Finding 520958 (2023-001)

Material Weakness Repeat Finding

Requirement

Questioned Costs

Year

2023

Accepted

2025-01-31

Audit: 340855

Organization: Hui No Ke Ola Pono, Inc. (HI)

Auditor: Carbonaro CPAS & Management Group

AI Summary

Core Issue: Significant adjustments were needed for financial statements due to inadequate internal controls, resulting in 13 material changes.
Impacted Requirements: Compliance with financial reporting standards and Uniform Guidance was compromised, particularly in payroll and disbursement processes.
Recommended Follow-Up: Management should enhance documentation and approval processes for payroll and disbursements, and ensure accurate account reconciliations to prevent future issues.

Finding Text

Internal Control over Financial Reporting, United States Department of Health and Human Services, Native Hawaiian Health Care 93.932 Criteria: Auditees are responsible for accurate recording and reporting on financial statements. Auditees are also responsible for major program compliance to Uniform Guidance Part 200 requirements. To ensure accuracy and compliance of financials and major program compliance, management is responsible to design sufficient internal control over financials recording and reporting. Condition: As a result of the auditing procedures over the financial statements, significant adjusting journal entries were required that resulted in a material change to the financial statements. Specifically, 13 adjustments were needed to fairly state the financial statements in all material respects. In addition, we had the following comments relating to internal controls— Internal control over payroll and disbursements We noted instances where employees’ pay rate approval forms and timesheets are not available to substantiate and document approved pay rates with employees. We noted instances where check and credit card disbursements did not have authorization approval forms to document approval or did not have receipts or invoices to substantiate the expenditure. Internal control over account balances We noted instances where subsidiary schedules and reconciliations did not agree to balances in the general ledger. Cause: Due to the personnel turnover in operation and accounting departments, there was a lack of oversight to ensure accurate accounting preparation for the fiscal year. Potential Effect: Lack of sufficient internal controls and monitoring processes increases the likelihood of misstatement and/or fraud. Questioned Costs: None. Recommendation: It is management’s responsibility to review financial statements for accuracy and ensure proper accounting is being performed. The accounting personnel and third party hired by the management to account for and prepare the financial statements should have adequate technical knowledge of Generally Accepted Accounting Standards and how to apply them to the internal procedures for preparing financial statements. Specific recommendations relating to the comments above are as follows: Internal control over payroll and disbursements We recommend the Organization make extra efforts to ensure required documentation and approvals are obtained on employee’s pay rate forms and timesheets. We recommend the Organization obtain proper approvals on disbursements based on the Organization’s internal control procedure. Internal control over account balances We recommend the Organization maintain an accurate accounts payable schedule to ensure all year end records were properly maintained. Repeat Finding: Yes. See Summary Schedule of Prior Audit Finding, Finding 2022-001 Views of Responsible Officials of the Auditee: Starting early 2023, the Accounting Department has taken better control and accountability in handling accounting and financial internal control processes and month-end journal entries that have allowed more insights and understanding of financial data. The Organization concurs with the finding and recommendation. See Management Responses and Corrective Action Plans.

Corrective Action Plan

Internal control over payroll and disbursements In January 2023 changes to any pay rates were submitted on a Personnel Action Form (PAF) by the Operations Manager. The PAF included the old pay rate and the new pay rate and was submitted to the Executive Director for review and approval. After approval, the form was filed in the employees paper file, as well as uploaded to their electronic record on the ProService platform. In May 2024, we hired a Human Resources Specialist who is responsible for updating and maintaining all personnel files and processing of payroll records. In October 2023, we hired an Accounting Specialist (AS) who is responsible for the processing of all vendor disbursements. Prior to ordering items or services, a Purchase Requisiton (PR) is submitted by the program manager to the Executive Director or Programs Director for review and approval. Upon approval the PR is submitted to the Controller for expense and grant coding. PR is then submitted to the AS to assign a PR number and enter the expenses on the PR tracking log. When the PR has been assigned a PR number it is sent to the Operations Manager for purchasing. When the invoice is received the PR is matched to the invoice indicating proper approvals. If the purchase is over $5,000, a Procurement form is completed to solicit 3 bids and reviewed and approved by the Executive Director. If the purchase is over $20,000, the Procurement form is submitted to the Board of Directors for approval. All Procurement forms are attached to invoices for payment processing. Internal control over account balances During the fiscal year, it was noted that there were credit card entries that were duplicated, and have been corrected as of the date of this report. Due to miscommunication with the previous fiscal staff, payments made by credit card were entered as an invoice and as an adjusting journal entry.

Other Findings in this Audit

520959 2023-002

Material Weakness Repeat
520960 2023-001

Material Weakness Repeat
520961 2023-002

Material Weakness Repeat
520962 2023-001

Material Weakness Repeat
520963 2023-001

Material Weakness
520964 2023-002

Material Weakness
520965 2023-001

Material Weakness
520966 2023-002

Material Weakness
1097400 2023-001

Material Weakness Repeat
1097401 2023-002

Material Weakness Repeat
1097402 2023-001

Material Weakness Repeat
1097403 2023-002

Material Weakness Repeat
1097404 2023-001

Material Weakness Repeat
1097405 2023-001

Material Weakness
1097406 2023-002

Material Weakness
1097407 2023-001

Material Weakness
1097408 2023-002

Material Weakness

Programs in Audit

ALN	Program Name	Expenditures
93.932	Native Hawaiian Health Systems	$1.61M
84.259	Native Hawaiian Career and Technical Education	$501,809
93.866	Aging Research	$18,637
84.362	Native Hawaiian Education	$6,970