BEBASHI - TRANSITION TO HOPENon-Profit

Condition and Context Bebashi failed to maintain an accurate trial balance and general ledger to support certain account balances resulting in auditor journal entries at year-end which were material to the current year financial statements and audit delays due to support not reconciling and multiple versions of the trial balance being provided. Criteria Accounting principles generally accepted in the United States of America and Government Auditing Standards require that the design or operation of internal control over financial reporting should allow management or employees in the normal course of performing their assigned functions to prevent, or detect and correct, misstatements on a timely basis. 2 CFR 200.303 states, “The non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statues, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ‘Standards for Internal Control in the Federal Government’ issued by the Comptroller General of the United States or the ‘Internal Control Integrated Framework,’ issued by the Committee of Sponsoring Organizations of the Treadway Commission.” 2 CFR 200.302 states, “The financial management system of each non-Federal entity must provide for the following… accurate, current, and complete disclosure of each Federal award or program in accordance with the reporting requirements set forth in sections 200.328 and 200.329.” Cause As a result of financial constraints, and corresponding staffing challenges, the accounting and finance team at Bebashi was unable to prepare its accounting records on a timely and thorough basis. At the same time, the accounting and finance team was faced with other administrative and operational matters requiring immediate attention to help ensure Bebashi remained operational. The financial and staffing constraints resulted in lack of timely preparation and detailed review of accounting records and analysis which resulted in material audit adjustments. Effect or Potential Effect The accounting records of certain account balances and transactions provided to the auditors were inaccurate for a period of time during the fiscal year and for the year ended June 30, 2024. In certain instances, the related reconciliations and analysis were not performed on a timely basis. This caused adjustments proposed by the auditors that were material to the financial statements. Recommendation We recommend that management implements a more detailed and adequate review of the accounting records including strong processes and internal controls surrounding financial reporting. This process should identify the required accounting records and reconciliations, ensure the existence of preparer and reviewer requirements for the accounting records and reconciliations, and implement an appropriate time frame for the completion of accounting records and reconciliations. We recommend that management implements processes and procedures to identify the required financial reporting deadlines and controls to ensure compliance with the deadlines. Views of Responsible Officials Management agrees with the finding above. Management will review the existing accounting policies and procedures and implement additional steps and controls to incorporate the recommendations above. Subsequent to year-end, management of Bebashi hired a new Director of Finance. Management will review the operational resources available to further expand the finance team and do so accordingly.

Condition The single audit report was required to be completed and filed by the earlier of 30 calendar days after the receipt of the auditor’s report, or nine months after the end of the period under audit; however, the single audit reports were not filed timely. Criteria Per 2 CFR 910.512(a)(1), the audit must be completed, and the reporting package must be submitted within the earlier of 30 calendar days after the receipt of the auditor’s report, or nine months after the end of the audit period. Cause Bebashi experienced unforeseen turnover during the audit process, and it was not able to be completed within the condition above. Effect or Potential Effect Absence of reporting could result in lack of up-to-date information provided to federal agencies and potential impacts on grant funding and Bebashi’s operations. Recommendation We recommend that Bebashi establishes procedures and controls to ensure all required single audit reports are filed and filed timely. Views of Responsible Officials Bebashi acknowledges the single audit report was not filed with the federal awarding agency within the condition. However, Bebashi made additional employment changes to assist in the timing and process of the audit procedures. Going forward, Bebashi will ensure timely filing to the federal clearinghouse will be completed moving forward.

The Organization failed to file its single audit report with the federal awarding agency prior to its due date. Condition The single audit report was required to be completed and filed by the earlier of 30 calendar days after the receipt of the auditor’s report, or nine months after the end of the period under audit; however, the single audit reports were not filed timely. Criteria Per 2 CFR 910.512(a)(1), the audit must be completed, and the reporting package must be submitted within the earlier of 30 calendar days after the receipt of the auditor’s report, or nine months after the end of the audit period. Cause The Organization experienced unforeseen turnover during the audit process, and it was not able to be completed within the condition above. Effect or Potential Effect Absence of reporting could result in lack of up-to-date information provided to federal agencies and potential impacts on grant funding and the Organization’s operations. Recommendation We recommend that the Organization establishes procedures and controls to ensure all required single audit reports are filed and filed timely. Views of Responsible Officials The Organization acknowledges the single audit report was not filed with the federal awarding agency within the condition. However, the Organization made additional employment changes to assist in the timing and process of the audit procedures. Going forward, the Organization will ensure timely filing to the federal clearinghouse will be completed moving forward.

