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.