Finding Text
Criteria: Under the Uniform Guidance (2 CFR 200), entities are required to maintain effective internal controls to ensure the proper stewardship of federal awards, including the appropriate internal controls over financial reporting for all executed agreements to assure the agreements are timely and accurately reported. Condition:In preparation for the 2025 audit, the Organization identified that a related party lease was not properly accounted for which resulted in an overstatement of investment in Ironton Medical Campus Partners LLC by $999,625; an overstatement of operating lease right of use asset by $2,099,381; an overstatement of operating lease liability by $3,436,284; and understatement of net assets without donor restrictions of $337,278 as of December 31, 2024. Cause: Ironton Medical Campus Partners LLC amended the lease for the medical office building, which the Organization is a member and lessee, effective January 1, 2024 and the lease amendment was not recorded during 2024. Procedures were not in place so that the complete information for all executed agreements are timely recorded. Effect: As of December 31, 2024, investment in Ironton Medical Campus Partners LLC was overstated by $999,625; operating lease right of use asset was overstated by $2,099,381; operating lease liability was overstated by $3,436,284; and net assets without donor restrictions was understated by $337,278. Questioned Costs: None. Recommendation: Procedures should be implemented to assure that all executed agreements are properly recorded in the trial balance/general ledger during the monthly financial close and year-end procedures. Views of Responsible Officials and Corrective Action Plan: Management agrees with the finding. The Director of Accounting has implemented a new process to assure that all executed agreements are received by the finance group to assure accurate and timely recording of all agreements.