Condition: Our internal controls testing over expenditures and revenue recognition resulted in the following findings: (1) Bebashi was unable to provide supporting documentation (i.e., vendor invoices, approval of expenditures) for 9 out of 25 expenditure transactions; (2) 16 out of 25 expenditure selections did not have evidence of approval; and (3) Bebashi was unable to provide supporting documentation (i.e., grant/pledge agreements, copy of cash receipt) for 16 out of 25 revenue recognition selections. Criteria: Entities must maintain an adequate system of internal controls over financial reporting to initiate, authorize, record, process and report financial data reliably in accordance with generally accepted accounting principles. Entities must also maintain support for all expenditures. Cause: Bebashi experienced significant turnover in key management positions during fiscal year 2021. Additionally, there was a flood in Bebashi?s offices which caused significant damage to the Finance department and resulted in limited access to the area and its records, and loss of hard copy records. Effect: Sufficient supporting documentation does not exist to support transactions recorded in the financial records. Additionally, a risk exists that payments could be made in incorrect amounts or to incorrect vendors or persons if payments are not reviewed and approved. Questioned Costs: Unknown. Recommendation: We strongly recommend that Bebashi develop and adhere to formal written procedures to maintain supporting documentation for transactions recorded in the financial records. We also recommend that Bebashi transition its records to a cloud-based system so that records can be backed up, stored, and accessible from remote locations. Finally, we recommend that Bebashi develop monthly and year-end financial reporting procedures and checklists to assist in the preparation of financial records. These policies should ensure reconciliations and other account analyses are completed and reviewed by appropriate supervisory personnel. Management?s Response and Corrective Action Plan Management agrees with the finding. See schedule of corrective action.

Condition: The Data Collection Form for the year ended June 30, 2021, was due for submission to the Federal Audit Clearing House by September 30, 2022 (under 6-month extension from the Office of Management and Budget) and was not submitted by that date. Criteria: In accordance with 2 CFR ? 200.512, the audit must be completed and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Cause: Bebashi experienced significant turnover in key management positions during fiscal year 2021 which also impacted fiscal 2022. Additionally, there was a flood in Bebashi?s offices which caused significant damage to the Finance department and resulted in limited access to the area and its records, and loss of hard copy records, which delayed the financial reporting process. Effect: Because of the late submission of the audit reports, the reporting package was not made available to users in a timely manner. Questioned Costs: None. Recommendation: We recommended that Bebashi develop procedures to ensure that future reporting packages are submitted within the earlier of 30 days after receipt of the auditor?s reports, or nine months after the end of the audit period. We also recommend that Bebashi transition its records to a cloud-based system so that records can be backed up, stored, and accessible from remote locations. Finally, we recommend that Bebashi ensure appropriate training, knowledge transfer, and succession planning within the organization to ensure that turnover in key management positions does not cause disruption to operations or financial reporting. Management?s Response and Corrective Action Plan Management agrees with the finding. See schedule of corrective action.

Criteria: In accordance with 45 CFR 75.453 costs incurred for materials, supplies and fabricated parts necessary to carry out a federal award are allowable. Condition: In our review of expenditures, it was noted that $28,227 was charged to the AACO Food Bank contract for food supplies that had not been received. Questioned Costs: $28,227 Effect: The expenditures reported were not based on cost actually incurred. Thus, those expenditures could be disallowed by the funder. Cause: Bebashi billed AACO for goods that had not been received by the end of June 30, 2019. Recommendation We recommend that Bebashi put a process in place to ensure that only expenditures for goods received are charged to the federal award.