Finding 51634 (2022-001)

Finding 2022-001 - Lack of Fiscal Oversight by a Trained Accountant due to staff transition, Assistance Listing 21.023 COVID 19 Emergency Rental Assistance Program Criteria: Government Auditing Standards require adequate internal controls over accounting functions to maintain proper accounting. These internal controls should reduce to a relatively low level the risk that inaccurate contract financial reporting for federal grants that are material in relation to a federal program being audited may occur and not be detected in a timely manner by employees in the normal course of performing their assigned functions. Thus, good accounting oversight should reduce to a relatively low level the risk of material financial misstatement. The financial statements are required to be prepared accurately using the accrual basis of accounting. Condition: Thirteen audit adjustments were required to correct account balances due to new staff?s inexperience and lack of fiscal oversight by a trained accountant with year-end closing procedures. Cause of Condition: Due to personnel changes in the organization. The organization?s licensed CPA staff person left the geographic area in the middle of the fiscal year and was replaced by unlicensed accounting staff. Potential Effect: Lack of fiscal oversight by a trained accountant may provide opportunities for errors or fraud to occur and cause material misstatements of the financial statements. Questioned Costs: None Context: The new fiscal personnel was not a licensed CPA. They transitioned into the position mid-year and were not fully familiar with the system or all accounting processes, and some account balances were not reconciled correctly prior to the audit. During the audit process, the staff performing the field audit identified accounting errors and provided guidance on proper accounting procedures to the organization's accounting staff. Recommendation: Best practice is to have accounting oversight by a trained accountant to ensure standard accounting procedures are followed, resulting in a higher likelihood of accuracy of the financial statements. This might include monthly and year-end review of account balances by a trained accountant as part of the closing process. Also included might be reconciled subsidiary ledgers for most balance sheet accounts and major revenue accounts.