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.