Finding 599658 (2022-001)

Significant Deficiency Repeat Finding
Requirement
P
Questioned Costs
-
Year
2022
Accepted
2023-09-28
Audit: 23973
Organization: Peace Villa Inc. (MN)

AI Summary

  • Core Issue: The Organization lacks an internal control system for preparing GAAP-compliant financial statements, relying on external auditors for drafting.
  • Impacted Requirements: Internal controls over financial reporting are insufficient, increasing the risk of misstatements in financial statements.
  • Recommended Follow-Up: Management should assess the risk of this deficiency and consider training existing staff to improve financial reporting capabilities.

Finding Text

2022-001. Preparation of financial statements and related footnotes Condition: The Organization does not have an internal control system designed to provide for the preparation of the financial statements being audited. Organization personnel do prepare periodic financial statements and other financial information for internal use that meets the needs of management and the Board. However, the Organization does not have the internal resources to prepare full-disclosure financial statements required by GAAP for external reporting. As auditors, we were requested to draft the financial statements and accompanying footnotes. Criteria: Internal controls over financial reporting include those related to the actual preparation and review of the audited financial statements. In order to prepare a complete set of financial statements in conformity with GAAP, the preparer must have the necessary expertise. Cause: The Organization does not have the resources to compile their own financial statements. Effect: This control deficiency could result in a misstatement to the financial statements that would not be prevented or detected. Recommendation: This control deficiency is not unusual in a small organization. However, it is the responsibility of management and the Board to decide whether to accept the degree of risk associated with this condition based on the cost of correction and other considerations. Response:The Organization is aware of the control deficiency, which is an unavoidable consequence of the financial restrictions of small organizations. Management recognizes that it is not economically feasible to fully correct this finding. However, we are aware of the deficiency and will rely on oversight by management and the Board to monitor the deficiency. The Organization will also explore options and cost-effective feasibility of training existing personnel to adequately prepare the annual financial reports.

Categories

Internal Control / Segregation of Duties Reporting

Other Findings in this Audit

  • 23212 2022-001
    Significant Deficiency Repeat
  • 23213 2022-002
    Significant Deficiency Repeat
  • 23214 2022-001
    Significant Deficiency Repeat
  • 23215 2022-002
    Significant Deficiency Repeat
  • 23216 2022-001
    Significant Deficiency Repeat
  • 23217 2022-002
    Significant Deficiency Repeat
  • 599654 2022-001
    Significant Deficiency Repeat
  • 599655 2022-002
    Significant Deficiency Repeat
  • 599656 2022-001
    Significant Deficiency Repeat
  • 599657 2022-002
    Significant Deficiency Repeat
  • 599659 2022-002
    Significant Deficiency Repeat

Programs in Audit

ALN Program Name Expenditures
10.766 Community Facilities Loans and Grants $5.77M
10.415 Rural Rental Housing Loans $802,671
10.427 Rural Rental Assistance Payments $105,072