Finding Text
Condition: The Organization reconciled significant accounts in the accounting system for December 31, 2022, with assistance by the auditing firm. The auditing firm’s assistance was overseen by an individual with the requisite skills, knowledge, and experience. However, reconciliations were not timely in that some reconciliations were not finalized until late September 2023. In addition, material adjustments were proposed and recorded by management during the audit to adjust accounts such as investments, grants and accounts receivable, accounts payable, and accrued expenses, and the related revenues and expenses, including adjustments of $80,942 to prior period balances and net assets. Additionally, errors in coding of transactions to the correct classes in the general ledger accounting software prevented the Organization from consistently implementing the control of comparing the grant draws and support to the general ledger detail.
Criteria: Uniform Guidance 200.302(b)(4) states each non-federal entity must provide for “effective control over, and accountability for, all funds, property, and other assets.”
Cause: Turnover in the CFO position twice during the year ended December 31, 2022, resulted in a time period where account reconciliations were not being maintained. The former CFO resigned effective March 2022, and her replacement resigned effective December 2022. This required extensive transition of knowledge that contributed to financial reporting delays.
Effect: A material weakness in internal control over financial reporting and over compliance exists due to failure to properly code transactions and to timely reconcile and adjust accounts which led to material adjusting journal entries being identified during the audit process. Where the Organization maintained adequate documentation to support costs allowable for substantially the full amount of the budget for grant number HESG-CV-20-003 (CFDA 14.231), there was an isolated incident of errors in developing and communicating support for $78,932 of the draws.
Recommendation: We recommend the Organization implement systems, procedures and training to ensure accounts are reconciled timely and accurately with the reconciliations completed entirely by the Organization’s accounting staff or by third party professionals prior to provision of the trial balance and supporting documentation to the auditor.
Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding and has developed and begun implementation of a corrective action plan. To address this finding, the Organization has implemented processes whereby the CFO compares profit and loss detail statements from the general ledger for each grant to the draw requests and investigates any differences.