Finding 13102 (2022-002)

Finding 2022-002: Internal Control over Financial Reporting and Account Adjustments Criteria: Auditing standards continue to place emphasis on determining an entity?s ability to fully prepare their own external financial statements, including the posting of all adjustments necessary to present financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) and evaluating the need for all necessary financial statement disclosures. Condition: During the audit process, several material adjustments involving capital asset additions, depreciation expense, student tuition and fees, federal and local grant revenue and unearned revenue, leases, prepaids, and payroll liabilities were proposed by the auditors in order that the financial statements could be prepared in accordance with GAAP. Then, using the information provided by management, the auditors prepared the GAAP financial statements, which were subsequently reviewed by management. These adjustments were necessary to properly reflect current year operations and account balances as of the year-end. Cause: EC3 has experienced key personnel turnover within the Finance Department. Effect: Adjustments were required to be recorded in order for the financial statements to be prepared in accordance with GAAP. Questioned costs: None Recommendation: We recommend that management evaluate the internal controls over the financial reporting process to ensure that the financial statements can be prepared internally in accordance with GAAP. Ideally, this would include ensuring that account balances are properly recorded and the supporting reconciliations are kept up to date to support the activity from month to month to ensure that accurate account information is being produced.