Finding 558075 (2024-001)

Material Weakness Repeat Finding

Requirement

Questioned Costs

Year

2024

Accepted

2025-04-29

Audit: 354936

Organization: Hui No Ke Ola Pono, Inc. (HI)

Auditor: Carbonaro CPAS & Management Group

AI Summary

Core Issue: Significant adjustments to financial statements were needed due to inadequate internal controls and oversight, particularly in disbursement approvals.
Impacted Requirements: Compliance with Uniform Guidance and accurate financial reporting were compromised, increasing the risk of misstatements or fraud.
Recommended Follow-Up: Management should ensure proper documentation for all disbursements and regularly review cancelled checks to strengthen internal controls.

Finding Text

2024-001 – Internal Control over Financial, United States Department of Health and Human Services, Native Hawaiian Health Care 93.932 Criteria: Auditees are responsible for accurate recording and reporting on financial statements. Auditees are also responsible for major program compliance to Uniform Guidance Part 200 requirements. To ensure accuracy and compliance of financials and major program compliance, management is responsible to design sufficient internal control over financials recording and reporting. Condition: As a result of the auditing procedures over the financial statements, significant adjusting journal entries were required that resulted in a material change to the financial statements. In addition, we had the following comments relating to internal controls: Internal control over disbursements - it was noted two out of 25 disbursements tested did not have the proper approval documented on the invoice or the purchase request form. We did note that the check for the disbursement was properly signed by an authorized check signor based on their review of the invoice when signing the check. Review of cancelled checks – it was noted that copies of cancelled checks are not attached to monthly bank statements and a check signor is reviewing images of cancelled checks online. Cause: Due to the personnel turnover in operation and accounting departments, there was a lack of oversight to ensure accurate accounting preparation for the fiscal year. Potential Effect: Lack of sufficient internal controls and monitoring processes increases the likelihood of misstatement and/or fraud. Questioned Costs: None. Recommendation: It is management’s responsibility to review financial statements for accuracy and ensure proper accounting is being performed. The accounting personnel and third party hired by the management to account for and prepare the financial statements should have adequate technical knowledge of Generally Accepted Accounting Standards and how to apply them to the internal procedures for preparing financial statements. In addition to the comments above, recommendation related to improve internal control are as follows: Internal control over disbursements – While we were able to conclude that an authorized check signor approved the disbursement while signing the check we recommend the Organization follow their internal control procedures. These procedures require documented approval on all disbursements, which is noted on the invoice or the purchase request form. Review of cancelled checks - We recommend an authorized check signor review images of cancelled checks monthly either online or attached to bank statements to ensure payee names, amounts and approval signatures are reasonable. Repeat Finding: Yes. See Summary Schedule of Prior Audit Findings, Finding 2023-001. Views of Responsible Officials of the Auditee: The Accounting Department has taken better control and accountability in handling accounting and financial internal control processes and month-end journal entries that have allowed more insights and understanding of financial data. The Organization concurs with the finding and recommendation. See Management Responses and Corrective Action Plans.

Corrective Action Plan

2024-001-Internal Control over Financial, United States Department of Health and Human Services Administration, Native Hawaiian Health Care 93.932 Significant adjusting journal entries Due to the high turnover of fiscal staff in previous years, the Organization fell behind in our audits. Therefore, many adjusting entries were required to reconcile accounts, while upkeeping the current financial state of the Organization during fiscal year’s 2024 and 2025, accordingly. In addition to the high turnover, during fiscal year 2024, Maui experienced devastation with the Lahaina wildfires, which led to an increase of funding from donors to support the communities’ needs to recover. Again, our staff were challenged to meet the demands of the requirements of the funding and continue to monitor the previous fiscal year and the current fiscal years financial state. Internal control over disbursements We have made significant improvements from prior years in internal control processes, with regards to disbursements. With the turnover of staff, there was no communication of fiscal internal controls. Since the turnover, we have hired new staff and implemented processes and reviewed the internal controls policies with the new staff to address these issues. We expect these issues to be resolved in fiscal year ending 2025, as these findings have been carryover issues from previous years. Review of cancelled check images During fiscal year 2022, the bank statements no longer included copies of cancelled checks. Due to this change, the cancelled check images are available online. As of January 2025, the Executive Director reviews cancelled check images online monthly. She also reviews the bank statements for awareness of the transactions and balances of accounts monthly.

Other Findings in this Audit

558076 2024-001

Material Weakness Repeat
558077 2024-001

Material Weakness Repeat
558078 2024-002

Material Weakness Repeat
558079 2024-001

Material Weakness Repeat
558080 2024-001

Material Weakness Repeat
558081 2024-001

Material Weakness Repeat
1134517 2024-001

Material Weakness Repeat
1134518 2024-001

Material Weakness Repeat
1134519 2024-001

Material Weakness Repeat
1134520 2024-002

Material Weakness Repeat
1134521 2024-001

Material Weakness Repeat
1134522 2024-001

Material Weakness Repeat
1134523 2024-001

Material Weakness Repeat

Programs in Audit

ALN	Program Name	Expenditures
84.259	Native Hawaiian Career and Technical Education	$502,061
93.932	Native Hawaiian Health Care Systems	$100,042
93.866	Aging Research	$27,780
84.362	Native Hawaiian Education	$16,341