Finding Text
Conditions: A well-designed accounting system includes establishing controls for processing basic transactions, including supporting adequately and evidencing approvals of cash disbursements.
Criteria: Throughout the audit testing, we noted a lack of clear, consistent controls in place over multiple areas of the accounting process. One area of note is the lack of adequate supporting documentation for cash disbursements. This deficiency impacts both the regular operations of the Center as well as the controls over federal grant awards.
Cause: The Center is a very small operation that, by its very nature, does not lend itself to an overly complex internal control system. However, there are many basic controls that can easily be implemented which would strengthen the processes and provide greater assurances that the accounting records are complete and accurate.
Effect: A lack of internal controls allows for the possibility of errors to be reflected in the financial statements that might not be discovered by staff in the normal course of their duties. Any potential for errors to be reflected in the financial statements means the governing board may be making important financial decisions based on inaccurate information.
Recommendation: Good Shepherd Community Center, Inc. should consider implementing some basic procedures such as the evidenced review and approval of all cash disbursements; approving bank reconciliations each month by a board member; and review by a board member of the bank statements even before they are reconciled. Even a small organization can implement a few strong controls that help everyone feel confident that the financial information they are reviewing is more likely than not to be error-free.
Views of Responsible Officials and Planned Corrective Actions: See Corrective Action Plan.