Finding 405927 (2023-002)

Material Weakness Repeat Finding
Requirement
BL
Questioned Costs
-
Year
2023
Accepted
2024-07-01
Audit: 311459
Auditor: Wipfli LLP

AI Summary

  • Core Issue: Lack of written procedures for journal entry reviews and missing approvals indicate weak internal controls.
  • Impacted Requirements: Non-compliance with Uniform Guidance 200.303(a) due to inadequate segregation of duties and oversight.
  • Recommended Follow-Up: Implement formal procedures for journal entry reviews and reassess the Chief Financial Officer's responsibilities.

Finding Text

Journal Entry Review and Segregation of Duties Condition: IMPACT does not have a written fiscal procedure for the review of journal entries. The Chief Financial Officer is responsible to preparing and posting journal entries to the general ledger. IMPACT’s practice is the Chief Operating Officer would review and approve the journal entries posted by the Chief Financial Officer. During the audit, Wipfli selected 9 journal entries to review for the Chief Operations Officer's approval. 7 of the 9 entries selected were missing approvals. The Chief Financial Officer is also an authorized check signer for the agency, has access to the checks, and maintains the user rights within the accounting software. A segregation of duties does not exist within the responsibilities of the Chief Financial Officer as this role has full access to the accounting system, have physical access to IMPACT’s cash, and is an authorized check signer. Criteria or Specific Requirement: Uniform Guidance 200.303(a) states a non-federal entity must “establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” Effect: A material weakness in internal control over financial reporting exists due to the lack of reviews surrounding journal entries, missing supporting documentation for journal entries, and a lack of segregations of duties within the Chief Financial Officer position. Cause: Rapid growth of new funding without a corresponding increase in fiscal personnel has resulted in additional responsibilities placed on the Chief Financial Officer and Chief Operating Officer. The transition to remote working has also resulted in difficulties with handling electronic documentation and approvals. Repeat: Yes - Years as repeat finding: Two 2022-002 Auditor's Recommendation: We recommend IMPACT implement procedures surrounding the journal entry review and approval process and review the duties assigned to the Chief Financial Officer position. View of Responsible Officials: Management agrees with the finding and has developed and begun implementation of a corrective action plan.

Corrective Action Plan

Management’s Response: Management agrees with the finding. Contact Person Responsible for Corrective Action: Anne Bacon, CEO Corrective Action Plan: The auditor finding concludes that the cause of the finding is: “Rapid growth of new funding without a corresponding increase in fiscal personnel has resulted in additional responsibilities placed on the Chief Financial Officer and Chief Operating Officer. The transition to remote working has also resulted in difficulties with handling electronic documentation and approvals.” An additional cause was the previous CFO’s decision to bypass the outlined process and not submit the journal entries for review. To address these causes, IMPACT Community Action Partnership will follow a rectifying course of action. 1. Remove CFO that was responsible for reconciliations (complete) 2. Hire an interim Controller to assess and rectify all fiscal internal controls (complete) 3. Do not grant check signing capability to the controller (complete) 4. Edit or official, board approved Fiscal Procedures to include process for the review of journal entries (August 2024) 5. Procure a more robust fiscal software that permits more efficient electronic record review. (complete) Anticipated Completion Date: August, 2024

Categories

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

Other Findings in this Audit

  • 405922 2023-001
    Material Weakness Repeat
  • 405923 2023-001
    Material Weakness Repeat
  • 405924 2023-001
    Material Weakness Repeat
  • 405925 2023-001
    Material Weakness Repeat
  • 405926 2023-001
    Material Weakness Repeat
  • 405928 2023-002
    Material Weakness Repeat
  • 405929 2023-002
    Material Weakness Repeat
  • 405930 2023-002
    Material Weakness Repeat
  • 405931 2023-002
    Material Weakness Repeat
  • 405932 2023-003
    - Repeat
  • 982364 2023-001
    Material Weakness Repeat
  • 982365 2023-001
    Material Weakness Repeat
  • 982366 2023-001
    Material Weakness Repeat
  • 982367 2023-001
    Material Weakness Repeat
  • 982368 2023-001
    Material Weakness Repeat
  • 982369 2023-002
    Material Weakness Repeat
  • 982370 2023-002
    Material Weakness Repeat
  • 982371 2023-002
    Material Weakness Repeat
  • 982372 2023-002
    Material Weakness Repeat
  • 982373 2023-002
    Material Weakness Repeat
  • 982374 2023-003
    - Repeat

Programs in Audit

ALN Program Name Expenditures
21.023 Covid-19 Emergency Rental Assistance Program $22.68M
93.568 Low-Income Home Energy Assistance $13.71M
93.569 Community Services Block Grant $962,119
93.499 Covid-19 Low Income Household Water Assistance Program $758,824
14.218 Community Development Block Grants/entitlement Grants $199,383
81.042 Weatherization Assistance for Low-Income Persons $180,086
14.239 Home Investment Partnerships Program $111,041
97.024 Emergency Food and Shelter National Board Program $5,926