Finding Text
Finding 2021-001: Year-End Close and Review
Condition and Criteria: During the prior year audit, we discovered deficiencies in internal controls over the year-end close and review process. The Organization had difficulties providing an appropriate trial balance for the current year. Upon receiving the trial balance, we noted numerous adjustments were needed to reverse prior year audit entries, clear out funds from prior years that should have no activity, and to balance expenditures and revenues in funds from the current year. Additionally, various year-end balances required adjustment including grants receivable and accrued wages. It is our understanding these errors were a result of the Organization not being able to see the impact of beginning balances on some year-end balance sheet accounts.
Current Status: We noted in the current year, there were numerous material adjustments needed to be made, similar to those described above and were caused by the aforementioned trial balance issues, which resulted in the net overstatement of assets in the amount of $10,680, liabilities in the amount of $6,595, and net assets in the amount of $4,085. The potential effect of these deficiencies is the misstatement year-end asset, liability, and net asset balances. We continue to recommend the Organization obtain a better understanding of the accounting system to allow for a thorough year-end close and review process. The year-end review should include reviewing current balances compared to the prior year, reviewing grant drawdowns near year-end to ensure they are recognized in the fiscal year the related costs were incurred, agreeing federal revenues earned to federal expenditures for cost-reimbursable grants, and reviewing details of account balances, as necessary, prior to providing the trial balance for audit.