Finding 478372 (2023-001)

Material Weakness
Requirement
P
Questioned Costs
-
Year
2023
Accepted
2024-07-12

AI Summary

  • Core Issue: Financial reporting procedures were not consistently followed, leading to material misstatements in the financial statements.
  • Impacted Requirements: Management must ensure accurate financial statements and effective internal controls, including timely reconciliations and supervisory reviews.
  • Recommended Follow-Up: Management should redesign financial review processes and enhance ERP system use to improve accuracy and accountability in financial reporting.

Finding Text

Criteria – Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Condition – Certain policies and procedures that were in place to ensure accurate and timely financial reporting information were not being followed, such as timely bank reconciliations, reconciliations of other asset and liability accounts to the general ledger, and detailed supervisory or manager level review of work completed. Cause – The Organization historically has not utilized the complete functionality of its Enterprise Resource Planning (ERP) system, and has utilized manual spreadsheets and other documentation for these functions. There has been significant turnover in the Finance Department of the Organization including a long-term employee that was responsible for many of these procedures. The procedures were not effectively reassigned to new employees, and detailed reviews were not regularly performed when procedures were reassigned timely and accurately information. In some instances, these procedures were reassigned multiple times during the year due to turnover. In addition, the Finance Department has taken on larger roles in operating deficiencies of the Organization, which reduces their time devoted to financial reporting. Effect – During our annual audit, there was an increase in the volume of adjustments made to the Organization’s financial statements that in the aggregate, were material to the financial statements, and the 2022 consolidated financial statements were restated. Management reviewed, approved, and accepted responsibility for the audit adjustments before the financial statements were issued. Further, a material misstatement of the financial statement could occur and not be prevented or detected and the Board of Directors and members of management using the Organization’s internal books and records may not have complete and accurate information throughout the year. Recommendation – We recommend management review and/or redesign existing policies in place to have an effective and timely financial statement review and approval process to ensure that necessary adjustments and reconciliations to the general ledger are performed. This process should include reconciling significant statement of financial position line items to supporting schedules each month and at year end, such as bank reconciliations, accounts receivable, accounts payable, debt, depreciation schedules, etc. Auditee's comments and response – Management agrees with the finding. Management is in the process of elevating the level of supervisory personnel across the finance function, more fully implementing its Enterprise Resource Planning system to leverage available technology and system controls, continuing its training and development of team members, and implementing standardized month end procedures and related review processes. Responsible party for corrective action: Angela Riley, Chief Financial Officer. Repeat Finding: No

Corrective Action Plan

Name of contact person – Angela Riley, Chief Financial Officer Corrective action – Management agrees with the finding. Management is in the process of elevating the level of supervisory personnel across the finance function, more fully implementing its Enterprise Resource Planning system to leverage available technology and system controls, continuing its training and development of team members, and implementing standardized month end procedures and related review processes. Proposed completion date – Management has begun the corrective action and is expected to have additional processes in place and training done by December 31, 2024.

Categories

Reporting Internal Control / Segregation of Duties

Other Findings in this Audit

  • 1054814 2023-001
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
21.011 Capital Magnet Fund $4.00M
21.000 Neighborworks America $592,355
21.027 Coronavirus State and Local Fiscal Recovery Funds $277,115
14.267 Continuum of Care Program $158,083
14.218 Community Development Block Grants/entitlement Grants $54,700
93.043 Special Programs for the Aging_title Iii, Part D_disease Prevention and Health Promotion Services $21,560