FAC Explorer

Finding 38676 (2022-001)

Material Weakness
Requirement
P
Questioned Costs
-
Year
2022
Accepted
2023-07-05
Audit: 44203
Organization: Transitional Resources (WA)
Auditor: Lindley & Associates LLC

AI Summary

  • Core Issue: There is a material weakness in internal controls due to untimely bank reconciliations, with reconciliations performed only three times in a year.
  • Impacted Requirements: This finding violates Uniform Guidance Part 6 and Government Auditing Standards, which require timely internal controls over federal awards.
  • Recommended Follow-Up: Implement a policy to complete bank reconciliations within 30 days of receiving statements, ensure a separate review by supervisory personnel, and verify that reconciliations align with the general ledger.

Finding Text

SECTION II Findings Relating to the Financial Statement Audit as Required to be Reported in Accordance with Generally Accepted Government Auditing Standards (continued) A. Material Weakness in Internal Control Finding 2022-001 Internal Control over Timely Bank Reconciliations Condition: During audit procedures, we reviewed twelve months of bank statements and related bank reconciliations for the audit period. We noted the bank reconciliations were performed three times during the year. The reconciliations were performed as follows: February 2022 through August 2022 (7 months) ? prepared in November 2022 September 2022 through November 2020 (3 months)? prepared in January 2023 January 2022 and December 2022 (2 months) ? prepared March 2023 The last two reconciliations were prepared when requested for audit procedures. The lack of timely preparation had not been noted by supervisory personnel performing their daily accounting functions. Cause: The Organization did not have adequate supervisory review of month-end procedures to detect the bank statement review and bank reconciliations had not been performed in a timely manner for the entire twelve-month period. Criteria: Uniform Guidance Part 6 ? Internal Control The 2 CFR section 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Government Auditing Standards Chapter 5 Internal Control Requirement: System of Quality Control 5.04 An audit organization should document its quality control policies and procedures and communicate those policies and procedures to its personnel. The audit organization should document compliance with its quality control policies and procedures and maintain such documentation for a period of time sufficient to enable those performing monitoring. Effect: Bank reconciliations are an essential internal control and are necessary in preventing and detecting fraud. They identify accounting and bank errors and provide explanations of the differences between accounting and bank balance cash balances. Due to the small number of, TRANSITIONAL RESOURCES SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED DECEMBER 31, 2022 (continued) and often remotely located, accounting personnel, this lack of oversite may not be discovered by employees in performing their normal duties. Recommendation: Bank reconciliations should be prepared within 30 days of the receipt of the statement. Banks may not correct any errors (or fraud) that is not detected and reported within that time frame. The bank statement and bank reconciliation should be reviewed by a person other than the preparer and that person should initial and date as reviewed (or electronic procedure of comparable nature). The bank reconciliation balance should agree with the general ledger balance(s). In addition, both statements should be initialed and dated as approved by supervisory personnel. We recommend supervisory personnel review accounting information provided to the auditor to verify it is complete, accurate, and has been timely prepared. We further recommend the organization tie and agree the beginning and ending balances of the twelve months of bank reconciliations. Performing bank reconciliations out of order can be utilized to hide fraudulent cash transactions. Management?s Response: Management concurs with the finding and recommendation and is taking appropriate corrective action.

Corrective Action Plan

Transitional Resources submits the following corrective action plan for the year ending December 31, 2022. Name and address of independent accounting firm: Lindley & Associates LLC, 1603 116th Ave NE, Suite 100, Bellevue, WA 98004-9003, Bellevue, WA 98004-9003 Audit period: January 1, 2022 to December 31, 2022 Contact person responsible for corrective action: Deb Orsillo, Director of Administration 2022-001: Material Weakness in Internal Control Finding: Internal Control over Timely Bank Reconciliations Condition: Transitional Resources? bank reconciliations were not completed in a timely manner. While supervisory personnel were aware the Accounting Manager was behind in accounting functions, they were unaware the bank reconciliations had not been completed in a timely manner. Cause: There was turnover in Transitional Resources? Accounting department which resulted in delays in completing the bank reconciliations. Due to the delay of the monthly accounting packets, which contain the bank reconciliations, Supervisory personnel did not initially identify those reconciliations were not completed in a timely manner. Effect: Safeguards of the agency?s accounts were in place by a thorough review of monthly bank statements by Supervisory personnel, however these reviews did not provide the same level of internal control as having timely bank reconciliations. Response: Effective June 26, 2023, bank reconciliations shall be prepared within 30 days of the receipt of the statement. The bank statement and bank reconciliation shall be reviewed by a person other than the preparer, initialed, and dated. The bank reconciliation balance shall agree with the general ledger balance. Both statements shall be initialed and dated as approved by supervisory personnel. In most cases, bank reconciliations shall be prepared by the Accounting Manager and reviewed by the Director of Administration. The Director of Administration shall not only ensure that monthly reviews of bank reconciliations are conducted but shall ensure all accounting information provided to the auditor is verified as complete, accurate, and timely.

Categories

Subrecipient Monitoring Material Weakness Matching / Level of Effort / Earmarking Internal Control / Segregation of Duties

Other Findings in this Audit

  • 38677 2022-002
    Material Weakness
  • 38678 2022-003
    Material Weakness
  • 38679 2022-001
    Material Weakness
  • 38680 2022-002
    Material Weakness
  • 38681 2022-003
    Material Weakness
  • 38682 2022-001
    Material Weakness
  • 38683 2022-002
    Material Weakness
  • 38684 2022-003
    Material Weakness
  • 38685 2022-001
    Material Weakness
  • 38686 2022-002
    Material Weakness
  • 38687 2022-003
    Material Weakness
  • 615118 2022-001
    Material Weakness
  • 615119 2022-002
    Material Weakness
  • 615120 2022-003
    Material Weakness
  • 615121 2022-001
    Material Weakness
  • 615122 2022-002
    Material Weakness
  • 615123 2022-003
    Material Weakness
  • 615124 2022-001
    Material Weakness
  • 615125 2022-002
    Material Weakness
  • 615126 2022-003
    Material Weakness
  • 615127 2022-001
    Material Weakness
  • 615128 2022-002
    Material Weakness
  • 615129 2022-003
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
14.239 Home Investment Partnerships Program $606,063
14.218 Community Development Block Grants/entitlement Grants $133,937
14.881 Moving to Work Demonstration Program $75,349
14.267 Continuum of Care Program $34,050