Finding Text
Finding 2023-001:
Criteria: Accounting standards generally accepted in the United States of America (“US GAAP”) establishes criteria for when cash, accounts receivable, accounts payable, fixed assets transactions should be recorded in the financial statements, and how capitalized expenses, debt payments, and accrued expenses should be recorded in the financial statements.
Condition and Context: During the year ended December 31, 2023, the former Executive Director retired prior to a replacement being located. As a result of this transition and the gap in Executive Directors, we identified several audit adjustments that were, both individually and in aggregate, material to the financial statements and several key review processes were no longer occurring.
Cause: The transition to a new Executive Director with a change in skillset was not addressed to compensate for the change in accounting experience.
Effect: Several audit adjustments, both individually and in aggregate, were material to the financial statements. Adjustments were needed to correct cash, accounts receivable, fixed assets, accounts payable, accrued expenses, and debt balances. Some of these adjustments were a result of several key review processes that were no longer occurring, such as:
• Review of expenses and fixed assets for additions, disposals, construction in process placed into service, and recording of accumulated depreciation / depreciation expense.
• Review of accrued liability accounts for balances reflecting the amounts incurred or the best estimate known by management.
• Review of expenses to identify payments made on the principal balance of debt.
• Review of security deposit cash balances to ensure cash is being maintained in a segregated bank account.
• Review of security deposit liabilities to ensure tenant funds are being properly tracked.
• Review of net asset roll forward to ensure transactions are recorded in the proper period and ending net assets are properly stated each period.
• Review of monthly bank reconciliations on a timely basis and review all check images for authorized signatures.
Recommendation: We recommend the Village restructure and hire a controller to assist with the overall accounting cycle. We recommend that management should review their monitoring and reconciliation policies and implement adjustments to these procedures to improve the internal controls in the accounting process.
Responsible Official’s Response: Management will modify its internal control practices to ensure that proper daily and monthly accounting processes and procedures are being followed for all asset and liability accounts by the Business Manager and reviewed timely each month by the Executive Director. Management is in the process of hiring a Controller to assist with monthly accounting cycle, reconciliations, and financial statement reporting, allowing the Executive Director to have more oversight responsibilities for the financial statements as a whole.
Planned Implementation Date of Corrective Action: Management will implement this change immediately.
Person Responsible for Corrective Action: Executive Director in conjunction with advice from the Board of Directors.