Finding Text
Criteria - Monthly bank reconciliations to general ledger bank balances is a key internal control when, on an ongoing basis, the cash balance on the balance sheet is substantiated. Bank reconciliations verify the integrity of data between the bank records and an entity’s internal financial records. The nature of the reconciliation control is detective, to uncover errors, missing items, and fraud, and most importantly to validate that the cash on the balance sheet is accurate. To be effective, bank reconciliations should be prepared as soon as possible after the bank balances are available. Unreconciled differences should be identified and disposed of on a timely basis. Condition - During our audit, we noted that KMNH did not prepare a certain bank reconciliation in a timely fashion. We selected one bank reconciliation for testing and noted that the December 2022 bank reconciliation was not prepared on a timely basis. Cause - Due to the limited number of employees and the unforeseen resignation of KMNH’s accountant in 2021, the chief executive officer was unable to prepare the bank reconciliation on a timely basis. Effect - The lack of a timely bank statement reconciliations to general ledger bank balances could result in a material misstatement of KMNH’s bank balances that may not be prevented, or detected and corrected on a timely basis. Identification of a Repeat Finding - This finding was reported as a federal award finding in the immediate previous audit as Finding No. 2021-002. Recommendation - We again recommend that management continue its efforts to engage a third-party accountant. Additionally, we recommend that all bank accounts be reconciled each month on a timely basis. The bank reconciliations should be reviewed for completeness and accuracy by an individual other than the preparer. Unreconciled differences should be identified and properly disposed of on a timely basis. Further, documentation should be maintained as to who prepared and reviewed those bank reconciliations, as well as when those bank reconciliations were completed. Views of Responsible Officials and Planned Corrective Action - KMNH agrees with the finding and recommendation and effective on March 1, 2024, all bank reconciliations are completed within 30 days of bank statement receipt.