Finding 554893 (2023-001)

Material Weakness Repeat Finding
Requirement
ABCIL
Questioned Costs
-
Year
2023
Accepted
2025-04-11
Audit: 353459
Organization: Lincoln Hall (NY)
Auditor: Bdo USA PC

AI Summary

  • Core Issue: Lincoln Hall is not allocating payroll and personnel costs correctly throughout the year, relying on manual year-end adjustments.
  • Impacted Requirements: This violates U.S. GAAP guidelines for cost allocation, affecting the accuracy of financial statements.
  • Recommended Follow-Up: Implement monthly cost allocations in the general ledger to ensure accurate financial reporting and reduce year-end adjustments.

Finding Text

Finding Number: 2023-001 Cost Allocations – (Material Weakness) Information on Federal Program: U.S. Department of Health and Human Services Federal Assistance Listing Number (ALN) Number: 93.676 ALN Name: Unaccompanied Alien Children Program Contract Period: July 1, 2022 through June 30, 2023 Criteria: In accordance with U.S. GAAP, if costs benefit multiple programs, the costs should be allocated to the programs based on the proportional benefit. Additionally, direct costs are those costs that can be identified specifically or directly assigned to such activities relatively easily with a high degree of accuracy. Condition: During our audit, we noted that payroll and the related personnel costs are not being charged directly or allocated to the correct cost center in the Serenic Navigator accounting system monthly. The finance team performs manual calculations of all allocations in Excel at the end of the fiscal year to update the allocations. Questioned Costs: None noted. Context: This is a condition identified during the audit of Lincoln Hall’s June 30, 2023, financial statements. Effect or Potential Effect: We observed that Lincoln Hall did not have formal cost allocation processes in place to properly allocate certain expenses throughout the year. As a result, these expenses were manually adjusted by the Finance team at year-end. Repeat Finding: This is a repeated finding from prior year. See Finding No. 2022-001 on the Summary Schedule of Prior Audit Findings. Cause: Certain non-personnel costs rely on the accurate allocation of personnel costs, which in turn depends on how employees are set up or assigned in ADP. However, there is no effectively established periodic review or assessment process to ensure the accuracy of these assignments throughout the year. Recommendation: The inability to generate financial statements that incorporate the federal and state agency cost allocations prevents Lincoln Hall from presenting functionally accurate interim financial statements. We recommend that these costs be properly allocated on a monthly basis within Lincoln Hall’s general ledger system. Regularly allocating these costs will enable Lincoln Hall to submit accurate and substantiated interim financial data to its funding sources. Additionally, properly tracking and allocating costs monthly will help prevent significant year-end cost reallocations by function. Views of Responsible Officials: Lincoln Hall agrees with the finding. Lincoln Hall continues to take steps to improve this process. See Lincoln Hall's further response to this finding as described in the accompanying management’s planned corrective actions, Appendix A.

Corrective Action Plan

Finding Number: 2023-001 Cost Allocations – (Material Weakness) Planned Corrective Action: The auditors noted that payroll and the related personnel costs are not being charged directly or allocated to the correct cost center in the Serenic Navigator accounting system monthly. The Finance team performed manual calculations of all allocations in Excel at the end of the fiscal year to update the allocations. Beginning in FY 2025, personnel costs are being manually recorded to the correct cost centers in Serenic Navigator each month. A parallel review of employee setups in ADP, our payroll system, led to the reassignment of staff to appropriate cost centers as needed. Going forward, ADP cost center assignments will be reviewed monthly to reflect any departmental changes. These steps are expected to reduce manual adjustments, improve the accuracy of interim financials, and ensure more precise federal and program drawdowns. Person Responsible: The Executive Director and Chief Financial Officer Completion Date: April 30, 2025

Categories

Allowable Costs / Cost Principles Material Weakness

Other Findings in this Audit

  • 554894 2023-002
    Material Weakness
  • 554895 2023-003
    Material Weakness Repeat
  • 554896 2023-004
    Material Weakness Repeat
  • 554897 2023-005
    Material Weakness Repeat
  • 554898 2023-006
    Material Weakness
  • 1131335 2023-001
    Material Weakness Repeat
  • 1131336 2023-002
    Material Weakness
  • 1131337 2023-003
    Material Weakness Repeat
  • 1131338 2023-004
    Material Weakness Repeat
  • 1131339 2023-005
    Material Weakness Repeat
  • 1131340 2023-006
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
93.676 Unaccompanied Children Program $11.60M
10.555 National School Lunch Program $133,232
10.553 School Breakfast Program $48,783