Finding 615284 (2022-001)

Material Weakness
Requirement
L
Questioned Costs
-
Year
2022
Accepted
2023-07-18

AI Summary

  • Core Issue: There is a material weakness in the preparation of financial statements and SEFA, indicating potential misstatements that may not be detected.
  • Impacted Requirements: Compliance with auditing standards and internal controls is lacking, as management did not adequately review certain accounts prior to the audit.
  • Recommended Follow-Up: Management should consider hiring external CPA assistance for thorough account reviews and expand the allowance analysis to meet new accounting standards.

Finding Text

FINDING ? FINANCIAL STATEMENT AUDIT Material Weakness #2022-001 FINDING: Preparation of Financial Statements and Schedule of Expenditures of Federal Awards (SEFA) and Audit Adjustments Federal Programs Affected: CDFI Rapid Response Program (CDFI RRP) ALN Number 21.024 Compliance Requirements: Reporting Questioned Costs: None Condition and Cause: We were requested to draft the audited consolidated financial statements, related footnote disclosures and SEFA as part of our regular audit services. Ultimately, it is your responsibility to provide for the preparation of your financial statements, disclosures and SEFA, and the responsibility of the auditor to determine the fairness of presentation with those statements. From a practical standpoint, we do these items for you at the same time in connection with our audit, which is not unusual for an organization of your size. However, auditing standards require us to communicate this situation to you in writing as an internal control deficiency. During the course of our engagement, we proposed and posted an audit adjustment to increase the allowance for doubtful accounts and to record property taxes payable for entities handled by the management company. These areas were not reviewed as part of year-end preparation for the audit. Criteria and Effect: This finding could result in a material misstatement to the financial statements and SEFA that may not have been prevented or detected by you. Repeat Finding from Prior Year: N/A ? Uniform Guidance not applicable in prior year. Recommendation: It is the responsibility of management to make the ultimate decision whether to accept the degree of risk associated with this condition because of cost or other considerations. We have reviewed in detail with management a draft of the auditor prepared financial statements, to include all audit adjustments and the SEFA, for accuracy and have answered any questions you had. We are satisfied the appropriate steps have been taken to provide you with the completed financial statements. Management should also consider contracting for additional time from the external CPA to assist in reviewing all accounts. The allowance analysis will need to be expanded in future years to comply with new accounting standards. Response/Correction Action Plan: Management is in agreement with the finding. See Correction Action Plan.

Categories

Reporting Internal Control / Segregation of Duties

Other Findings in this Audit

  • 38842 2022-001
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
21.024 Community Development Financial Institutions Rapid Response Program (cdfi Rrp) $1.13M
10.766 Community Facilities Loans and Grants $375,492
21.000 Neighborworks America $132,200
21.020 Community Development Financial Institutions Program $92,984
14.239 Home Investment Partnerships Program $63,000
14.169 Housing Counseling Assistance Program $46,183
10.447 The Rural Development (rd) Multi-Family Housing Revitalization Demonstration Program (mpr) $45,420
10.433 Rural Housing Preservation Grants $26,925
14.181 Supportive Housing for Persons with Disabilities $18,662