Finding 480550 (2023-002)

Material Weakness
Requirement
B
Questioned Costs
-
Year
2023
Accepted
2024-08-06

AI Summary

  • Core Issue: There are unreconciled differences between the general ledger and account detail reports for accounts receivable, inventory, and customer deposits.
  • Impacted Requirements: Compliance with internal control standards as outlined in federal regulations is not being met, specifically regarding monthly reconciliations.
  • Recommended Follow-Up: The authority should review policies and software used for accounting, and ensure monthly reconciliations are conducted to strengthen internal controls.

Finding Text

MONTH END CLOSING-ALN 21.027-FEDERAL PROGRAM-CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS- FEDERAL AGENCY: DEPARTMENT OF THE TREASURY-CRITERIA: CHAPTER 2, PART 200, § 200,303, "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". ONE COMPONENT OF AN EFFECTIVE INTERNAL CONTROL SYSTEM IS PROPER SUPERVISORY REVIEW AND USE OF CONTROL PROCEDURES TO ENSURE ADEUATE DETAIL OF MONTH END FINANCIAL CLOSE ENSURING ASSETS AND LIABILITIES ARE MAINTAINED AND RECORDED. CONDITION: RECONCILIATIONS OF ACCOUNTS RECEIVABLE, INVENTORY AND CUSTOMER DEPOSITS IN PREPARATION FOR YEAR-END FINANCIAL STATEMENTS REVEALED UNRECONCILED DIFFERENCES BETWEEN THE GENERAL LEDGER AND THE ACCOUNT DETAIL REPORTS. CAUSE AND EFFECT: INADEQUATE CONTROL OVER THE SOFTWARE AND RECONCILIATION TO THE GENERAL LEDGER CAUSED THE UNRECONCILED DIFFERENCES. THE DIFFERENCE IN INVENTORY WAS ADJUSTED BY MANAGEMENT. THE DIFFERENCES IN ACCOUNTS RECEIVABLE AND CUSTOMER DEPOSITS WERE NOT MATERIAL TO THE FINANCIAL STATEMENTS AND ADJUSTMENTS HAVE BEEN WAIVED. RECOMMENDATION: I RECOMMEND THE AUTHORITY REVIEW ITS POLICIES AND SOFTWARE UTILIZED TO ACCOUNT FOR THE BALANCE SHEET ITEMS. MONTHLY RECONCILIATION OF INVENTORY, ACCOUNTS RECEIVABLE AND CUSTOMER DEPOSIT DETAILS TO THE GENERAL LEDGER IS A KEY COMPONENT TO INTERNAL CONTROL. RESPONSIBLE OFFICIAL'S RESPONSE: MANAGEMENT WILL WORK WITH THE SOFTWARE COMPANY AND EMPLOYEES TO IMPLEMENT PROCEDURES TO ENSURE MONTHLY RECONCILIATIONS OF BALANCE SHEET ITEMS.

Categories

Equipment & Real Property Management Matching / Level of Effort / Earmarking Internal Control / Segregation of Duties

Other Findings in this Audit

  • 480549 2023-002
    Material Weakness
  • 1056991 2023-002
    Material Weakness
  • 1056992 2023-002
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
11.307 Economic Adjustment Assistance $68,256
21.027 Coronavirus State and Local Fiscal Recovery Funds $30,000