Rogers Park Community Council DBA Northside Community ResourcesNon-Profit

Internal Control Deficiencies over Financial Reporting-Prior Period Adjustment and Recording Cutoff (Material Weakness) Criteria: Management is responsible for establishing and maintaining effective internal controls over financial reporting in accordance with 2 CFR §200.303 (Internal Controls) and the COSO Internal Control Framework. These standards require adequate segregation of duties, proper review and approval of transactions and reconciliations, and documentation evidencing that control activities are performed. Statement of Condition: During our audit procedures, we identified instances of improper cut-off of transactions. We also noted deficiencies in the design and operating effectiveness of internal controls over financial reporting. Due to limited personnel, incompatible duties are performed by the same individual, including processing invoices, recording transactions, and participating in the reconciliation process. Although policies require supervisory review of disbursements, a sample of invoices tested lacked documented evidence (e.g., signatures, initials, or electronic approval) indicating that such review occurred prior to payment. In addition, while bank reconciliations were prepared in accordance with established procedures, there was no documented evidence of independent review. Furthermore, the Council’s financial reporting process did not identify and properly record accrued vacation and deferred revenue in the prior year, resulting in a material prior period adjustment to beginning net assets Statement of Cause: While the Council has established policies and procedures related to review and approval processes, these controls were not consistently implemented or documented. Additionally, limited staffing resources contribute to challenges in maintaining appropriate segregation of duties. Statement of Effect: As a result, there is an increased risk that errors or misstatements, including those related to the timing and recording of transactions, may not be prevented or detected in a timely manner. Also, liabilities and net assets were misstated in the prior year financial statements Recommendation: We recommend that management strengthen the implementation and monitoring of existing internal controls. Management should ensure that all invoice approvals and bank reconciliation reviews are consistently performed and documented in accordance with established policies. Evidence of review should include signatures, dates, or electronic approvals. In situations where full segregation of duties is not feasible, management should implement compensating controls, such as independent review by individuals not involved in processing transactions and periodic oversight of disbursement activity and reconciliations. Additionally, management should implement monitoring procedures to periodically verify compliance with established policies and procedures. Repeat Finding: No Views of responsible officials and planned corrective actions: Management acknowledges the limitation in staffing and will implement additional review procedures to strengthen internal controls.

Schedule of Expenditures of Federal Awards (SEFA) Preparation and Reconciliation- Material Weakness Information on Federal Program: This finding is not specific to a single federal program and impacts the Schedule of Expenditures of Federal Awards as a whole. Criteria: 2 CFR §200.510(b) requires that the auditee prepare a Schedule of Expenditures of Federal Awards (SEFA) that is complete and accurate. The SEFA must include total federal awards expended for each federal program and be supported by the underlying accounting records. Additionally, sound internal control principles require that schedules used for financial reporting be reconciled to the general ledger and reviewed by an individual independent of the preparer. Statement of Condition: The Council provided multiple versions of the SEFA during the audit, and the final SEFA did not reconcile to the general ledger. The SEFA was prepared by a single individual without evidence of supervisory review or a formal reconciliation process to ensure completeness and accuracy. Statement of Cause: The Council lacks adequate internal controls over the preparation and review of the SEFA, including the absence of a formal reconciliation process to the general ledger and no independent review of the schedule prior to submission for audit. Statement of Effect: The lack of reconciliation and independent review represents a material weakness in internal control, as there is a reasonable possibility that material misstatements in the SEFA could occur and not be prevented or detected in a timely manner. Errors in the SEFA could result in inaccurate reporting of federal expenditures, improper identification of major programs, and an incorrect determination of audit scope and coverage. Questioned Costs: None. Perspective Information: The SEFA is a critical component of the Single Audit, as it serves as the basis for determining major programs and audit coverage. During the audit, multiple revised versions of the SEFA were required, indicating deficiencies in the preparation and review process. The condition was not isolated, as it affected the overall reliability of the SEFA. Recommendation: The Council should strengthen internal controls over the preparation of the SEFA by implementing a formal process to reconcile the SEFA to the general ledger and supporting documentation. Additionally, the Council should establish a documented review process whereby an individual independent of the preparer reviews the SEFA for completeness and accuracy prior to submission for audit. Repeat Finding: No Views of responsible officials and planned corrective actions: Management agrees with the finding and plans to implement procedures to ensure the SEFA is reconciled to the general ledger and reviewed by a second individual prior to submission in future periods.

