Finding Text
2023-001: Reconciliations and Material Adjustments
Questioned Costs: None
How the questioned costs were computed: N/A
Grant Funding Source Grant Period
Head Start U.S. Department of Health 06/01/2022 - 05/31/2023
10CH010945-04 and Human Services
Early Head Start U.S. Department of Health 07/01/2022 - 06/30/2023
Child Care Partnerships and Human Services
10HP000422-03
COVID-19 Head Start U.S. Department of Health 04/01/2021 - 03/31/2024
10HE000845-01 and Human Services
COVID-19 Early Head U.S. Department of Health 07/01/2021 - 06/30/2022
Start Child Care and Human Services
Partnerships
10HP000422-02-C3
Condition: At the time of audit fieldwork, Umatilla-Morrow Head Start, Inc. had not reconciled all account balances. As a result, Wipfli, LLP proposed and management posted adjusting journal entries to contributions receivable, grants receivable, refundable advance, property and equipment, grant revenue, and in-kind. During our tests of controls over bank reconciliations we also noted one individual is responsible for preparing the bank reconciliation, this individual also has the ability to post journal entries and there is no review of the completed bank reconciliation. As Umatilla-Morrow Head Start, Inc.’s internal controls did not discover these adjustments prior to our audit and as there is a lack of segregation of duties within the bank reconciliation process, a material weakness exists in Umatilla-Morrow Head Start, Inc.’s internal controls over financial reporting.
Criteria: Federal Regulation 2 CFR 200.302(4) requires that an organization have…Effective control over, and accountability for, all funds, property, and other assets.
Cause: During the audit year, Umatilla-Morrow Head Start, Inc. experienced turnover in its business office which contributed to the lack of timely reconciliations, review of reconciliations performed, and subsequent adjustments to account balances.
Effect: As a result of the lack of segregation of duties surrounding bank reconciliations and not reconciling all account balances resulting in subsequent adjustments to accounts, a material weakness exists in internal controls over financial reporting.
Recommendation: Accounts should be reconciled monthly with the adjustments posted timely so that management is relying on accurate financial information to make decisions. We recommend management and those charged with governance evaluate the operation of the business office and implement adequate and timely closing procedures to ensure that financial statement amounts are being reconciled, reviewed, and adjusted in a timely manner.
View of Responsible Officials: Management agrees with the assessment and subsequent to year end, steps were taken to correct the matter.