Finding Text
Finding 2022-001: Material Weakness – Internal Control Over Financial Reporting
Condition: A number of adjustments were required to report Unitrans’ financial statements in
accordance with generally accepted accounting principles (GAAP). The books were not in balance at
the start of the audit, and fieldwork was delayed as a result.
Criteria: Internal controls over financial reporting should be in place that provide reasonable
assurance that the financial statements are complete and accurate.
Cause: Unitrans’ accounting is performed by the Associated Students of the University of California
at Davis (ASUCD), which coordinates with the University of California at Davis (UCD) for a number
of transactions. Unitrans’ has not been assigned a full chart of accounts by ASUCD to report its
financial activity consistently with Unitrans’ audited financial statements. This results in numerous
reclassifying entries being needed to facilitate financial reporting. In addition, UCD performs
purchasing and grant accounting functions for Unitrans along with the accounting for UCD and
ASUCD, which results in Unitrans’ transactions being obscured by the volume of transactions
processed by ASUCD and UCD.
Effect: The trial balance was not in balance at the start of the audit. This was due to the import of
balances from ASUCD reports not being done correctly. As a result, the trial balance had to be redone
and re-imported, causing the audit to be delayed.
Context: Numerous accounts are either missing from Unitrans’ chart of accounts or were not fully
updated, including due from other governments, restricted cash and investments, capital assets,
accumulated depreciation, due to ASUCD, unearned revenue, restrictions of net position, investment
in capital assets and a number of revenue and expense accounts (capital contributions, depreciation,
student fees, etc.). The 2018 “Yellow Book” (Government Auditing Standards) was effective during
the year ended June 30, 2020, which has increased scrutiny over auditor independence. Assistance
with adjusting entries during the audit is considered a nonaudit service that must be evaluated to
determine whether the services provided may impair independence. The level of assistance provided
to properly record and classify transactions makes us uncomfortable when considering the
independence requirements of the 2018 Yellow Book.
Recommendation: For the year ended June 30, 2021 and 2022, Unitrans put together its own trial
balance in accordance with GAAP but some assistance was still required during the audit to ensure
completeness of financial reporting. We had recommended in prior audits that Unitrans’ management
work with ASUCD and UCD finance staff to develop and update a more thorough self-balancing
chart of accounts with names that are consistent with the audited financial statements that captures all
of Unitrans’ financial activity. We noted some progress made in this area as separate Unitrans funds
have been created by ASUCD for recording student fee revenue. However, there is still work needed
to ensure all accounts balance. Prior to the audit, reconciliations should be done to ensure all activity
have been properly recorded and included in the trial balance. We also recommend Unitrans’
management work with ASUCD and UCD finance staff to develop a process to ensure all of
Unitrans’ operating and capital transactions are identified, recorded and correctly classified as
required by generally accepted accounting principles prior to the start of the audit.
View of Responsible Official and Planned Corrective Action: See Corrective Action Plan
attached.