Finding Text
Criteria: Dekalb Preparatory Academy, Inc. (“the School”) management is responsible for having internal controls and procedures in place to accurately report the results of its operations, close its books, and properly prepare the financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP). This includes properly recognizing expenses and revenues in the proper period on the accrual basis of accounting.
Condition: The lack of appropriate policies, procedures, and internal control processes led to a failure to accurately record financial information in the proper period and resulted in material audit adjusting entries.
During the audit, auditor proposed adjusting journal entries were proposed for the following: Capitalization of fixed asset additions, correction of overstated prepaid expenses and accounts payable, proper recording of deferred outflows related to pension contributions, correction of misstated accrued payroll liabilities and correction of beginning balances of fixed assets and accumulated depreciation.
Cause: The School has experienced turnover in its accounting department function. This has led to a failure to establish adequate internal control processes to detect and prevent inaccurate financial reporting, as well as a failure in properly oversighting outsourced accounting personnel. Marshall Jones notes the School hired a permanent inhouse CFO subsequent to year end.
Effect: Insufficient internal controls over financial reporting could result in accounting errors or material misstatement due to error or fraud.
Recommendation: Marshall Jones recommends that the School receive additional assistance in improving their financial reporting processes from individuals who are familiar with GAAP. Marshall Jones also recommends that management establish policies and procedures to ensure that management level reviews of monthly and annual financial information are performed on a timely basis.
Views of Responsible
Officials: Management of the School acknowledges the finding. Please refer to the Corrective Action Plan.