Neighborhoods, Inc. of Battle CreekNon-Profit

Internal Control Over Financial Reporting - Account Reconciliations Criteria or Specific Requirement: An accounting system and respective internal controls should provide timely and accurate information for management. The reconciliation of account balances is an integral internal control activity to determine that stated account balances are accurate and fairly reported. Management and accounting personnel should reconcile general ledger accounts to subsidiary ledgers and other supporting documents in a timely and effective manner. Condition: Beyond cash, Neighborhoods, Inc. of Battle Creek (NIBC) did not reconcile most all asset and liability accounts on the general ledger for the year ended June 30, 2022. Reconciliation of the accounts required auditor assistance and required extensive research and data gathering by NIBC to accurately reflect account balances. Effect: Without performing adequate account reconciliations, information provided to management is inaccurate. Also, the probability that fraud or material errors will occur and go undetected generally increases. Additionally, the June 30, 2022 audit was not submitted within nine months after the fiscal year end as required by Uniform Guidance. Cause: Turnover in fiscal and management positions resulted in individuals not being aware of the nature of account balances and how to reconcile them. Additionally there were changes in systems and bank accounts which created further difficulties in locating historical information. Auditor's Recommendation: We recommend NIBC implement procedures to ensure accounts are reconciled timely and accurately.

Internal Control Over Financial Reporting - Internal Control Evidence Criteria or Specific Requirement: Internal controls should be in place that provide reasonable assurance that transactions are reviewed and approved. This is critically important for grant funding to assure that expenditures incurred are allowable grant costs. Condition: During the audit, transactions tested for payroll and journal entries lacked evidence of review and approval by others. Although management represents that timesheets were reviewed by a supervisor during the period under audit, the samples we observed did not have evidence of supervisor approval. Management also represented that journal entries were reviewed and approved, however the supporting documentation provided to us lacked evidence of approvals. Effect: A material weakness in internal control over financial reporting exists due to the lack of documentation of internal control processes. Cause: NIBC transitioned their accounting function from an outsourced model to utilizing in-house staffing which resulted in the loss off approval documentation maintained by the outsourced accountant. Auditor's Recommendation: We recommend NIBC implement procedures to ensure documentation of approvals is retained.