Finding 554368 (2023-001)

Finding 2023-001 – Material Misclassifications • Criteria: A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions to prevent or detect misstatements of the financial statements on a timely basis. AU-C Section 265 Communication Internal Control Related Matters Identified in an Audit, identifies deficiencies in controls over the period-end financial reporting process, including controls over procedures used to enter transactions and journal entries into the general ledger and to record recurring and nonrecurring adjustments to the financial statements that was not initially identified by the entity’s internal controls even if management subsequently corrects the misstatement. • Condition: There were material misclassifications in the financial statements under audit. Multiple accounts were not reconciled on a regular basis. In addition, deposits were not recorded on a timely basis resulting in material errors on the financial data schedule that was submitted to REAC. • Context: Several items were discovered that were misclassified. More specifically, assets, liabilities, revenues and expenses were not able to be verified or reconciled. • Effect: The financial statements of Housing Authority of the City of Conway were not materially correct. • Recommendation: Review procedures for proper classification of expenditures and reconcile accounts on a regular basis. • Views of Responsible Officials and Planned Corrective Actions: We are working with our accountant to resolve the issue. During the current fiscal year, our accountant was not able to access our financial records on a timely basis which resulted in multiple items not being recorded or reconciled.