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.