Finding Text
Finding No. 2022-002: Cash Disbursements and Classifications (Material Weakness) Statement of condition Allowable costs Activities allowed or unallowed During the year ended June 30, 2022, the Organization did not properly capitalize certain expenditures as fixed assets in accordance with the Organization's capitalization policy. Management did not properly cut off disbursements at fiscal year end, resulting in expenses not being recorded within the current audit period. Management did not properly classify certain expenditures between expense accounts, properly classify certain capitalized charges between fixed asset accounts, and revenue items between revenue classifications during the current fiscal year. Criteria Management must review invoices after fiscal year end to ensure all expenses related to the fiscal period are being accurately captured. Additionally, management should review expenditures for accurate expense account classification, capitalize charges to the appropriate fixed asset account, and review revenue classifications to the appropriate revenue account recording to ensure proper financial and HUD reporting. Cause Review procedures were not sufficient to ensure expenditures were recorded in accurate expense accounts, charges were appropriately capitalized and classified to the appropriate fixed asset account, and revenue was recorded in the appropriate revenue account. Review procedures were not adequately followed to review subsequent invoices for relevance to the current fiscal period. Effect Certain utility expenses presented for the current fiscal year were not recorded until the next fiscal year, resulting in understated expenses. Additionally, improperly capitalized expenditures and inaccurate expenses, fixed assets, and revenue classification could result in improper financial and HUD reporting. Recommendation Management should revisit and enhance its internal controls and review procedures regarding subsequent expenditures to ensure expenses are captured in the correct fiscal period. Management should implement an additional period-end review to ensure all expenses, fixed assets, and revenue are appropriately classified. Identification of repeat finding The finding is a repeat of Finding No. 2021-002. Auditor non-compliance code S - Internal control deficiencies 50 NEW VISIONS HOUSING CORPORATION (A California Nonprofit Corporation) HUD PROJECT NO. 122-HD037-WDD-NP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022 Section III - Federal Award Findings and Questioned Costs (Continued) Finding No. 2022-002: Cash Disbursements (Material Weakness) (Continued) Questioned costs None Finding resolution status In process Reporting views of responsible officials and planned corrective actions Management will ensure that moving forward there are controls in place to ensure expenses are captured in the correct fiscal period and that at year end there is a final review of the transactions to ensure that everything is not only properly entered, but properly classified as well.