FAC Explorer

Finding 465 (2023-001)

Material Weakness
Requirement
ABCEFGHIJLMNP
Questioned Costs
-
Year
2023
Accepted
2023-10-23
Audit: 1010
Organization: Tmsa, Inc. (GA)
Auditor: Mjco LLC

AI Summary

  • Core Issue: The School has a material weakness in internal controls, leading to inaccurate financial reporting.
  • Impacted Requirements: Failure to adhere to GAAP for timely recognition of expenses and revenues, resulting in significant audit adjustments.
  • Recommended Follow-Up: Seek expert help to enhance financial reporting and establish policies for regular management reviews of financial data.

Finding Text

Internal Control Impact: Material Weakness. Repeat Finding: No. Questioned Costs: None. Criteria: TMSA, Incorporated (the “School”) management is responsible for having internal controls and procedures in place to accurately report the results of its operations, close its books, and properly prepare the financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. This includes properly recognizing expenses and revenues in the proper period on the accrual basis of accounting. Condition: The lack of appropriate policies, procedures, and internal control processes led to a failure to accurately record financial information in the proper period and material audit adjusting entries. During the audit, auditor proposed adjusting journal entries were posted for the following: Current year pension activity in accordance with Governmental Accounting Standards Board (GASB) No. 68, Accounting and Financial Reporting for Pensions, current year lease activity in accordance with GASB No. 87, Leases, correction of duplicate payments, capitalization of property and equipment expenditures, calculation and posting of current year depreciation, correction of unrecorded accounts payable and related expenses, and correction of unrecorded accounts receivable and related governmental revenues. Cause: The School has experienced turnover in its financial department and outsourced accounting function. This has led to a failure to establish adequate internal control processes to detect and prevent inaccurate financial reporting. Effect: Insufficient internal controls over financial reporting could result in accounting errors or material misstatement due to error or fraud. Recommendation: Marshall Jones recommends that the School receive additional assistance in improving their financial reporting processes from individuals who are familiar with GAAP and governmental grant accounting. Marshall Jones also recommends that management establish policies and procedures to ensure that management level reviews of monthly and annual financial information are performed on a timely basis. Views of Responsible Officials: Management of the School acknowledges the finding. Please refer to the Corrective Action Plan.

Corrective Action Plan

September 29, 2023, Audit Period For the Year July 1, 2022 - June 30, 2023, Re: Request for Corrective Action Plan - Material Weakness, The Main Street Academy (TMSA) is in receipt of The Financial Statement Finding from Marshall Jones. TMSA responds as follows:Recommendation: Marshall Jones recommends that the School receive additional assistance in improving its financial reporting processes from individuals who are familiar with GAAP and governmental grant accounting. Marshall Jones also recommends that management establish policies and procedures to ensure that management-level reviews of monthly and annual financial information are performed on a timely basis. Views of Responsible Officials: The management of the School acknowledges the finding and concurs with the recommendation of Marshall Jones and provides the following Corrective Action Plan.Response of Responsible Officials: To continuously improve TMSA’s Accounting and Financial Reporting, workflows, and internal controls, TMSA transitioned back-office accounting providers mid-fiscal year (February 2023) due to various noted back-office operating weaknesses with the previous accounting provider. The previous back-office accounting provider did not set up the books well for continuation and transition. As a result, significant journal entries required correction by the new back-accounting provider to correct and strengthen the overall financials and back-office operating procedures of the organization. The management of the school and the current firm (Belay Accounting) have knowledge in the areas of both GASB and GAAP. The current back-office accounting provider and firm will continue with their existing monthly reviews of TMSA’s financials. The Chief Financial Officer (CFO) of the back-office firm Belay Accounting will work with the management of the school to continue to review the work of the back-office accounting staff monthly, specifically checking for adherence to GASB and GAAP standards. Following the transition from the previous back-office accounting provider to the current back-office accounting provider; the management of the school updated on February 10, 2023, its Financial & Accounting Control Policies & Procedures to further strengthen TMSA’s internal controls.Corrective Action Plan: The management of the school and the back-office accounting provider will continue to seek and attend training, in addition to receiving additional assistance to continue improving the financial reporting processes as recommended. Since the transition to the current back-office accounting provider and firm, monthly and annual financial reviews are currently being performed on a timely basis, which was not the case in the past with the previous back-office accounting provider. The management of the school will work with the CFO and back-office accounting staff to ensure that financial reviews and reporting continue to be performed on a timely basis. In partnership, Chaddrick Owes, Ed.D., Executive Director

Categories

Material Weakness Reporting Equipment & Real Property Management Internal Control / Segregation of Duties

Other Findings in this Audit

  • 576907 2023-001
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
84.425 Education Stabilization Fund $740,773
10.555 National School Lunch Program $435,909
84.010 Title I Grants to Local Educational Agencies $249,482
32.004 Universal Service Fund - Schools and Libraries $84,368