Finding Text
Criteria: Internal controls including proper segregation of duties should be in place to provide reasonable assurance that all financial transactions are properly reported, and assets are safeguarded. This is essential to ensure accurate internal and external financial statements can be prepared. Management must have accurate financial information in order to monitor, control and execute decisions in the best interest of the School. Condition: Specific areas of concern are as follows: 1)The School relies on the audit firm to determine that there are no material misstatements in the financial records and to prepare the financial statements including all required disclosures. The preparation of the financial statements is based on the School's trial balance and inquiries made to management and independent sources. The Business Manager reviews and approves underlying information and the financial statements and attempts to stay current on new governmental and accounting standards. 2)Bank reconciliations were completed but needed some adjustment to match the general ledger. In the prior year we had proposed an adjustment of $480,348 related to payments to the IRS that were not actually tendered for payment. In the prior year they were reclassified to payroll liabilities. The balance of the payments was made in the current year but the reclassification was not reversed in their books. There were several other items that were not recorded in the proper period that needed adjustments. Context: Many issues were corrected in the current year but there were some lingering problems with the Internal Revenue Service issue. Cause: COVID had also arrived in March of 2020 and the school had gone virtual for the most part for the next several years. This caused additional issues with obtaining complete information needed in a timely manner and additional problems with remote assignments and personnel not always available. A new Business Manager was hired in March of 2020. She and her new business office staff spent considerable time over the last several years correcting, researching and recording for the past years in order to complete the audits and get the School back in compliance. Effect: The effectiveness of the internal control system relies on prudent policies and enforcement by management and the Board of Education. If either element is deficient, the School?s risk of errors occurring and going undetected rises. In addition, the risk of fraudulent transactions or misappropriation of assets increases. This was seen in many bookkeeping issues to clean up. Identification of Prior Audit Findings: This finding is a repeat of prior year findings 2021-002. Recommendation: It is the School?s responsibility to determine the financial statements, schedule of expenditures of federal awards and related footnotes are free of material misstatement. The most effective controls lie in management and the Board of Education?s knowledge of the School?s financial operations. Supervision and review functions must be done continually during all phases of the accounting cycle. With a small staff in the business office, cross training becomes exceptionally important. The Business Manager should continue to assist with disclosure information and approves all adjusting entries to the trial balance. Currently, she reviews and approves all draft and final copies of the financial statements including disclosures. In light of the guidance of SAS 115, we recommend additional and continuing training for the Business Manager or designated staff. The goal is to provide the training in government financial reporting and current reporting standards to enable management to continue to take the responsibility for the statements and disclosures. The School should continue their implementation of their new financial policies and take steps to ensure they are being followed. Views of Responsible Officials: The views of management are included in the corrective action plan beginning on page 41.