Finding Text
Condition Found:
During our testing, we noted that there was an unaccounted discrepancy between the bank statement and the reconciliation performed by the School. In addition, we noted material differences between contributions traced in the donor database and the records of the accounting department, which are recorded in the general ledger.
Criteria:
The School should reconcile cash accounts accurately and on a timely basis using the bank balance and the balance per the general ledger. In addition, there should be a reconciliation between the donor database and the general ledger. Reconciliations should be reviewed by a member of management who is knowledgeable in such matters.
Cause:
During the audit, it appeared that a proper bank reconciliation was not performed throughout the year that led to the material differences between contributions tracked in the donor database and the records of the accounting department.
Possible Asserted Effect:
This resulted in cash being understated by approximately $29,000 at year-end. In addition, there could potentially be future material adjustments to cash due to the improper method used to reconcile cash. There was also an approximately $100,000 difference between the donor database and the general ledger.
Repeat Finding:
See Finding 2023-002 for a similar finding in the prior year.
Recommendation:
We recommend that all bank accounts be reconciled monthly and in a timely manner. The School should pursue adding the bank reconciliation module to their accounting software. In addition, reconciliations should be prepared using the bank balance and the balance per the general ledger instead of the check register balance. Lastly, we suggest that a member of management review the bank reconciliations for any unusual items, investigate and fully resolve any such items, and document his or her approval.
We also recommend that management review the cash receipts process. From review of the process of the daily cash receipts log, it includes both cash receipts received in hand along with cash receipts from credit cards. Cash receipts received are deposited either the same day or the next day. However, cash receipts from credit cards are not received until a few days or even a week after. Therefore, the cash receipts log does not agree to bank statements on a daily basis. We strongly suggest that the cash receipts log match the bank statements on a daily basis. This will assist in bank reconciliation process at the end of the month.
Lastly, we suggest that as part of the School’s normal close and reporting process, the donor database be reconciled to the general ledger on a monthly basis. Any differences should be investigated, resolved, and documented on a timely basis.
Management Response:
Proper cash reconciliations are now occurring. In addition, a new donor processing software has been implemented as of July 1, 2024, and a separate bank account has been opened as of October 1, 2024 to track donations.