Finding Text
Criteria: The Organization’s regulatory agreement provides that the Organization’s books and accounts must be complete, accurate, and current at all times. Posting must be made at least monthly to the ledger accounts, and year-end adjusting entries must be posted promptly in accordance with sound accounting principles. Additionally, the Organization has reporting objectives under Uniform Guidance that require books to be maintained under the accrual basis of accounting and follow GAAP.
Condition: The Organization lacks sufficient controls surrounding financial reporting, year-end close, and oversight of the Organization’s financial reporting and internal controls by those charged with governance.
Cause: The Organization failed to ensure proper oversight over those in the accounting and financial reporting function. The Organization also maintains their books and records on a cash-basis throughout the year. Substantial corrections are required to bring the Organization’s financial statements in compliance with GAAP.
Effect: The issue discussed above resulted in preliminary balances being misstated and required a large number of material adjustments to correct the balances. The matter is considered a finding and a significant deficiency in internal control over financial reporting and on compliance in accordance with Government Auditing Standards.
Recommendation: We recommend that the Organization review the month-end and year-end closing procedures in order to determine what additional internal controls are needed to ensure the books and records are in accordance with generally accepted accounting principles throughout the year. We recommend formal month-end and year-end closing schedules which include all tasks necessary to close the books be established. As part of the tasks, the Organization should reconcile the general ledger accounts for all significant balances to supporting documentation on a monthly basis.
Views of Responsible Officials: The Organization agrees with the finding and the auditors’ recommendation will be completed. Management will record all adjusting entries and will implement measures to ensure all supporting schedules and documents are reconciled to the underlying general ledger accounts consistently and timely going forward.
Condition Status: In Progress
Repeat Finding: Yes; finding is a repeat from prior audit finding 2022-001.