Finding 524378 (2023-002)

Finding 2023-002: Account Reconciliations and Financial Statement Close Process (Significant Deficiency) Federal Programs: All Federal programs Criteria: Under 2 CFR 200.303, Internal Controls, the Uniform Guidance requires that the grantee must: establish, document and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The year-end schedules supporting certain asset and liability accounts were incorrectly prepared and required revision, resulting in adjustments to ICMEC's consolidated financial statements. In addition, the intercompany assets and liabilities were not reconciled. Due to the above, a significant amount of time was spent by management during the audit process reconciling various accounts which resulted in audit delays. The audit delays, in turn, resulted in additional audit work performed after the original end date of field work. Cause: ICMEC's controls are not adequately designed to ensure timely and accurate reconciliation of asset and liability accounts, including the intercompany assets and liabilities. As a result, significant adjustments were proposed by management and the auditors during the audit. Effect: Without the proper reconciliation of all accounts on a monthly basis, in a timely manner, as well as the proper review and approval of such reconciliations, there exists the potential for reporting errors and misappropriation of funds. Additionally, as a result of these delays, ICMEC did not submit its Data Collection Form in time to be in compliance with the due date of September 30, 2024. Questioned Costs: None noted. Context: Our audit procedures consisted of testwork completed on various asset, liability, support and revenue and expense account balances. We consider our sample and testing to be representative of the population. Identification as a Repeat Finding: Not a repeat finding. Recommendation: We recommend that all asset and liability account reconciliations, including intercompany assets and liabilities, be performed on a monthly or quarterly (at a minimum) basis. We also recommend detailed reviews and approvals of all supporting schedules (and related consolidated financial statements) be performed and contemporaneously documented in the accounting records. Any discrepancies or other issues should be resolved in a timely manner.