Inaccurate Reporting of Expenditures on the Schedule of Expenditures of Federal Awards (SEFA) – Material Weakness Information on Federal Program: Various Programs Criteria: 2 CFR §200.510(b) requires that the auditee prepare a Schedule of Expenditures of Federal Awards (SEFA) that accurately presents federal expenditures for the period under audit. The SEFA should include only expenditures incurred during the reporting period and be supported by the underlying accounting records. Statement of Condition: During our review of the SEFA, we noted that certain expenditures included in the schedule were incurred outside of the audit period of July 1, 2024 through June 30, 2025. Specifically, expenditures incurred prior to the beginning of the audit period (e.g., June 2024) and subsequent to the end of the audit period (e.g., July 2025) were included in the SEFA. Statement of Cause: The Council did not have adequate controls in place to ensure that expenditures reported on the SEFA were limited to the audit period. Specifically, there was no effective process to review the timing of expenditures included in the SEFA or to reconcile reported amounts to the appropriate reporting period. Statement of Effect: As a result, the SEFA did not accurately reflect federal expenditures for the period under audit. This could result in misstatement of total federal expenditures and may impact the determination of major programs and audit coverage. Questioned Costs: None reported, as the expenditures were incurred within the allowable grant periods; however, they were reported in the incorrect fiscal period on the SEFA. Perspective Information: The errors identified were related to the inclusion of expenditures outside the audit period rather than noncompliance with grant requirements. This indicates a deficiency in controls over SEFA preparation and reporting accuracy. Recommendation: The Council should implement procedures to ensure that only expenditures incurred within the audit period are included in the SEFA. Such procedures should include reconciling the SEFA to the general ledger by fiscal period and implementing a review process to verify proper cut-off of expenditures. Repeat Finding: No Views of responsible officials and planned corrective actions: Management agrees with the finding and will implement procedures to ensure expenditures are reported in the appropriate fiscal period in future SEFA preparation

Control Deficiency in the Operation of Review and Approval of Expenditures Charged to Federal Awards - Significant Deficiency Information on Federal Program: 14.418 Fair Housing Initiatives Program Compliance Requirement: Allowable Costs/Cost Principles Criteria: 2 CFR §200.403 requires that costs charged to federal awards be allowable, reasonable, necessary, and adequately documented. Additionally, the Council’s established policies require that expenditures be reviewed and approved to ensure compliance with grant requirements prior to submission for reimbursement. Statement of Condition: During our testing of expenditures, we noted that invoices charged to federal awards did not contain evidence of review and approval in accordance with the Council’s established procedures. While reimbursement requests submitted to the grantor included a certification signature, there was no documented evidence that the underlying expenditures were reviewed for allowability, reasonableness, or proper grant activity prior to submission. Statement of Cause: Although the Council has established procedures requiring review and approval of expenditures, these controls were not consistently performed or documented. Statement of Effect: The failure to operate established controls increases the risk that unallowable or unsupported costs could be charged to federal awards and not be prevented or detected in a timely manner. Questioned Costs: None reported. Perspective Information: The condition was identified through testing of expenditures charged to federal awards. While no unallowable costs were identified, the lack of evidence that review controls were performed indicates that the control is not operating effectively. Recommendation: The Council should ensure that established review and approval controls over expenditures are consistently performed and documented. Evidence of review (e.g., signatures, initials, or electronic approval) should be maintained to demonstrate compliance with internal policies and federal requirements. Repeat Finding: No Views of responsible officials and planned corrective actions: Management agrees with the finding and will reinforce procedures to ensure review and approval controls are consistently performed and documented.

Segregation of Duties - Significant Deficiency Information on Federal Program: This finding is not specific to a single federal program and impacts internal controls over financial reporting and compliance Criteria: Internal control standards require that duties be adequately segregated so that no single individual has control over multiple phases of a transaction, including authorization, custody of assets, recordkeeping, and reconciliation. Statement of Condition: The Council has limited segregation of duties within its accounting functions. Certain key responsibilities, including cash receipts processing, recording transactions, and performing bank reconciliations, are performed by the same individual without sufficient independent review. Statement of Cause: Due to the size and limited staffing of the Council, sufficient personnel are not available to fully segregate incompatible duties. Statement of Effect: The lack of segregation of duties increases the risk that errors or irregularities, including fraud, could occur and not be prevented or detected in a timely manner. Questioned Costs: None reported. Perspective Information: This condition is common in smaller organizations with limited staff; however, it represents an ongoing internal control deficiency that should be mitigated through compensating controls where possible. Recommendation: The Council should implement compensating controls to mitigate the lack of segregation of duties. Such controls may include increased oversight by management or the Board of Directors, independent review of bank reconciliations, and periodic review of supporting documentation for significant transactions. Repeat Finding: No Views of responsible officials and planned corrective actions: Management acknowledges the limitation in staffing and will implement additional review procedures to strengthen internal controls.