Finding 547967 (2024-001)

Significant Deficiency
Requirement
P
Questioned Costs
-
Year
2024
Accepted
2025-03-31
Audit: 351891
Organization: Nuestra Escuela (PR)
Auditor: Rsm Puerto Rico

AI Summary

  • Core Issue: Accrued expenses and grants receivables were recorded incorrectly, leading to financial statement misstatements.
  • Impacted Requirements: GAAP mandates that expenses and receivables must be recognized in the period they are incurred or earned.
  • Recommended Follow-up: Strengthen internal controls, provide training on cut-off procedures, and conduct regular account reviews to ensure accurate financial reporting.

Finding Text

Improper cut-off of accrued expense and grants receivables Category: Internal control -significant deficiency Condition: The Organization did not accurately record accrued expenses and grants receivable at the end of the reporting period. Several invoices and receivables that should have been recorded in the current period were instead recorded in the subsequent period, leading to an understatement of both accrued expense and contributions and grants receivables. Criteria: According to generally accepted accounting principles (GAAP), both accrued expense and grants receivables should be recognized in the period they are incurred or earned, regardless of when the invoice is received, or payment is made. Cause: The improper cut-off was due to inadequate internal controls over the recording of accrued expenses and grants receivables, as well as a lack of understanding of proper cut-off procedures by the accounting staff. Effects: This resulted in misstated financial statements, with both the accrued expense and grants receivables being understated and/or overstated, potentially leading to inaccurate financial reporting and decision-making. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management strengthen internal controls over the recording of accrued expenses and grants receivables, provide additional training to accounting staff on proper cut-off procedures, and conduct regular reviews to ensure that both accrued expense and grants receivables are recorded in the correct period. Management’s response: Nuestra Escuela will ensure that all grants and accrued expenses received are recorded promptly and that services rendered are accounted for in the correct period of accurately. The Administrative Director will perform regular reconciliation of accounts to detect any discrepancies that may indicate cut-off errors. The Administrative staff will take training about the best practices of cut-off procedures and the impact of errors on financial reporting. Nuestra Escuela will reinforce internal audits to review cut-off procedures and ensure they are strictly enforced. Nuestra Escuela is committed to preventing cut-off errors with a proactive approach from accountants, involving a combination of robust procedures, technology, and a culture of accuracy and compliance within the accounting department. By following these best practice, accountants can help ensure the integrity of the financial reporting

Corrective Action Plan

Management response: • Nuestra Escuela will strengthen its processes to ensure that all grants and accrued expenses are recorded promptly and that services rendered are accounted for in the correct period accurately. • The Administrative Director will perform regular reconciliations of accounts to detect, identify, and correct, any discrepancies that may indicate cut-off errors. • The administrative staff and accounting team will receive additional training on the best practices and proper cut-off procedures, emphasizing the importance of timely and accurate recognition of liabilities and receivables and the impact of errors on financial reporting. • Nuestra Escuela will reinforce its internal audit processes to periodically review compliance with cut-off procedures. This practice will involve analyzing the impact of contractual clauses on the period of receipt and use of funds. • Nuestra Escuela will Create documentation of its cut-off policies and procedures to ensure consistent application and understanding among all relevant staff and ensure that they are strictly enforced. • Nuestra Escuela is committed to preventing cut-off errors through a proactive approach from accountants. This involves a combination of robust procedures, leveraging technology, and fostering a culture of accuracy and compliance within the accounting department. By following these best practices, accountants can help ensure the integrity of the financial reporting process. Corrective action plan: Action Date of Compliance Involved areas Reconciliations of each account to identify any discrepancies that may indicate cut-off errors. Monthly Executive President Administrative Director Analyze the impact of contractual clauses on the period of receipt and use of funds. Apr 15 – 2025 Jul 15 -2025 Oct 15 – 2025 Ene 15 - 2026 Executive President Administrative Director Training on the best practices and proper cut-off procedures May 8 - 2025 External Consultant Executive President Administrative Director Directors in charge of Programs Complete file with cut-off policies and procedures Jun 20 - 2025 Administrative Director Directors in charge of Programs   Actions to complete monthly: • Reconciliations of each account to identify any discrepancies that may indicate cut-off errors. Actions to complete quarterly: • Analyze the impact of contractual clauses on the period of receipt and use of funds. • Training on the best practices and proper cut-off procedures • Complete file with cut-off policies and procedures Contact Person: Ana Yris Guzmán – Executive President

Categories

Reporting Significant Deficiency Internal Control / Segregation of Duties

Other Findings in this Audit

  • 547968 2024-002
    Significant Deficiency
  • 547969 2024-001
    Significant Deficiency
  • 547970 2024-002
    Significant Deficiency
  • 547971 2024-001
    Significant Deficiency
  • 547972 2024-002
    Significant Deficiency
  • 547973 2024-001
    Significant Deficiency
  • 547974 2024-002
    Significant Deficiency
  • 547975 2024-001
    Significant Deficiency
  • 547976 2024-002
    Significant Deficiency
  • 547977 2024-001
    Significant Deficiency
  • 547978 2024-002
    Significant Deficiency
  • 547979 2024-001
    Significant Deficiency
  • 547980 2024-002
    Significant Deficiency
  • 547981 2024-003
    Significant Deficiency
  • 547982 2024-001
    Significant Deficiency
  • 547983 2024-002
    Significant Deficiency
  • 547984 2024-003
    Significant Deficiency
  • 1124409 2024-001
    Significant Deficiency
  • 1124410 2024-002
    Significant Deficiency
  • 1124411 2024-001
    Significant Deficiency
  • 1124412 2024-002
    Significant Deficiency
  • 1124413 2024-001
    Significant Deficiency
  • 1124414 2024-002
    Significant Deficiency
  • 1124415 2024-001
    Significant Deficiency
  • 1124416 2024-002
    Significant Deficiency
  • 1124417 2024-001
    Significant Deficiency
  • 1124418 2024-002
    Significant Deficiency
  • 1124419 2024-001
    Significant Deficiency
  • 1124420 2024-002
    Significant Deficiency
  • 1124421 2024-001
    Significant Deficiency
  • 1124422 2024-002
    Significant Deficiency
  • 1124423 2024-003
    Significant Deficiency
  • 1124424 2024-001
    Significant Deficiency
  • 1124425 2024-002
    Significant Deficiency
  • 1124426 2024-003
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
93.575 Child Care and Development Block Grant $245,992
16.575 Office for Victims of Crime (ovc) - Crime Victim Assistance $242,697
93.575 Child Care and Development Block Grant $170,996
21.027 Coronavirus State and Local Fiscal Recovery Funds $147,111
14.218 Community Development Block Grants/entitlement Grants $79,308
93.558 Temporary Assistance for Needy Families $48,585