DISABILITY RIGHTS ARIZONANon-Profit

Condition: In the prior year, numerous draws were made beyond the federal expenditures reported under the grant. This resulted in six of the federal programs being over-drawn in the previous fiscal year by approximately $175,957. These prior year overdraws were not spent during the year ended September 30, 2022, and remained in refundable grant advances as of year-end. Criteria: Federal grant funds drawn in advance should not be held in the Center?s cash accounts for more than 3 days after receipt. Cause and effect: Cash drawdowns during part of the prior year were made using average historical amounts, not actual expenditures, resulting in various grants being overdrawn. During the year ended September 30, 2022, prior year federal grant funds drawn in advance and held in the Center?s cash accounts for more than 3 days after receipt totaled $175,957, carried over from the prior year. The prior year?s audit was issued in June 2022. As a result, recommendations from the previous audit were not implemented during the year ended September 30, 2022.Recommendation: The Center has reviewed and revised the system of internal controls over federal grant drawdowns to ensure that adequate processes are in place to ensure the proper amount is requested from the federal awarding agency. However, in order to remain in compliance with federal guidelines, the Center should spend prior year amounts that were overdrawn prior to requesting additional drawdowns. Management response: We concur with the recommendation. See Corrective Action Plan for more information.

Condition: For the year audited, numerous draws were made beyond the federal expenditures reported under the grant. This resulted in six of the federal programs being over-drawn for the fiscal year by approximately $175,957. Criteria: Drawdowns requested by accounting staff should be supported by documentation of expenditures made under the grant. Cause and effect: Cash drawdowns during the year were made using average historical amounts, not actual expenditures, resulting in various grants being overdrawn during the year. During the year ended September 30, 2021, federal grant funds drawn in advance and held in ACDL's cash accounts for more than 3 days after receipt totaled $175,957. In addition, due to the pandemic, the prior year's audit was issued in November 2021. As a result, findings from the previous audit could not be implemented during the current audit period ended September 30, 2021. Recommendation: We recommend that the Center review and revise the system of internal controls over federal grant drawdowns to ensure that adequate processes are in place to ensure the proper amount is requested from the Federal Award agency. This will result in a correctly stated pre-audit trial balance and appropriate internal financial statements prepared under generally accepted accounting principles for use by management, the Finance Committee and the Board of Directors throughout the year. Management response: Management does not disagree with the finding. See Corrective Action Plan for more information.

Condition: For the year audited, numerous and material audit adjustments were required for the financial statement to be correct at year-end. Thus, the unadjusted general ledger was not materially correct under accounting principles generally accepted in the United States of America. This is a repeat of prior year finding 2019-001. Criteria: Recording a significant number or material adjustments during the audit is a strong indicator of a control deficiency if an organization has ineffective controls over the preparation of the underlying general ledger which is used to prepare the financial statements, including the notes. It is critical for an organization to have appropriate processes in place to properly adjust the general ledger in a timely manner throughout the year and especially at year end, prior to audit fieldwork, as part of the year-end closing process, as well as to maintain the general ledger in accordance with generally accepted accounting principles throughout the year. Cause and effect: Due to turnover in the accounting department during the prior year, the internal control system for financial reporting did not appear to be working as designed. This resulted in errors in the general ledger that were not discovered in the normal course of business (such as through timely reconciliations and monitoring of journal entry postings) but were uncovered during the audit process. Recommendation: We recommend that the Center review and revise the system of internal controls over financial reporting to ensure that adequate processes are in place to properly adjust the general ledger throughout the year and especially at year end, prior to audit fieldwork, as part of the year-end closing process. This will result in a correctly stated pre-audit trial balance and appropriate internal financial statements prepared under generally accepted accounting principles for use by management, the Finance Committee and the Board of Directors throughout the year.

