Finding 959959 (2023-003)

Improve Financial Close Process. Federal Program Information: Substance Abuse and Mental Health Services Projects of Regional and National Significance (Assistance Listing - 93.243) Condition and Criteria: During the course of the audit, we proposed approximately 18 audit adjusting journal entries to properly state the financial statements. Eight of these entries were to restate beginning net assets to record transactions in the proper period. Many of the adjustments related to proper revenue recognition and related accounts receivables and the reversal of accounts receivable and payables that related to prior years. Prior year audit finding: N/A. Cause and Effect: The lack in internal control over financial reporting exists in the financial statement close process for preparing the Center’s year-end financial statements. This could result in management making operational and financial decisions based on inaccurate financial information. Additionally, the inaccurate financial information could result in inaccurate reporting to federal and state funding agencies on grants and awards. Context: This represents a systemic problem. Questioned Costs: None. Recommendation: To improve the financial statement close process, we recommend that the Center establish more efficient and effective policies to provide timely and accurate completion of financial reporting, as well as timely review and approval of all statement of financial position reconciliations and account balances. Management’s Response: Management uses interim accounting and financial management reports that are designed to assist the board and officers to manage the Center’s grants effectively, efficiently, and aligned with financial and non-financial grant compliance. Management and the board realize that certain adjustments to the interim financial statements used to manage grant compliance and performance are not prepared on an as-if-audited basis. We will consider the implementation of a more rigorous monthly close to more accurately reflect period-end balances and the capturing of any potential reconciling items that could later be needed to substantiate expenditures as of a particular date.