Respond Inc

FINDING 2022-001 - FINANCIAL CLOSING AND REPORTING - TYPE: MATERIAL WEAKNESS - FEDERAL AND STATE OF NEW JERSEY AWARDS: ALL Criteria Controls should be in place to evaluate accounts, review and approval of transactions, record entries into the general ledger in a timely, complete and accurate manner and generate a final trial balance and financial statements. Condition The Agency’s existing process of initiating, reviewing and approving transactions, maintaining supporting documentation, closing the books and preparing financial statements includes recording a significant number of manual post-closing entries and audit adjustments. We noted the following control deficiencies, which in combination, are considered a material weakness: • Supporting documentation for journal entries is not maintained in one central location nor does it evidence formal review by an individual at least one level above the preparer. • Weaknesses over recording rental activity include recording rental income on a cash basis and inconsistent application of late rental fees and utility payments charged to tenants. • Charges to corporate debit and credit cards are not formally reviewed by management. • Accounts receivable aging is not maintained timely or reconciled and uncollected accounts receivable balances are not followed up on for correct recorded balances. Lack of controls over the timing of revenue recorded resulted in material adjustments. • Day care expenses are not consistently allocated to grants that are reimbursed based on student attendance/meal counts. • Weakness over recording fixed assets additions, in-kind donations, and disposals, maintaining fixed asset schedule, and reviewing fixed assets for impairment. • Child care fees are recorded on a cash basis. • Property taxes and utility payments are consistently paid late, resulting in significant penalties and accrued interest and difficulty reconciling to balance due at year-end. • Expenses not consistently allocated to grants that are reimbursed based on student attendance/meal counts and weakness over preparation and review of statement of functional expenses. • Difficulty locating documentation and agreements supporting current year transactions. • Accounts payable aging not maintained timely or reconciled. • Payroll not accrued properly or timely. • The Agency spent funds for the Neighborhood Revitalization Tax Credit program before receiving budget modification approval from the grantor resulting in delays or not receiving expense reimbursements. Cause Failure to enforce its policies and procedures over financial closing and reporting and turnover of personnel in the accounting department.Effect Agency’s initial trial balance was materially misstated. Identification of a Repeat Finding This is a repeat finding from the immediate previous audit, 2021-01. Recommendation Management has begun to implement new controls in the accounting department and hire additional staff and external consultants. We recommend management to continue to develop and further refine its financial reporting processes. Management should continue to conduct a thorough assessment of the adequacy and completeness of the Agency’s accounting and financial closing and reporting policies and procedures. Based on the results of the continued assessment, management should develop additional policies and procedures and/or reinforce the existing policies and procedures to personnel. Views of Responsible Officials and Planned Corrective Actions The Agency agrees with this finding and will adhere to the corrective action plan in this audit report.

FINDING 2022-002 - CASH MANAGEMENT - TYPE: SIGNIFICANT DEFICIENCY - FEDERAL AND STATE OF NEW JERSEY AWARDS: ALL Criteria A cash management plan should be in place to monitor cash flow, current budget projections, debt covenants, and forecast future cash flows timely and accurately to meet statutory requirements. Condition The following instances were noted due to a lack of monitoring by the Agency of their cash flow levels timely and accurately: 1) Property taxes and utility payments are consistently paid late, resulting in penalties and accrued interest. 2) Uncollected accounts receivable balances are not monitored and followed up on for timely collection. 3) Significant outstanding checks on bank reconciliations were not timely followed up on. Cause Failure to monitor their cash flow and receivables, current budget projections, and forecast future cash flows timely and accurately. Effect Potential future and previous failure by the Agency to meet its obligations as they become due. Identification of a Repeat Finding This is a repeat finding from the immediate previous audit, 2021-02. Recommendation The Agency has implemented a plan to monitor cash flow, create more detailed budgets, and cash flow forecasts, but the plan should be formally adopted and reviewed with management consistently. The Agency has sold properties and cut expenses resulting in positive changes in net assets during 2022 and 2021. Prior to 2020, the Agency had experienced large net operating deficits. These prior year deficits and the noncompliance with statutory requirements have highlighted the need for an effective cash management plan. We recommend management develop and further refine its cash management plan to monitor cash flow and forecast future cash flows timely and accurately to prevent future noncompliance with statutory requirements and avoid unnecessary costs.  Views of Responsible Officials and Planned Corrective Actions The Agency has reviewed these findings and will strive to adhere to the suggested corrective action plan in this audit report. Additionally, management plans to continue to aggressively implement structural cost-saving measures throughout the Agency. Identification of a Repeat Finding This is a repeat finding from the immediate previous audit, 2021-02.

FINDING 2022-003 - REPORTING - TYPE: SIGNIFICANT DEFICIENCY - FEDERAL AND STATE OF NEW JERSEY AWARDS: ALL Criteria The Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”) and State of New Jersey Office of Management and Budget Circular 15-08, State Grant Compliance Supplement, Part III, require the Agency to submit its audit to New Jersey funding agencies no later than nine months after fiscal year-end. The Agency is required to establish internal control systems to ensure required reporting is completed timely for compliance with Uniform Guidance and State of New Jersey Office of Management and Budget Circular 15-08, State Grant Compliance Supplement, Part III. Condition The Agency failed to meet the federal and state reporting deadline of September 30, 2023. Cause Due to lack of internal controls over its financial reporting process, the late completion of the Agency’s consolidated financial statements contributed to the late submission of its audit.Effect The late submission affects all federal and state programs the Agency administers. Questioned Costs None noted. Identification of a Repeat Finding This is a repeat finding from the immediate previous audit, 2022-003. Recommendation The Agency should improve its financial reporting process so that it can submit its audit to New Jersey Funding Agencies and potentially its Single Audit Reporting Package to the federal clearinghouse, if required, no later than nine months after fiscal year-end. Views of Responsible Officials and Planned Corrective Actions The Agency agrees with this finding and will adhere to the corrective action plan in this audit report.

Controls should be in place to evaluate accounts, record entries into the general ledger in a complete and accurate manner and generate a final trial balance.

A cash management plan should be in place to monitor cash flow, current budget projections, and forecast future cash flows timely and accurately to meet statutory requirements.

Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and the New Jersey Office of Management and Budget Circular 15-08, State Grant Compliance Supplement, Part III, require the Agency to submit its Single Audit Reporting Package to the federal clearinghouse and New Jersey funding agencies no later than nine months after fiscal year-end.

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