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SECTION II - FINANCIAL STATEMENT FINDINGS Finding No. 2022-001: Financial Close Process and Account Reconciliations – Material Weakness in Internal Control Over Financial Reporting Criteria Human Resources Development, Inc. and Affiliates’ (HRDI) is responsible for keeping an accurate accounting of its financial information. Condition During the audit, there were several errors which were not discovered during the financial close process or review of the financial reports. Adjustments were needed to correctly reconcile beginning net assets to the prior year audit, to correct accounts payable and various accruals, to tie intercompany balances, to adjust the allowance, and to correct depreciation expense. This resulted in multiple adjustments proposed by Marcum and approved by HRDI’s management that took place between June 2023 and December 2023 to correct and reconcile the balances as of June 30, 2022. Cause HRDI did not follow its established policies and procedures which resulted in there being a lack of appropriate documentation for its financial reporting. This hindered HRDI’s ability to perform the necessary monthly and year-end reconciliations and review of the accounts in a timely manner, thus resulting in a delayed financial reporting audit in the current year. Effect This could lead to inaccurate financial information, on the basis of which HRDI’s decisions are made. In addition, it is not allowing HRDI to complete its financial reporting audit in a timely manner and by the due date required by the Uniform Guidance, which is nine months after HRDI’s year end. Recommendation We recommend that, as part of the system of internal control over the monthly closing process, accounting staff be assigned to review the detailed schedules of liability and asset account reconciliations for accuracy and completeness and that any unusual balances, such as long-outstanding balances or negative balances, should be reviewed, reconciled and any required adjustments posted. We also recommend that HRDI implement any additional procedures needed to ensure that monthly reconciliations are a priority and are both completed and subsequently reviewed by an independent individual in a timely manner. Furthermore, we recommend that HRDI enhance its procedures to ensure that the evidence of review of schedules and other reconciliations, such as sign-offs by both the preparer and reviewer on the documents, are retained. Views of Responsible Officials and Planned Corrective Actions See corrective action plan.