Finding Text
Section II – Financial Statements Findings
Finding No. 2023-001
Material Weakness on Internal Controls over Financial Reporting Requirements
Inaccurate and Incomplete Accounting Records
Criteria
20 CFR 200.510 requires auditees to prepare financial statements that reflect its financial position, results of
operations and changes in net assets for the fiscal year audited. Also, the accounting system established should be
designed to reflect or provide complete and clear information related to the agency's financial results of operations.
It should also provide accurate reports that act as a basis for the preparation and support of the budget needs and
for the control and proper monitoring of the budget.
29 CFR, Part 97, Subpart C, Section 97.20 "Standards for financial management systems", establishes the
following: (a) A State must expand and account for grant funds in accordance with State laws and procedures for
expending and accounting for its own funds. Fiscal control and accounting procedures of the State, as well as its
sub-grantees and cost-type contractors, must be sufficient to (1) Permit preparation of reports required by this part
and the statutes authorizing the grant, and (2) Permit the tracing of funds to a level of expenditures adequate to
establish that such funds have not been used in violation of the restrictions and prohibitions of applicable statutes;
(b) The financial management systems of other grantees and sub-grantees must meet the following standards: (1)
Financial reporting. Accurate, current, and complete disclosure of the financial results of financially assisted
activities must be made in accordance with the financial reporting requirements of the grant or sub-grant; (2)
Accounting records.
Statement of Condition
The entity has no established policies and procedures to ensure that financial statements are prepared with accurate
and reliable information on a timely basis. No adequate and timely recording procedures are performed in the
general ledger accounts. The accounting records were not properly closed, and significant adjustments were made
to the general ledger accounts. The financial information is not reviewed, analyzed and reconciled on a monthly
basis by management.
Management provided an incomplete and inaccurate trial balance resulting in several audit adjustments. The
significant audit adjustments were as follows;
1. Understatement of deferred revenue in the amount of $2.5 million.
2. Adjustment of inventory by $875 thousand.
3. Liability to an agency not recognized in the amount of $220 thousand.
4. Overstatement of accounts receivable by $481 thousand.
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Section II – Financial Statements Findings (Continued)
We can conclude that these situations represent a systemic material weakness in the accounting records that
increase the risks that errors may occur and not be detected in a timely manner. The adjustments were made to the
audited financial statements presented on this report.
Cause of Condition
Management did not perform an accounting closing analysis to assure that all transactions and adjusting entries are
recognized in the financial statements. Lack of adequate accounting procedures for reconciliation and analysis of
the financial transactions recorded during the year.
Effect of Condition
The entity may not be able to detect errors or irregularities on a timely basis. Financial statements may not present
its financial position and results for operations.
Recommendation
The Organization should establish policies and procedures to perform monthly preparation of its financial
statements with complete and accurate information. The adjustments and analysis of accounts should be improved
to obtain financial statements on time for the decision-making process. Management should analyze the balances
and transactions periodically throughout the year to accelerate the accounts analysis and effectively monitor and
perform the year-end closing process.
Management Response
Management concurs with the findings. The closing process will be improved to perform detailed reviews of the
closing process and to obtain reliable and complete general ledger.
Responsible Officials
Mr. Marcos Rivera
CEO