FAC Explorer

Finding 394321 (2023-001)

Significant Deficiency
Requirement
B
Questioned Costs
$1
Year
2023
Accepted
2024-04-24
Audit: 304318
Organization: Choanoke Area Development Associaion, Inc. (NC)
Auditor: Mpcompany LLP

AI Summary

  • Core Issue: There is a significant deficiency in internal control over financial reporting, specifically related to the timing of recording expenditures.
  • Impacted Requirements: The Association failed to properly track and record services received and invoiced after the fiscal year end, leading to an overstatement of expenditures.
  • Recommended Follow-Up: Develop a process for managing late invoices and provide training to staff to ensure expenses are recorded in the correct fiscal year.

Finding Text

Type of Finding: Significant deficiency in internal control over financial reporting. Criteria: A system of internal control over financial reporting includes controls over recording revenues and expenditures within the appropriate fiscal period. Condition and Context: During the course of the audit, an overstatement of current year expenditures was identified. Questioned Costs: $58,384 Cause: The Association did not have a process in place for tracking services received during the fiscal year and invoiced after the fiscal year end in accordance with generally accepted accounting principles. Effect: There was an understatement of the Association’s net assets without donor restrictions as of the beginning of the audit period and an overstatement of the Association’s total expenditures at the end of the audit period. Recommendation: The Association should develop a process and control for oversight of invoices received after fiscal close for services received during the fiscal year. Responsible Official’s Response: The Choanoke Area Development Association did receive the invoice dated November 8, 2022. CADA did not expense the invoice in the proper fiscal year of the Association. This invoice came after the closing of the prior year. The Association closed for the June 30, 2022 fiscal year in October 12, 2022. The Association’s accounting department recognizes the importance of ensuring that expenses are in the proper actual Association’s fiscal year. Therefore, whenever this situation occurs, the accounting department will reopen the proper year and account properly those invoices in the corresponding year then re-close. CADA will notify/remind vendors to submit vendor invoices timely. CADA programmatic and accounting staff will examine all invoices in accordance with fiscal policy requirements to ensure authorized posting in correct fiscal year. The Executive Director and the Finance Director will provide training to staff on the changes to the Fiscal Policy emphasizing the requirement to ensure that invoices are reconciled in the correct fiscal year.

Corrective Action Plan

The Association will update the procedures for review and posting of invoices for proper cutoff dates. Currently, our cutoff policy is the end of the month. CADA will amend the Fiscal Policy to add that accounting staff will carefully review all invoices to ensure that CADA has reconciled each authorized invoice for payment in the correct fiscal year, with proper coding and authorizations. Accounting staff will check with service providers/vendors to ensure that CADA has received all invoices/purchase orders for a fiscal year prior to final closing of the fiscal year. The CADA Executive Director and Finance Director will present recommended Fiscal Policy changes to the Association’s Fiscal and Executive Committees for their review and input. After the Committees’ review and input, the Chairs of The Executive and Finance Committees will present the recommended changes to the Fiscal Policies to CADA’s full Board for approval. Upon Board approval of the Amended Fiscal policy, the Finance Director will train the accounting staff about the fiscal policies changes and instruct staff to implement the policy changes. The Executive Director and Fiscal Director will provide oversight throughout the year including requiring staff to check with service providers to ensure that the vendors have submitted all invoices for the fiscal year and all purchase orders reconciled or cleared by end of fiscal year. Proposed Completion Date: June 30, 2024.

Categories

Questioned Costs Internal Control / Segregation of Duties HUD Housing Programs Reporting Significant Deficiency

Other Findings in this Audit

  • 970763 2023-001
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
14.871 Section 8 Housing Choice Vouchers $1.46M
93.600 Head Start $343,154
93.568 Low-Income Home Energy Assistance $233,679
10.558 Child and Adult Care Food Program $222,751
81.042 Weatherization Assistance for Low-Income Persons $182,131
17.259 Wia Youth Activities $168,545
14.239 Home Investment Partnerships Program $134,870
93.569 Community Services Block Grant $105,573
97.024 Emergency Food and Shelter National Board Program $18,202