Finding 584510 (2023-001)

Significant Deficiency
Requirement
L
Questioned Costs
$1
Year
2023
Accepted
2024-01-10
Audit: 10627
Auditor: Bdo USA

AI Summary

  • Core Issue: Journal entries were created and approved by the same person, violating internal control policies.
  • Impacted Requirements: This situation breaches 2 CFR 200 requirements for effective financial management and segregation of duties.
  • Recommended Follow-Up: Implement stronger manual controls to ensure separate individuals handle the creation and approval of journal entries.

Finding Text

Criteria: 2 CFR 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards §202.303, Internal Controls, requires the recipients of federal funds maintain financial management systems that provide effective controls over accountability for all funds, property, and other assets. These controls should be in compliance with the internal control integrated framework. In addition, as noted above, the preparation of the consolidated financial statements is the responsibility of management, including management’s assertions that the consolidated financial statements are complete and accurate; that the rights and obligations recorded in the consolidated financial statements exist, belong to the entity, and are properly valued; and that the information presented in the consolidated financial statements is presented in accordance with generally accepted accounting principles. Furthermore, these standards require the entity to take prompt action to address findings identified and to protect personal identifiable information and other deemed sensitive information. Condition: During testing of journal entries, BDO identified instances where journal entries were created and reviewed/approved by the same individual, which did not comply with the Agency’s documented policies and procedures and identified control requiring a separate reviewer/approver from the creator of the journal entry. BDO noted that the information technology system allows an individual to post an entry without a separate level of review. Individuals that are able to post journal entries without a separate review included: Chief Financial Officer, Controller, and Accounting Manager. Cause: The Agency’s internal controls, as documented above, were not operating as designed causing some journal entries to be posted that were created and approved by the same individual. It was also noted that the information technology system does not require the reviewer/approver of a journal entry to be separate from the creator. Effect or Potential Effect: Potential misstatement due to lack of segregation of duties within the financial statement close process. Recommendation: The Agency should enhance manual controls in place to eliminate or reduce the instances where the creator and reviewer/approver of journal entries are performed by the same individual. Views of Responsible Officials: While it is the Agency’s policy that no individual who created a journal entry should review and/or post their own entry in the accounting system, the accounting system lacks a technology control to prevent such an occurrence from happening. As a result, a small percentage of entries were inadvertently approved by the same staff member who created the entries during the fiscal year ended June 30, 2023. Those entries were subsequently reviewed by management and the auditors and found to be appropriate. Also, in management’s view, the Agency has very strong mitigating controls in place in its financial review process that would have detected any material misstatements that could have resulted from these occurrences. That said, management agrees that additional measures are needed to ensure no further occurrences.

Categories

Questioned Costs Internal Control / Segregation of Duties Allowable Costs / Cost Principles

Other Findings in this Audit

  • 8068 2023-001
    Significant Deficiency
  • 8069 2023-001
    Significant Deficiency
  • 8070 2023-001
    Significant Deficiency
  • 8071 2023-001
    Significant Deficiency
  • 8072 2023-001
    Significant Deficiency
  • 8073 2023-001
    Significant Deficiency
  • 8074 2023-002
    Significant Deficiency
  • 8075 2023-002
    Significant Deficiency
  • 8076 2023-002
    Significant Deficiency
  • 8077 2023-002
    Significant Deficiency
  • 8078 2023-002
    Significant Deficiency
  • 8079 2023-002
    Significant Deficiency
  • 584511 2023-001
    Significant Deficiency
  • 584512 2023-001
    Significant Deficiency
  • 584513 2023-001
    Significant Deficiency
  • 584514 2023-001
    Significant Deficiency
  • 584515 2023-001
    Significant Deficiency
  • 584516 2023-002
    Significant Deficiency
  • 584517 2023-002
    Significant Deficiency
  • 584518 2023-002
    Significant Deficiency
  • 584519 2023-002
    Significant Deficiency
  • 584520 2023-002
    Significant Deficiency
  • 584521 2023-002
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
10.553 School Breakfast Program $117,370
93.667 Social Services Block Grant $74,453
10.558 Child and Adult Care Food Program $70,411
93.870 Maternal, Infant and Early Childhood Home Visiting Grant $23,536
84.126 Rehabilitation Services_vocational Rehabilitation Grants to States $11,754
21.027 Coronavirus State and Local Fiscal Recovery Funds $10,207
10.579 Child Nutrition Discretionary Grants Limited Availability $8,128
93.600 Head Start $7,123
10.555 National School Lunch Program $628