Finding Text
Finding No. 2022-001: Financial Reporting ? Significant Deficiency Assistance Listing Program Title and Number: All Federal Agency: All Criteria: An accounting system and effective internal control environment should support the preparation of the financial statements in accordance with Generally Accepted Accounting Principles (?GAAP?) and grant reports in accordance with Federal and State compliance requirements, including a robust financial close process at year end. Condition: In fiscal year 2022, the Organization?s accounting processes and internal controls over financial reporting were not functioning timely to support generating complete and accurate financial information. Revisions to the grant schedule required adjustments to the trial balance; therefore, the grant schedule was not finalized timely. Cause: The Organization experienced resource constraints and changes in finance department personnel during the fiscal year. Effect: The books and records were not closed and finalized until many months after year end. Context: The Organization?s accounting processes and internal controls over financial reporting were not performed in a timely manner. Recommendation: We recommend that the Organization maintain an adequate level of appropriately trained and experienced personnel. This will help ensure that the accounting processes and internal controls over financial reporting will function properly, and that the financial close process will be complete, accurate, and timely. Management?s Response/View of Responsible Officials: We agree with the auditors' findings. However, we believe the ?Cause? section above needs more information. Over the past year, New Reach has hired a new Finance Director to replace a Finance Director who had been in the position for many years. When the former Finance Director left the organization, we subsequently lost our Senior Grants Accountant, who up to that point was able to maintain the status quo established by the former Finance Director. When the new Finance Director, Josh Arnone, came on board, he immediately took steps to understand and assess the structure, involving leadership and the board of directors on changes that were necessary and challenges along the way. In prior years, the auditors expressed no concern over the design or operating effectiveness of New Reach?s financial management system (the same financial management system that the new Finance Director inherited). In the past, the auditors did not issue findings on the financial statements, or on federal/state compliance and internal control requirements. For FY22, the audit firm assigned a new lead auditor, and there was a learning curve for both the auditor and auditee which contributed to the delayed closing as well as the late audit. We are actively working to train existing staff, and this past year we have been working with outside grants management Consultants that have assisted New Reach with financial management and process improvements. We will look at hiring additional, experienced staff as resources allow. As a further corrective action, we are reviewing and revising existing policies and procedures surrounding grants management, financial management, and financial reporting, and providing staff and leadership with training on the importance of an internal control framework and internal controls (policies and procedures) that are in place at New Reach.