Finding Text
FINDING 2022-001 ? Financial Close and Reporting Condition Found: During our audit, we noted the following: ? The University did not record the expenses related to the Paycheck Protection Program loan or HEERF funds correctly. Instead of recognizing qualified expenses as revenue, the University reduced the related expense accounts. ? Discounts for El Camino online students were not recorded correctly. Criteria: The design and implementation of policies and procedures in place should be sufficient enough for the reconciliation of significant financial accounts and transaction classes to prevent and detect material misstatements in the financial statements. Cause: The University currently does not have a strong process for making sure the ending balances, especially of assets and liabilities, are correct before providing the trial balance for audit. The University did hire an outside firm to help with the year end closing, which appeared to be of benefit, however, there were still some errors in the recording of transactions. Independent review of nonstandard journal entries is not included as part of the financial close and reporting process. Possible Asserted Effect: In fiscal year 2022, we proposed adjustments to accounts such as accounts receivable, tuition revenue, and various income and expense items. If individual journal entries are not reviewed and approved, misstatements are highly likely to occur in the financial statements without anyone?s knowledge, making it difficult to prevent and detect them, whether due to fraud or error. Repeat Finding: See Finding 2021-001 for a similar finding in the prior year. Recommendation: We recommend that the University put in place necessary controls and procedures to ensure that all transactions are properly classified, and whether each journal entry represents a valid, accurate transaction. As part of this evaluation, the University should consider the preparation and separate, independent document review and approval of these transactions as well as the accurate posting to the books and records. While there appears to be review of budget vs. actual and other financial statement review by the management and the Board at an overall level, that level of review was not sufficient to identify the material misstatements noted above. Special attention should be paid to the accounting and reporting of material and/or unusual transactions such as the PPP loan, government grants, donor restricted net assets, significant estimates, and transactions at locations outside the main campus, among others. The books and records should be ready for audit before the engagement begins. If there are questions regarding the closing of the books, we encourage you to contact us or your contract accountants for guidance. Management Response: Randall University, beginning in the Fall of 2021 began using an outside accounting firm to assist our business office, finance staff, and financial aid staff with financial reporting and accounting. The contract accounting firm was used in 2021-2022 to address many financial reporting and accounting processes. In response to this finding, Randall University will have an independent review of non-standard journal entries added to the contract accountant?s scope-of-work as a part of Randall University?s financial closing and reporting processes. The contract accountant will communicate with the auditing firm to seek guidance and requirements to better address this issue.