Finding 555179 (2023-001)

Material Weakness Repeat Finding
Requirement
ABP
Questioned Costs
-
Year
2023
Accepted
2025-04-16
Audit: 353787
Organization: Porchlight, Inc. (WI)
Auditor: Wipfli LLP

AI Summary

  • Core Issue: Porchlight, Inc. has significant deficiencies in internal controls and compliance over financial reporting, leading to a material weakness.
  • Impacted Requirements: Inadequate documentation for grant expenses, lack of timely reconciliations, and improper authorizations for transactions violate essential fiscal policies.
  • Recommended Follow-Up: Management should enhance business office operations and establish timely closing procedures to ensure accurate financial reporting and compliance.

Finding Text

Condition – During our audit, Wipfli, LLP identified several deficiencies related to Porchlight, Inc.'s internal controls and compliance over financial reporting. Wipfli noted deficiencies in both the design and the execution of the fiscal policies and procedures. Matters identified were as follows: Management was unable to provide individual profit and loss statements for each specific grant award that could be used to verify the accuracy of the information provided on the schedule of expenditures of federal awards. Expenses were recorded to the program expense categories identified in the Statement of Activities but management was unable to provide sufficient audit evidence to identify the specific expenses to specific grant awards. Management was unable to provide adequate audit evidence to substantiate how indirect expenses were allocated to specific expense categories. Proper review and approval of reconciliation's and journal entries in accordance with fiscal policies and procedures was not evident. Essentially all significant general ledger accounts were not reconciled in a timely manner throughout the year. Proper authorizations of cash disbursement transactions was not evident. Financial reports provided to the Board of Directors did not provide an accurate presentation of Porchlight, Inc's financial results based on material adjustments made to signficant account balances during the audit. Material adjusting journal entries to cash, investments, accounts receivable, allowance for credit losses, promises to give and accounts payable were proposed by the auditor and recorded by management during the audit. The financial statements and schedule of expenditures of federal awards were prepared by Wipfli, LLP as the audit information provided did not provide an accurate presentation of Porchlight, Inc's financial results. The primary cause of these deficiencies was the resignation of the Finance Director during the year. Porchlight, Inc. did hire an outside contractor as well as additional finance team members to reconcile accounts in preparation of the financial audit. Subsequent to fiscal year end, a new Finance Director was hired to oversee the fiscal department of Porchlight, Inc. Based on the items noted above, a material weakness exists in Porchlight, Inc.’s internal control and compliance over financial reporting. Criteria – Proper design and execution of Internal controls are essential to ensure effective control over, and accountability for all funds, property and other assets for all programs operated by Porchlight, Inc. Cause – During the audit year, there was turnover in Porchlight, Inc.’s business office which contributed to the lack of timely reconciliation's.Porchlight, Inc. is working on streamlining and implementing processes to address the deficiencies noted in the condition paragraph. Effect – As a result of the financial reporting matters identified in the condition paragraph, a material weakness exists in Porchlight, Inc.'s internal control and compliance over financial reporting. Recommendation – We recommend management and those charged with governance evaluate the operation of the business office and implement adequate and timely closing procedures to ensure that financial statement amounts are being reconciled appropriately and all reconciliation's/purchases/reports are being reviewed. View of Responsible Officials – Management agrees with the assessment and has committed to a corrective action plan.

Corrective Action Plan

To fortify our internal controls over financial reporting, we will introduce new software to streamline data management and reporting processes, ensuring both accuracy and efficiency. Concurrently, we will refine our internal workflows, introducing comprehensive procedural guides to standardize operations and enhance transparency across all departments. Additionally, we'll implement a centralized repository for document storage with stringent retention policies to uphold organized and accessible record-keeping. Finally, we commit to conducting regular, rigorous reviews of financial information by designated personnel, enabling timely identification and resolution of any discrepancies, thereby reinforcing our control environment and safeguarding the integrity of our financial reporting system.

Categories

Reporting Procurement, Suspension & Debarment Material Weakness

Other Findings in this Audit

  • 555180 2023-002
    Significant Deficiency Repeat
  • 555181 2023-001
    Material Weakness Repeat
  • 555182 2023-002
    Significant Deficiency Repeat
  • 555183 2023-003
    Material Weakness
  • 1131621 2023-001
    Material Weakness Repeat
  • 1131622 2023-002
    Significant Deficiency Repeat
  • 1131623 2023-001
    Material Weakness Repeat
  • 1131624 2023-002
    Significant Deficiency Repeat
  • 1131625 2023-003
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
21.027 Coronavirus State and Local Fiscal Recovery Funds $1.03M
14.218 Community Development Block Grants/entitlement Grants $638,906
14.267 Continuum of Care Program $433,557
64.024 Va Homeless Providers Grant and Per Diem Program $430,034
14.228 Community Development Block Grants/state's Program and Non-Entitlement Grants in Hawaii $233,376
97.024 Emergency Food and Shelter National Board Program $10,402
14.231 Emergency Solutions Grant Program $10,000