Finding Text
Criteria: The District should have internal control policies and procedures surrounding the administration and monitoring of financial activity of the District on a routine, timely basis. Properly designed and implemented internal controls should ensure that account balances (cash, withholdings, other) and activity associated with revolving accounts are formally Reconciled and monitored on a routine basis. Condition: The District did not perform timely reconciliation and close-out of fiscal activity throughout fiscal year 2023. The District hired a third-party consultant to assist with the close-out and year end reporting to the Massachusetts Department of Revenue for the fiscal year ending June 30, 2023. This was performed in January 2024. The prior year audit (for the year ended June 30, 2022) was issued January 2024. As we have recommended in prior years, formalized policies, and procedures to ensure timely reconciliation of activity (cash, withholdings, other) and disposition of identified variances have not yet been fully implemented. Potential Effect: Lack of timely reconciliations, reporting and monitoring of financial activity presents the reasonable possibility that material misstatements of the District’s financial activity (error or otherwise) will not be prevented or detected and corrected in a timely manner. Cause: As noted in the prior audit, the District has experienced significant turnover in certain key positions (Business manager, accountant) and other staffing issues. These staffing issues and additional complexities associated with navigating the development and passage of a new regional agreement, continued to delay overall completion of work. For the June 30, 2023, the District hired a third-party consultant for assistance with the close-out and required filings with the Commonwealth of Massachusetts. Auditor’s recommendation: Based upon our discussion with current personnel, the District continues to work to improve upon the timeliness of financial reporting. Current personnel are striving to evaluate and make additional enhancements to current processes. In our professional opinion, it is important for management and those charged with governance to routinely review the design and implementation of internal controls surrounding financial reporting and compliance with laws and regulations to ensure timely reconciliation, reporting, monitoring of all financial activity. An effectively designed, implemented, and maintained internal control system (no matter the size of the organization) addresses certain key areas such as (a) reliability of the organization’s financial reporting, (b) the effectiveness and efficiency of its operations, and (c) its compliance with applicable laws and regulations. Considerations in evaluating the design and operations of internal control should be evaluated within the basic five components summarized as follows: control environment (tone of the organization/structure); risk assessment (identification, analysis and management of risks affecting financial reporting); information systems (procedures and records established to initiate, authorize, record and process transactions; resolve incorrect processing; account for overrides of systems or bypassing controls; ensure information is accumulated, recorded, processed, summarized, reported and maintained); control activities ( policies and procedures that assist in ensuring management directives are carried out); and monitoring (accessing the quality of internal control over time). In addition to ensuring the adequacy of staffing, management should evaluate potential cross-training of personnel, which can provide additional benefits in times of staffing turnovers. It continues to be important that all risk assessments include formal documentation of evaluations and decisions made. Additionally, expected timelines, and reporting methodologies should be established which provide reasonable monitoring activities, which allow for prevention, detection and correction of errors and misstatements in a timely manner. Current accounting and auditing standards continue to emphasis and require additional and more comprehensive and in-depth participation by the governing body in regard to the overall risk assessment and monitoring of financial activities of the organization. View of Responsible Official and Planned Corrective Action: I concur with the auditor’s findings. The District is reviewing current staffing of the Business Office. The District Leadership team has requested additional staffing, potentially in the roles of Grants Management, additional Accounting staff, and additional Treasurer staff. These positions were not provided for in FY25 due to a challenging budget cycle. It is understood that these additional staff will assist in addressing the issues of: Reliability of District’s financial reporting, Effectiveness and efficiency of its operations, Compliance with applicable laws and regulations. In addition, Business Office policies and procedures will be documented and staff will receive professional development to ensure their understanding. The School Committee has been made aware that lack of additional staff has hampered progress on this.