowledge to perform financial reporting activities and has not established formal policies, procedures, and documentation requirements over key financial reporting processes. Repeat Finding Yes. This finding was also reported in the prior year as Finding 2024-001. Recommendation We recommend that management establish and document formal policies and procedures for monthly and annual financial reporting. Such procedures should include a financial reporting timeline, standardized closing checklists, documented review and approval requirements, and clearly defined responsibilities for the preparation and review of financial information. Additionally, management should implement timely reviews and reconciliations of all balance sheet, revenue, and expense accounts to ensure amounts are properly recorded, supported, reviewed, and approved. Management’s Response/Views of Responsible Officials See Auditee’s Corrective Action Plan.