Michigan College Access NetworkNon-Profit

Finding Type Material Weakness Condition During the audit, we noted a significant amount of adjusting journal entries were required to be recorded in order to adjust the year end balances to their appropriate amounts. This includes journal entries related to the Organization?s funding sources as of September 30, 2022. Criteria Accounting books and records should be complete and accurate and include all relevant documentation to support the amounts. Cause Formal procedures related to proper accounting practices were not in place to ensure all activities were addressed and reported appropriately in conformity with generally accepted accounting principles. Effect General ledger accounts were not analyzed and reviewed by management prior to the start of the audit to ensure financial records were properly recorded. Recommendation We recommend the Organization review and update, as necessary, its written procedures regarding processing and recording of transactions and monitor such processing to ensure that transactions are processed and reported and reconciled in an accurate manner. This includes maintaining documentation and support for each entry in an orderly fashion. Furthermore, the Organization should review each funding source agreement on a timely basis to verify the accounting treatment is in conformity with generally accepted accounting principles. Response Although management acknowledges that the number of journal entries was less than prior year, it will continue the implementation of new accounting processes and grant accounting treatment recommended from the current and previous year audits to limit the number of changes to the financial statements presented at the beginning of the audit to ensure that the journal entries recorded during future audit periods are non-substantive.

Finding Type Material Weakness Condition During the audit, we noted several instances in which the proper grant accounting was not applied to grant receivables and therefore contribution revenue. We also noted the proper classification between contributions with donor restrictions and without donor restrictions was not achieved. Criteria ASU 2018-08 updates the definition of a contribution and distinguishes transactions between contributions and exchange transactions. For transactions determined to be contributions, the Organization must also determine if the contribution is conditional or unconditional as well as if there are any time or purpose restrictions resulting in the funds being classified as with donor restrictions until the restrictions are satisfied. Cause The proper procedures, including review of agreements and subsequent cash receipts, and related support documents, were not performed by the Organization. Effect The financial statements were not complete with respect to grants receivable and contribution revenue as well as the proper classification of contribution revenue between with donor restrictions and without donor restrictions. Recommendation We recommend all grant agreements and related support documents are reviewed to ensure proper cut-off is achieved. Response The organization has worked to improve its organizational knowledge regarding the accounting of all grant transactions. Key management personnel meet upon awarding of each new grant to discuss the accounting treatment of the grant. With this new process in place, we have made a significant shift to the new standard of recording revenue. While this process has been successful in the majority of grant recordings this past fiscal year, management recognizes we still have some room for growth. We plan to implement a new tracking document and updated spreadsheet as part of this process to ensure we are capturing all relevant information and recording revenue accordingly. This includes a detailed discussion considering the determinations of condition and restrictions. Management expects the new process to reduce the number of year-end adjustments. Management also welcomes assistance and/or tools to better guide revenue recognition.

Finding Type Material Weakness, Repeat Finding Federal Program AmeriCorps, ALN #94.006 Condition During the audit, we noted a significant amount of adjusting journal entries were required to be recorded in order to adjust the year end balances to their appropriate amounts. This includes journal entries related to the Organization?s funding sources as of September 30, 2022. Criteria Accounting books and records should be complete and accurate and include all relevant documentation to support the amounts. Cause Formal procedures related to proper accounting practices were not in place to ensure all activities were addressed and reported appropriately in conformity with generally accepted accounting principles. Effect General ledger accounts were not analyzed and reviewed by management prior to the start of the audit to ensure financial records were properly recorded. Identification of a Repeat Finding This is a repeat finding from the 2021 audit, 2021-004. Recommendation We recommend the Organization review and update, as necessary, its written procedures regarding processing and recording of transactions and monitor such processing to ensure that transactions are processed and reported and reconciled in an accurate manner. This includes maintaining documentation and support for each entry in an orderly fashion. Furthermore, the Organization should review each funding source agreement on a timely basis to verify the accounting treatment is in conformity with generally accepted accounting principles. Response Although management acknowledges that the number of journal entries was less than prior year, it will continue the implementation of new accounting processes and grant accounting treatment recommended from the current and previous year audits to limit the number of changes to the financial statements presented at the beginning of the audit to ensure that the journal entries recorded during future audit periods are non-substantive.

