Finding Text
Criteria: The information contained in the financial statements and the schedule of expenditures of federal awards should be derived from and relate directly to the underlying accounting and other records used to prepare financial statements, and be sufficiently prepared, reconciled and reviewed to ensure that such financial reporting is fairly stated in all material respects. Condition:The amounts reported in accounts receivable and grant revenue were not properly reconciled to the amounts reported on the schedule of expenditures of federal awards. The receivable and revenue for the Head Start and Early Head Start (HS/EHS) program were found to contain a material misstatement. The amount of expenditures reported for the HS/EHS program on the schedule of expenditures of federal awards had various offsetting variances, netting to a misstatement that was not considered material to the financial statements. Various other misstatements were noted throughout the course of the audit causing significant delays and difficulty in auditing the financial statements and the schedule of expenditures of federal awards. Cause: Reconciling procedures were not strictly followed or enforced in a timely manner after period-end. Effect or Potential Effect: Potential understatement or overstatement of expenditures could exist in the financial statements and in the schedule of expenditures of federal awards and not be detected and corrected. Questioned Cost: None. Repeat of a Prior-Year Finding: 2021-001 Recommendation: The Organization should establish policies and procedures to reconcile amounts reported in the financial statements and on the schedule of expenditures of federal awards in a timely manner after the period-end. Accounting personnel should take relevant training in the preparation of financial statements and the schedule of expenditures of federal awards, with particular focus on costs to be included and documentation to be retained in processing grant drawdowns and in preparing reconciliations of significant accounts and grants, grant financial reporting, and the reporting of amounts on the schedule of expenditures of federal awards. The Organization should also consider contracting with an external accounting firm to help oversee the year-end close, audit preparedness, as well as grant financial reporting. Organization's Response 2021: The Organization will improve their efforts to ensure an efficient and accurate closing process before the January 31, 2022 audit. Organization's Response 2022 and Corrective Action Plan: The Organization concurs with the recommendation and had already released updated financial policies and procedures as of September 2022. Further revisions will be made in 2023 and include specific instructions for particular grants including federal and state. Additional training is needed for all levels of the fiscal team as well as for program managers to better understand the fiscal requirements of each grant. It is acknowledged that the fiscal team must be expanded and restructured and we have already started the process of recruiting a new CFO. The new CFO will be expected to consistently maintain a comprehensive matrix including all grant requirements. During this time we are seeking a consultant to help us establish better processes, controls and systems and assist until a permanent CFO is established. Other consultants may be obtained for supportive services as needed/recommended in the future. All applicable staff (fiscal and management) will be trained regarding procedures to review grant expenditures for compliance with terms of the grant, and to maintain sufficient records that reconcile to amounts reported as grant expenditures. Further, a new accounting system, Blackbaud, with enhanced cost recording, reporting and budgeting capabilities, has been approved by our Board of Directors to be implemented at the start of the next fiscal year. This implementation includes extensive training for fiscal and program staff. The fiscal committee and the Board will receive monthly updates on the progress being made in these areas. (Current responsible party: Renee Hungerford, Executive Director/CEO) Auditor's Response to Organization's Response 2022 and Corrective Plan: We have noted the Organization's response which appears sufficient and appropriate in the circumstances, and we further note the certain referenced steps already taken in discussion with management.