Finding Text
Finding No. 2023-003: Cash Disbursements and Classification (Material Weakness)
Statement of condition
Allowable costs
Activities allowed or unallowed
During the year ended June 30, 2023, the Organization:
did not properly classify certain expenditures between expense accounts;
did not obtain bids for two expenditures over $10,000;
did not properly cut off disbursements at fiscal year end, resulting in expenses not being recorded within the current audit period; and
did not accurately record gross potential rent, due to and from affiliates, and receivables.
Criteria
Management must review invoices after fiscal year end to ensure all expenses related to the fiscal period are being accurately captured. Additionally, management should review expenditures for accurate expense account classification and review revenue classifications to the appropriate revenue account recording to ensure proper financial and HUD reporting. The Uniform Guidance requires bidding be obtained for expenditures over $10,000.
Cause
Review procedures were not sufficient to ensure expenditures were recorded in accurate expense accounts and revenue was recorded in the appropriate revenue account. Review procedures were not adequately followed to review subsequent invoices for relevance to the current fiscal period. Review procedures were not sufficient to ensure expenditures over $10,000 received competitive bids.
Effect
Certain utility expenses presented for the current fiscal year were not recorded until the next fiscal year, resulting in understated expenses. Additionally, improperly capitalized expenditures and inaccurate expenses, fixed assets, and revenue classification could result in improper financial and HUD reporting.
Recommendation
Management should revisit and enhance its internal controls and procedures over subsequent expenditures to ensure expenses are captured in the correct fiscal period. Management should implement an additional period-end review to ensure proper classification of expenses, complete accrued expenditures, and accurate recording of revenue, due to and from affiliates, and receivables. Management should review its controls over expenditure authorization to ensure competitive bids are obtained where necessary.
Identification of repeat finding
The finding is a repeat of Finding No. 2022-005.
Auditor non-compliance code
S - Internal control deficiencies
Questioned costs
None
Finding resolution status
In process