Finding Text
Internal Control Material Weakness - Financial Reporting, Closing & Board Oversight
Criteria: Management is responsible for implementing proper internal controls surrounding the financial
reporting and closing process on a monthly and annual basis. The reconciliation of bank balances to the
accounting system is the most basic and primary control process performed. Failure to complete accurate
and timely reconciliations may allow for accounting errors, theft, and or fraud to occur without timely
detection. Additionally, failure to provide financial reports to the Board for review in a timely manner
results in ineffective monitoring controls.
Condition: During our audit, we noted the monthly bank reconciliations and monthly financials were not
prepared or reviewed in a timely manner, which led to some transactions not being properly accrued in the
correct accounting period.
Cause: The Station experienced turnover with personnel responsible for preparing and reviewing financial
reports. No backup or contingency plan was in place to ensure financial reporting packages were delivered
to the Board timely for review.
Effect: Failure to complete reconciliations monthly increases the possibility that the Station will not be able
to analyze, classify and record its transactions correctly. Further, the lack of accurate monthly reporting and
review by the Board increases the risk of theft or fraud over the cash cycle and could lead to inaccurate
reporting within the financial statements.
Recommendation: The Station should prepare monthly bank (and other trial balance account)
reconciliations on a timely basis. Any variances should be investigated, documented and corrected. In
addition, the Board should review the monthly financials, including monthly bank reconciliations, and
document the completion of their review and approval.
Management's Response: See Corrective Action Plan