Finding Type Material Weakness Condition During the audit, we noted several instances in which the proper grant accounting was not applied to grant receivables, refundable advances and therefore contribution revenue. We also noted the proper classification between contributions with donor restrictions and without donor restrictions was not achieved. Criteria ASU 2018-08 updates the definition of a contribution and distinguishes transactions between contributions and exchange transactions. For transactions determined to be contributions, the Organization must also determine if the contribution is conditional or unconditional as well as if there are any time or purpose restrictions resulting in the funds being classified as with donor restrictions until the restrictions are satisfied. Cause The proper procedures, including review of agreements and subsequent cash receipts, and related support documents, were not performed by the Organization. Effect The financial statements were not complete with respect to grants receivable, refundable advances and contribution revenue as well as the proper classification of contribution revenue between with donor restrictions and without donor restrictions. Recommendation We recommend all grant agreements and related support documents are reviewed to ensure proper cut-off is achieved. Response All grant agreements and related supporting documents will be reviewed by a team including the Finance Manager, the Executive Director, and relevant program staff to ensure the proper grant accounting for receivables and proper restriction classification, prior to revenue being recognized.

Finding Type Material Weakness Condition During the audit, we noted there is no formal review and approval process for manual journal entries prior to posting to the general ledger. Criteria Accounting books and records should be complete and accurate and include all relevant documentation to support the amounts. Cause Formal procedures related to proper accounting practices were not in place to ensure all activities were addressed and reported appropriately in conformity with generally accepted accounting principles. Effect This finding resulted in multiple journal entry adjustments. Recommendation We recommend the Organization review and update, as necessary, its written procedures regarding approval, processing and recording of transactions and monitor such processing to ensure that transactions are approved, processed and reported and reconciled in an accurate manner. Response All manual journal entries will be reviewed and approved by the Executive Director prior to posting to the general ledger.

Finding Type Material Weakness Condition During the audit, we noted a significant amount of adjusting journal entries were required to be recorded in order to adjust the year end balances to their appropriate amounts. This includes journal entries related to the Organization?s funding sources as of September 30, 2021. Criteria Accounting books and records should be complete and accurate and include all relevant documentation to support the amounts. Cause Formal procedures related to proper accounting practices were not in place to ensure all activities were addressed and reported appropriately in conformity with generally accepted accounting principles. Effect General ledger accounts were not analyzed and reviewed by management prior to the start of the audit to ensure financial records were properly recorded. Recommendation We recommend the Organization review and update, as necessary, its written procedures regarding processing and recording of transactions and monitor such processing to ensure that transactions are processed and reported and reconciled in an accurate manner. This includes maintaining documentation and support for each entry in an orderly fashion. Furthermore, the Organization should review each funding source agreement on a timely basis to verify the accounting treatment is in conformity with generally accepted accounting principles. Response All grant agreements and related supporting documents will be reviewed by a team including the Finance Manager, the Executive Director, and relevant program staff to ensure the proper grant accounting for receivables and proper restriction classification, prior to revenue being recognized. Additionally, all manual journal entries will be logged by number and description of the reason for the entry and reviewed by the Executive Director prior to posting.

Finding Type Material Weakness, Repeat Finding Federal Program AmeriCorps, ALN #94.006 Condition During the audit, we noted a significant amount of adjusting journal entries were required to be recorded in order to adjust the year end balances to their appropriate amounts. This includes journal entries related to the Organization?s funding sources as of September 30, 2021. Criteria Accounting books and records should be complete and accurate and include all relevant documentation to support the amounts. Cause Formal procedures related to proper accounting practices were not in place to ensure all activities were addressed and reported appropriately in conformity with generally accepted accounting principles. Effect General ledger accounts were not analyzed and reviewed by management prior to the start of the audit to ensure financial records were properly recorded.