Condition: There was no evidence of review and approval by the Chief Executive Officer (CEO) for two entries out of six entries tested. Both entries were significant as they involved fiscal year adjustments to allocate administrative costs to the various programs and accrue grants receivable at fiscal year end. The adjustment to record administrative costs to the various programs included a transaction that was recorded as an expense in error. In addition, the year-end allocation of administrative costs to the federal programs was not calculated correctly. This resulted in an over-allocation of administrative expenses to the programs, and resulted in four of the federal programs being over-drawn for the fiscal year by approximately $36,217. This is a repeat of prior year finding 2019-002 that has been modified for the current year. Criteria: Journal entries posted by accounting staff should be supported by documentation indicating the reason the adjustment is needed and the amount and general ledger accounts and classes requiring adjustment. This documentation should be reviewed by an individual without right to adjust the general ledger, should be signed by such individual as evidence of the monitoring control, and should be maintained. Cause and effect: Due to turnover in the accounting department during the prior year, the internal control system for financial reporting did not appear to be working as designed. This resulted in a failure of control activities related to maintaining documentation supporting entries posted to the general ledger, and in monitoring related to oversight of preparation and maintenance of the general ledger. The entity changed their method of keeping the accounting records during the year to using a cash basis, however, although the DOA&F discussed the two year-end adjustments with the CEO there was no evidence of the CEO?s review and approval of the entries. Recommendation: We recommend that all journal entries posted to the accounting software be supported by documentation illustrating the necessity for the entry, identification of accounts requiring adjustment and calculation of the adjustment to be made. We further recommend that such documentation be reviewed and approved by an individual without access to the general ledger who is not subordinate to the staff member responsible for the entry, that the documentation be initialed or signed as evidence of the monitoring, and that the documentation be retained.

Condition: For the year audited, numerous and material audit adjustments were required for the financial statement to be correct at year-end. Thus, the unadjusted general ledger was not materially correct under accounting principles generally accepted in the United States of America. Criteria: Recording a significant number or material adjustments during the audit is a strong indicator of a control deficiency if an organization has ineffective controls over the preparation of the underlying general ledger which is used to prepare the financial statements, including the notes. It is critical for an organization to have appropriate processes in place to properly adjust the general ledger in a timely manner throughout the year and especially at year end, prior to audit fieldwork, as part of the year-end closing process, as well as to maintain the general ledger in accordance with generally accepted accounting principles throughout the year. Cause and effect: Due to turnover in the accounting department during the year, the internal control system for financial reporting did not appear to be working as designed. This resulted in errors in the general ledger that were not discovered in the normal course of business (such as through timely reconciliations and monitoring of journal entry postings) but were uncovered during the audit process. Recommendation: We recommend that the Center review and revise the system of internal controls over financial reporting to ensure that adequate processes are in place to properly adjust the general ledger throughout the year and especially at year end, prior to audit fieldwork, as part of the year-end closing process. This will result in a correctly stated pre-audit trial balance and appropriate internal financial statements prepared under generally accepted accounting principles for use by management, the Finance Committee and the Board of Directors throughout the year. Management response: At the end of the prior fiscal year, the Center experienced the retirement of two long-term finance staff members who were significantly key to a successful accounting workflow. In fiscal year 2019, a new Chief Financial Officer (CFO) was hired. Systems that had been in place were revised and restructured to align with the CFOs accounting methodology. In July of 2019, the CFO resigned and the position remained vacant until September of 2019. The position was retitled as Director of Administration and Finance (DOA&F). Management acknowledges inconsistencies as a result of multiple accounting staff during the audit period. As a result, the Center recognizes areas of improvement involving its internal controls.

Condition: Documentation supporting journal entries posted by the former CFO, and review and approval of those entries by the Executive Director, could not be located for 12 out of 22 journal entries selected for testing. Criteria: Journal entries posted by accounting staff should be supported by documentation indicating the reason the adjustment is needed and the amount and general ledger accounts and classes requiring adjustment. This documentation should be reviewed by an individual without right to adjust the general ledger, should be signed by such individual as evidence of the monitoring control, and should be maintained. Cause and effect: Due to turnover in the accounting department during the year, the internal control system for financial reporting did not appear to be working as designed. This resulted in a failure of control activities related to maintaining documentation supporting entries posted to the general ledger, and in monitoring related to oversight of preparation and maintenance of the general ledger. Recommendation: We recommend that all journal entries posted to the accounting software be supported by documentation illustrating the necessity for the entry, identification of accounts requiring adjustment and calculation of the adjustment to be made. We further recommend that such documentation be reviewed and approved by an individual without access to the general ledger who is not subordinate to the staff member responsible for the entry, that the documentation be initialed or signed as evidence of the monitoring, and that the documentation be retained. Management response: At the end of the prior fiscal year, the Center experienced the retirement of two long-term finance staff members who were significantly key to a successful accounting workflow. In fiscal year 2019, a new Chief Financial Officer (CFO) was hired. Systems that had been in place were revised and restructured to align with the CFOs accounting methodology. In July of 2019, the CFO resigned and the position remained vacant until September of 2019. The position was retitled as Director of Administration and Finance (DOA&F). Management acknowledges inconsistencies as a result of multiple accounting staff during the audit period. As a result, the Center recognizes areas of improvement involving its internal controls.