Finding 481360 (2023-001)

Material Weakness
Requirement
P
Questioned Costs
-
Year
2023
Accepted
2024-08-16
Audit: 317399
Organization: Community Action of Napa Valley (CA)

AI Summary

  • Core Issue: Community Action of Napa Valley improperly recorded all revenue and expenses related to a fiscal representative agreement, leading to financial misstatements.
  • Impacted Requirements: Internal controls over financial reporting were inadequate, resulting in non-compliance with generally accepted accounting principles for nonprofits.
  • Recommended Follow-Up: Implement monthly reconciliations of assets and liabilities to ensure accurate financial reporting and compliance.

Finding Text

Finding is for the following federal award Federal Assistance Listing Number Program Name Expenditures 93.569 Community Service Block Grant $ 374,651 Type of Compliance Requirement: Other Finding 2023-001: Internal Control Over Financial Reporting – Fiscal Agency Accounting - Material Weakness Criteria: Internal control over financial reporting requires that personnel with adequate skill, knowledge and experience in Nonprofit accounting and financial reporting oversee the maintenance of an entity's general ledger accounting system, subsidiary records, and external financial reporting processes. Condition: Community Action of Napa Valley is a participant in a fiscal representative agreement with another California nonprofit 501(c)(3) corporation, (an Administrator). Community Action of Napa Valley recorded all revenue and expenses related to the fiscal representative agreement rather than just fees earned for providing these services. Context: Per the agreement, Community Action of Napa Valley has been selected to promptly disburse funds in order to assist the Administrator’s beneficiaries in the applicable counties served, and to be separately compensated by the Administrator for any necessary service fees or agreed upon reimbursements. The accounting for fiscal agency arrangements serving as agent: Community Action of Napa Valley, records the assets received on the Statement of Net Position, along with an offsetting liability. Community Action of Napa Valley does not record any revenues or expenses for the activity, except for the fees received for providing the agency services as required by generally accepted accounting principles for nonprofits using the accrual basis of accounting. Effect: The effect was that the organization did not have controls and procedures in place to prevent the recording of the activity of the California nonprofit 501(c)(3) corporation administering the program in accordance with generally accepted governmental accounting practices. The impact was that revenue and expenses were overstated on the financial reports. Cause: The cause, the auditor’s judgment, was turnover of the financial management staff with adequate skill, knowledge and experience to maintain the organization’s general ledger accounting system, reconciling the account balances on a regular basis, and preparing its annual financial statements. Recommendation: We recommend Community Action of Napa Valley reconcile the asset and offsetting liability to supporting schedules and documentation each month. Views of Responsible Officials and Corrective Actions: Community Action of Napa Valley has participated in the season of sharing program for more than 10 years. So far the practice has been to recognize revenue when funding is received and at the end of the year credit any unused funds to deferred revenue. Per auditor recommendation, CANV will only record assets and offsetting liabilities, not the expense and revenue of any season of sharing activities.

Categories

Cash Management Material Weakness Reporting Internal Control / Segregation of Duties

Other Findings in this Audit

  • 481359 2023-001
    Material Weakness
  • 481361 2023-001
    Material Weakness
  • 481362 2023-002
    Significant Deficiency
  • 481363 2023-002
    Significant Deficiency
  • 481364 2023-002
    Significant Deficiency
  • 1057801 2023-001
    Material Weakness
  • 1057802 2023-001
    Material Weakness
  • 1057803 2023-001
    Material Weakness
  • 1057804 2023-002
    Significant Deficiency
  • 1057805 2023-002
    Significant Deficiency
  • 1057806 2023-002
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
93.045 Special Programs for the Aging_title Iii, Part C_nutrition Services $353,722
93.569 Community Services Block Grant $202,166
93.596 Child Care Mandatory and Matching Funds of the Child Care and Development Fund $112,803
10.558 Child and Adult Care Food Program $54,885
93.575 Child Care and Development Block Grant $51,855
97.024 Emergency Food and Shelter National Board Program $50,000
14.231 Emergency Solutions Grant Program $40,171
10.568 Emergency Food Assistance Program (administrative Costs) $37,313
93.053 Nutrition Services Incentive Program $1,061