Finding Text
MATERIAL WEAKNESS 2022-001 - Financial Management Lacks General Knowledge to Apply Generally Accepted Accounting Principles (GAAP) in the Preparation of Annual Financial Statements and Governmental Accounting Standards in the Preparation of the Annual Schedule of Expenditures of Federal Awards (SEFA): Criteria: Auditing standards require that PILC be able to take responsibility for the preparation of financial statements in accordance with accounting principles generally accepted in the United States of America. Government auditing standards require that PILC be able to take responsibility for the preparation of PILC?s Schedule of Expenditures of Federal Awards (SEFA) in accordance with accounting principles generally accepted in the United States of America. As part of these requirements and standards, PILC is expected to employ and/or contract with personnel with general knowledge to apply Generally Accepted Accounting Standards in the preparation of the annual financial statements and Governmental Accounting Standards in the preparation of the annual SEFA. Such responsible personnel should also have general experience and knowledge with grant accounting and reporting practices. We noted a significant number of audit adjustments during the 2022 audit, some of which were required to adjust the Organization?s financial statements to the accrual basis of accounting from the cash basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America. Condition and Context: During the 2022 audit, we noted that PILC did not employ personnel with general knowledge to apply Generally Accepted Accounting Standards in the preparation of the annual financial statements and Governmental Accounting Standards in the preparation of the annual SEFA. We noted at or around PILC?s fiscal year end of September 30, 2022, PILC hired an outsourced Chief Financial Officer (CFO) whom is a licensed Certified Public Accountant (CPA) in the state of Texas. Cause: PILC did not employ personnel with general knowledge to apply Generally Accepted Accounting Standards in the preparation of the annual financial statements and Governmental Accounting Standards in the preparation of the annual SEFA. Effect or Potential Effect: PILC?s Management cannot take responsibility for the preparation of the annual financial statements in accordance with Generally Accepted Accounting Standards and preparation of the SEFA in accordance with Governmental Accounting Standards. Recommendation: We noted that PILC hired an outsourced Chief Financial Officer (CFO) whom is a licensed Certified Public Accountant (CPA) in the state of Texas immediately prior to the September 30, 2022 fiscal year end. We recommend that the outsourced CFO adjust PILC?s books for end of year accruals and prepare the SEFA in accordance with GAS. Responsible Official?s Response: PILC hired an outsourced Chief Financial Officer (CFO) whom is a licensed Certified Public Accountant (CPA) in the state of Texas immediately prior to the September 30, 2022 fiscal year end. The outsourced CFO will adjust PILC?s books for end of year accruals and prepare the SEFA in accordance with GAS.