Finding Text
Finding #2023-001 – Material Weakness – Accounting Recordkeeping
All Programs
Other
Criteria
Accounting tasks such as timely monthly analysis, reconciliations and review of accounts play a key role in providing the accuracy of accounting data and information included in the interim and year-end financial statements. Trial balances should be maintained for the Organization continuously, in accordance with U.S. GAAP. Detailed supporting schedules should be maintained for all significant asset, liability, revenue and expense accounts. Reconciling items should be investigated and resolved in a timely manner. All of the forementioned items are essential to ensure that financial statements and data collection forms are submitted in conformance with 2 CFR Section 200.512(a)(1).
Condition
During the year ended June 30, 2023, management was unable to provide timely year-end trial balances in
accordance with U.S. GAAP without significant adjusting journal entries required to accurately reflect the underlying accounting transactions.
Cause
The significant delay was caused primarily due to significant turnover in personnel within the accounting/finance
department and efforts related to a merger between HopePHL and Youth Service, Inc., which resulted in a backlog of recording transactions, and in reconciliations not being performed timely.
Effects
Not performing timely and complete monthly and year-end account reconciliations and closing procedures leads to a continually and growing backlog of transactions and journal entries that are not posted to the accounting system, which renders the accounting information ineffective for making well-informed business decisions.
This has led to the expenditure of significant time and effort by many to complete the required reconciliation
procedures and prevented the timely delivery of financial statements to management, board members and funders. In addition, this led to the Organization to be noncompliant with required deadlines for Uniform Guidance and Data Collection Form submission.
Questions Costs
None.
Perspective
This audit finding is systematic.
Statistical Sample
A statistical sample is not applicable to this finding.
Repeat Finding
This audit finding is not a repeat finding.
Recommendation
We recommend that individuals overseeing the accounting and finance department continue to review the
Organization's current accounting policies and update existing policies or implement new policies, as needed, to
ensure that the trial balances are accurately maintained throughout the year, reconciliations are completed and
reviewed monthly or quarterly, as appropriate, and the trial balances and related supporting schedules are prepared and reviewed timely after year-end.
Views of Responsible Officials
Management agrees with the finding.
Management has implemented a structured monthly closing process to ensure timely and accurate recording of
transactions. All balance sheet accounts will be reconciled by the 15th day of the following month. We will develop and implement a month-end and year-end closing checklist based on U.S. GAAP and, as necessary, any city, state, or federal reporting requirements. We are also evaluating current staffing levels to determine if there is a need to hire additional personnel or retain external accounting support during the year-end closing process. We will conduct a pre-closing review in the 4th quarter to identify and resolve discrepancies prior to year-end. We will also prepare a preliminary trial balance and draft financial statements by July 31 to allow sufficient time for audit fieldwork. The Finance Committee of the HopePHL Board of Directors will receive quarterly updates on the status of the monthly financial closing process.