Finding Text
2022-01 - Account Reconciliations (Material weakness in internal controls)
Criteria:
Code of Federal Regulations requires that recipients of federal awards maintain adequate documentation and records to support the transactions recorded by the organization and the financial reports generated during the year.
Condition:
Several of the general ledger accounts required significant adjustments and clean up in order to be presented in accordance with U.S. generally accepted accounting principles and to agree to supporting documentation at June 30, 2022.
Cause:
During the year ended June 30, 2022, unusually high turnover and new personnel within the accounting department continued to lead to many delays in performing accurate and timely month end account reconciliations during the year.
Effect:
Delays were encountered which resulted in the organization being unable to submit the Single Audit reporting package by the deadline required by Uniform Guidance. In addition, various funding agencies were not provided with a timely annual audit report as required.
The preparation of accurate and timely financial records in accordance with generally accepted accounting principles is essential to all organizations accepting governmental funding. Without adequate financial records, management must base its decisions on incomplete and/or inaccurate information during the year. Additionally, an inadequate accounting system can result in cash flow shortages, inaccurate reports to funding agencies, and cause other problems detrimental to the success of the Organization's mission. Transactions must be properly recorded and accounted for in order to:
• Permit the preparation of reliable financial statements and federal reports.
• Maintain accountability over assets.
• Demonstrate compliance with laws, regulations, and other compliance requirements.
Recommendation:
We believe that monthly reconciliations of all general ledger and balance sheet accounts should be performed timely and accurately to quickly identify errors and any needed corrections. If reconciliations are performed infrequently, errors and omissions can occur, resulting in potentially inaccurate financial records which could require significant corrections upon discovery. Any reconciling differences should be corrected before the books are closed for the month. A benefit of monthly reconciliations is that errors do not accumulate but can be identified and attributed to a particular period, which makes it easier to perform future reconciliations.
Management's Response:
The Organization agrees with this finding and will adhere to the corrective action as detailed in the attached Corrective Action Plan