Finding 554471 (2022-008)

Material Weakness 2022-08 Federal ALN Number 94.011 - Deficiencies in Complying with 2 CFR Section 200.403(g) - Adequate Documentation Criteria: Compliance with 2 CFR Section 200.403(g) necessitates adequate documentation of expenses. Invoices aid in the organization's expense tracking efforts, facilitating the allocation of costs to specific accounts or projects. Additionally, they serve as a tool for reconciling financial statements and accounts, ensuring the alignment of recorded disbursements with actual expenditures, and fostering financial integrity. Condition: We have observed the following issues related to Federal ALN Number 94.011: a. We selected samples for cash disbursements testing and noted that out of the 40 samples selected, 19 of them lack supporting invoices. b. Schedule of federal awards (SEFA) total disbursements does not tie up with the total expenditures per general ledger (GL). Cause of Condition: This internal control over financial closing and reporting process is not being observed: a. All journal entries, including nonstandard/nonroutine entries, have adequate supporting documentation and are reviewed and approved independently prior to posting. b. The organization has accounting procedures, charts of accounts, etc., for identifying and recording receipts and expenditures of program funds separately and in the appropriate cost category for each award or grant. Effect: The absence of supporting invoices and checks can lead to inaccuracies, incompleteness in the financial records and non-compliance with regulatory standards, especially 2 CFR Section 200.403(g). Without proper documentation, it becomes challenging to verify the legitimacy and details of the disbursements, which may result in errors or omissions and possibility of disallowed cost. Lack of supporting invoices may also result to difficulty in properly allocating expenses to different programs of the Organization. Questioned Cost: $11,261 for the lack of invoices while $1,336 for the variance between SEFA and GL Recommendation: Implement a documentary management system that can help the Organization keep its financial documents organized and easily accessible. Also, develop a document retention policy which sets guidelines that determine how long financial documents should be retained and when they should be disposed of. A well-designed document retention policy can help the Organization comply with legal and regulatory requirements while reducing storage costs. Recommendation: Implement a documentary management system that can help the Organization keep its financial documents organized and easily accessible. Also, develop a document retention policy which sets guidelines that determine how long financial documents should be retained and when they should be disposed of. A well-designed document retention policy can help the Organization comply with legal and regulatory requirements while reducing storage costs.