Finding Text
2022-001: Lack of Regular Preparation and Review of Reliable Internal Financial Statements Material Weakness Criteria ? Management is responsible for oversight of IPTF, which includes timely recording, processing, summarizing, and review of accounting data (i.e., maintaining and reviewing internal books and records). Good internal controls also requires the Board of Directors to meet regularly and review the financial status and results of operations of IPTF. Condition ? Monthly internal financial statements were not prepared or reviewed by management after the transition to an outside contract accountant beginning in January 2022. Management also only had board minutes indicating the board met twice during the year. Cause ? IPTF?s Finance Director retired during the year and an outside accounting firm was contracted to take over the role of the accounting department. During the transition, monthly internal financial statements were either not prepared by the contract accountant, or when prepared were done late and were full of errors. Corrections to reports with errors were not made on a timely basis. As relates to the board meetings, the Executive Director indicated that while the Board does not formally meet every quarter and in person, they stay in regular contact and are meeting via phone and email. No formal documentation of these phone and email meetings is currently maintained by IPTF as board minutes. Effect ? Without a regular review of financial statements, a misstatement could occur and not be detected by management. Without good documentation of meetings, it is easy for an issue to be missed or forgotten in later meeting. Recommendation ? We recommend that management implement a formal process to prepare and review internal financial statements for all reporting entities on a monthly basis. IPTF should also implement a process for ensuring the board meet at least quarterly, and that these meetings be properly documented. Auditee?s comments and response ? IPTF has hired a new contract accountant and will ensure they prepare internal financial statements on a monthly basis as required by their written financial policies and send to management for review. Also, the board will plan to meet quarterly and document meeting minutes. Responsible party for corrective action: Sharon Day, Executive Director