Finding Type Significant Deficiency Condition During the audit, we identified payables that were not recorded in the correct period. Criteria Payables should be recorded in the period in which the goods are received or services are performed. Cause The proper cutoff procedures, including review of invoices and related support documents, were not performed by the Organization. Effect The financial statements were not complete with respect to accounts payable. Recommendation We recommend all invoices and related support documents are reviewed to ensure proper cut-off is achieved. Response On a monthly basis, the senior staff reviews all expense posting for accuracy of expense classification and the available budget for the remainder of the year. This process will minimize the end of the year confusion regarding the accounting treatment of spending. In addition, a rigorous review will occur at the end of fiscal year 2020 based on the experience of this year audit.

Finding Type Material Weakness Condition During the audit, we noted a significant amount of adjusting journal entries were required to be recorded in order to adjust the year end balances to their appropriate amounts. This includes journal entries related to the Organization?s funding sources as of September 30, 2019. Furthermore, we noted instances in which the Organization did not have readily available and organized supporting documentation for their journal entries. Criteria Accounting books and records should be complete and accurate and include all relevant documentation to support the amounts. Cause Formal procedures related to proper accounting practices were not in place to ensure all activities were addressed and reported appropriately in conformity with generally accepted accounting principles. Effect General ledger accounts were not analyzed and reviewed by management prior to the start of the audit to ensure financial records were properly recorded. Recommendation We recommend the Organization review and update, as necessary, its written procedures regarding processing and recording of transactions and monitor such processing to ensure that transactions are processed and reported and reconciled in an accurate manner. This includes maintaining documentation and support for each entry in an orderly fashion. Furthermore, the Organization should review each funding source agreement on a timely basis to verify the accounting treatment is in conformity with generally accepted accounting principles. Response Journal entries are being prepared with supporting documentation and being stored electronically for quick access and historical reference. Senior Management will review and sign off on all journal entries during the monthly financial meetings.

Finding Type Significant Deficiency Federal Program AmeriCorps, CFDA #94.006 Condition Expenditures reported on the Financial Status Reports relating to the program were less than total expenditures recorded in the general ledger. Criteria Reported expenditures should reconcile to the financial records of the Organization without any exception. Cause A proper reconciliation was not performed to ensure reported expenditures agreed to the general ledger. Effect The Financial Status Report omitted expenditures relating to the program. Recommendation We recommend a reconciliation be performed monthly to ensure the reported expenditures agree to the general ledger. Response Monthly reconciliation of MSU reported expenses plus MCAN?s expense in QuickBooks will be prepared as support for the reporting in OnCorps and subsequent request for funding. Reconciliation will be prepared by accountant and submitted to management for approval before the reporting due on the 15th of each month.

Finding Type Material Weakness Federal Program AmeriCorps, CFDA #94.006 Condition During the audit, we noted a significant amount of adjusting journal entries were required to be recorded in order to adjust the year end balances to their appropriate amounts. This includes journal entries related to the Organization?s funding sources as of September 30, 2019. Furthermore, we noted instances in which the Organization did not have readily available and organized supporting documentation for their journal entries. Criteria Accounting books and records should be complete and accurate and include all relevant documentation to support the amounts. Cause Formal procedures related to proper accounting practices were not in place to ensure all activities were addressed and reported appropriately in conformity with generally accepted accounting principles. Effect General ledger accounts were not analyzed and reviewed by management prior to the start of the audit to ensure financial records were properly recorded. Recommendation We recommend the Organization review and update, as necessary, its written procedures regarding processing and recording of transactions and monitor such processing to ensure that transactions are processed and reported and reconciled in an accurate manner. This includes maintaining documentation and support for each entry in an orderly fashion. Furthermore, the Organization should review each funding source agreement on a timely basis to verify the accounting treatment is in conformity with generally accepted accounting principles. Response Journal entries are being prepared with supporting documentation and being stored electronically for quick access and historical reference. Senior Management will review and sign off on all journal entries during the monthly financial meetings.