FAC Explorer

Finding 398104 (2023-001)

Material Weakness
Requirement
L
Questioned Costs
-
Year
2023
Accepted
2024-05-21
Audit: 306847
Organization: Talbot County, Maryland (MD)
Auditor: Sb & Company LLC

AI Summary

  • Core Issue: Inadequate controls over the bank reconciliation process led to delays and inaccuracies.
  • Impacted Requirements: Commingling of accounts complicated reconciliations, risking unnoticed errors that could affect financial statements.
  • Recommended Follow-Up: Implement monthly reconciliations for all bank accounts and investigate any suspicious items promptly.

Finding Text

Condition and Context: Management did not have adequate controls over the bank reconciliation process to ensure that the reconciliation was completed on a timely and accurate basis. Criteria: The Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control – Integrated Framework defines control activities as “policies and procedures that help ensure management’s directives are carried out.” Effect or Potential Effect: Management included multiple bank accounts in a single general ledger account. Additionally, management included due from/due to accounts within cash account transactions which led to commingled activity within the general ledger account and thus reconciliation to the bank statements a more challenging process. As a result, management recorded journal entries during the audit to correct the general ledger for previous month ends. This could have allowed unidentified errors to go unnoticed during the fiscal year which potentially could have been material to the financial statements. The potential effect is that accurate information may not be available on a timely basis to make management decisions. Questioned Costs: None. Recommendation: During the audit, we were informed by management that the yearend bank statements were not accurately reconciled to the general ledger on a timely basis. Most of the problems encountered within the area of cash can be avoided if a proper system of checks and balances is incorporated into the County’s procedures. We recommend that all of the bank accounts be reconciled monthly to specific general ledger accounts and that all suspicious reconciling items be promptly investigated and adjusted with adequate explanations. Views of Responsible Officials: Management agrees with the finding. Refer to the schedule of corrective action plans section in this report.

Corrective Action Plan

First, we created a general ledger account for each bank account, which involved the rewrite of multiple processes, including changes in our software. We then needed to address reconciliation of past banking and general ledger transactions that were recorded using the old processes. To achieve this step, we contracted for accounting services with a firm independent of our auditors. This firm is reconciling every cash transaction in our general ledger going back to July l, 2022, to the present day. The third step of our plan involves contracting with this same firm to work with the County and its financial software company to set up our cash management software module so that we may eliminate the manual process by leveraging technology to reconcile our multiple bank accounts on a monthly basis.

Categories

Subrecipient Monitoring Internal Control / Segregation of Duties

Other Findings in this Audit

Programs in Audit

ALN Program Name Expenditures
21.027 Arpa Funds, Coronavirus State and Local Fiscal Recovery Funds (cslfrf) $1.82M
21.023 Emergency Rental Assist Program $1.26M
20.106 Airport Improvement Program 52 $1.12M
20.509 Cares-Mta Grant $639,318
20.509 5311 Operating Assistance Fy 23 $315,272
10.760 St. Michael's Sewer System Improvement $281,300
20.106 Airport Improvement Program 51 (arpa) $148,000
20.509 5311 Operating Assistance Fy 22 $92,695
20.106 Airport Improvement Program 48 Coronavirus Response and Relief Supplemental Appropriation (crrsa) $91,162
20.106 Airport Improvement Program 50 $84,416
97.042 Emergency Management Performance ('21) $72,505
20.509 5311 Capital Assistance (preventative Maintenance) Fy 23 $24,000
97.067 Homeland Security Grant ('19) $21,903
97.042 Emergency Management Performance ('21) Arpa $20,680
97.042 Emergency Management Performance ('20) $19,841
97.067 Homeland Security Grant ('20) $16,178
97.067 Homeland Security Grant ('21) $16,178
14.228 Housing Infrastructure $15,155
97.047 Hazard Mitigation Program $9,750
20.509 5311 Capital Assistance (preventative Maintenance) Fy 22 $6,745
20.616 Highway Safety Program (impaired Driving) $2,082
20.600 Highway Safety Program (occupant Protection) $1,686
20.600 Highway Safety Program (speed Enforcement) $1,000