TH, INC

Condition: The Organization’s internal control system does not reliably and consistently produce adjustments to bring the accounting records into compliance with generally accepted accounting principles. Additionally, the Organization does not have a system of internal controls in place that would enable management to conclude the financial statements and related disclosures are complete and presented in accordance with U.S. generally accepted accounting principles (GAAP). This is not unusual in organizations of this size. Criteria: The Organization’s accounting records should comply with generally accepted accounting principles and the Organization should have internal controls in place to provide reasonable assurance that management takes responsibility for the financial statements. Context: The organization outsources the drafting of the financial statements to ensure they are prepared in conformity with GAAP. Cause: Several account balances are not adjusted for accruals throughout the year; rather, adjustments to those account balances are proposed at year end by auditors. The Organization’s management does not have the internal controls in place to ensure financial statements would be prepared in conformity with GAAP without outsourcing these services to experienced accountants. Effect: Significant journal entries were identified, proposed, and recorded during the audit to bring the accounting records in compliance with generally accepted accounting principles. Interim financial statements may be unreliable and inconsistent with yearend results. Because of the outsourcing of drafting the financial statements, the Organization’s management relies upon an accounting firm to draft the financial statements and related disclosures. Recommendation: We recommend the Organization adopt policies and procedures to ensure the accounting records are in compliance with generally accepted accounting principles. Additionally, procedures should remain for requiring the Organization’s management to review the drafted financial statements with the accounting firm and take responsibility for the finalized financial statements. Views of Responsible Officials and Planned Corrective Action: The Organization is recording more activity on the accrual basis of accounting and will continue to review its policies and procedures related to producing accounting records in accordance with generally accepted accounting principles. The Organization recognizes management’s responsibility for the financial statements despite being drafted by an accounting firm due to the Organization’s small size and limited staff. Procedures have been formalized for Administrator and Board oversight.

Condition: The size of the office staff precludes optimal segregation of accounting functions to assure adequate internal control. The condition is not unusual in non-profit entities this size. Criteria: Internal controls should be in place so no one person handles a transaction from beginning to end and incompatible duties between functions are not handled by the same person. Context: The Organization has limited office staff performing multiple accounting duties. Cause: The Organization finds it unnecessary, due to its size, to have a large office staff in place to segregate all of the accounting functions. The cost does not outweigh the benefit at this time. Effect: Because of the small office staff, the entity relies on a limited number of individuals to handle all the accounting functions. Recommendation: Management and Board of Directors should remain aware of this situation and continue to monitor the various functions of the office staff and review detail reports to improve reliance on information prepared. Views of Responsible Officials and Planned Corrective Action: Management and the Board of Directors will continue to monitor the accounting function. Management and Board of Directors continue to review financial transactions at board meetings. Procedures have been formalized for Administrator and Board oversight.

Condition: The Organization’s internal control system does not reliably and consistently produce adjustments to bring the accounting records into compliance with generally accepted accounting principles. Additionally, the Organization does not have a system of internal controls in place that would enable management to conclude the financial statements and related disclosures are complete and presented in accordance with U.S. generally accepted accounting principles (GAAP). This is not unusual in organizations of this size. Criteria: The Organization’s accounting records should comply with generally accepted accounting principles and the Organization should have internal controls in place to provide reasonable assurance that management takes responsibility for the financial statements. Context: The organization outsources the drafting of the financial statements to ensure they are prepared in conformity with GAAP. Cause: Several account balances are not adjusted for accruals throughout the year; rather, adjustments to those account balances are proposed at year end by auditors. The Organization’s management does not have the internal controls in place to ensure financial statements would be prepared in conformity with GAAP without outsourcing these services to experienced accountants. Effect: Significant journal entries were identified, proposed, and recorded during the audit to bring the accounting records in compliance with generally accepted accounting principles. Interim financial statements may be unreliable and inconsistent with yearend results. Because of the outsourcing of drafting the financial statements, the Organization’s management relies upon an accounting firm to draft the financial statements and related disclosures. Recommendation: We recommend the Organization adopt policies and procedures to ensure the accounting records are in compliance with generally accepted accounting principles. Additionally, procedures should remain for requiring the Organization’s management to review the drafted financial statements with the accounting firm and take responsibility for the finalized financial statements. Views of Responsible Officials and Planned Corrective Action: The Organization is recording more activity on the accrual basis of accounting and will continue to review its policies and procedures related to producing accounting records in accordance with generally accepted accounting principles. The Organization recognizes management’s responsibility for the financial statements despite being drafted by an accounting firm due to the Organization’s small size and limited staff. Procedures have been formalized for Administrator and Board oversight.

Condition: The size of the office staff precludes optimal segregation of accounting functions to assure adequate internal control. The condition is not unusual in non-profit entities this size. Criteria: Internal controls should be in place so no one person handles a transaction from beginning to end and incompatible duties between functions are not handled by the same person. Context: The Organization has limited office staff performing multiple accounting duties. Cause: The Organization finds it unnecessary, due to its size, to have a large office staff in place to segregate all of the accounting functions. The cost does not outweigh the benefit at this time. Effect: Because of the small office staff, the entity relies on a limited number of individuals to handle all the accounting functions. Recommendation: Management and Board of Directors should remain aware of this situation and continue to monitor the various functions of the office staff and review detail reports to improve reliance on information prepared.Views of Responsible Officials and Planned Corrective Action: Management and the Board of Directors will continue to monitor the accounting function. Management and Board of Directors continue to review financial transactions at board meetings. Procedures have been formalized for Administrator and Board oversight.

Condition: The Organization’s internal control system does not reliably and consistently produce adjustments to bring the accounting records into compliance with generally accepted accounting principles. Additionally, the Organization does not have a system of internal controls in place that would enable management to conclude the financial statements and related disclosures are complete and presented in accordance with U.S. generally accepted accounting principles (GAAP). This is not unusual in organizations of this size. Criteria: The Organization’s accounting records should comply with generally accepted accounting principles and the Organization should have internal controls in place to provide reasonable assurance that management takes responsibility for the financial statements. Context: The organization outsources the drafting of the financial statements to ensure they are prepared in conformity with GAAP. Cause: Several account balances are not adjusted for accruals throughout the year; rather, adjustments to those account balances are proposed at year end by auditors. The Organization’s management does not have the internal controls in place to ensure financial statements would be prepared in conformity with GAAP without outsourcing these services to experienced accountants. Effect: Significant journal entries were identified, proposed, and recorded during the audit to bring the accounting records in compliance with generally accepted accounting principles. Interim financial statements may be unreliable and inconsistent with yearend results. Because of the outsourcing of drafting the financial statements, the Organization’s management relies upon an accounting firm to draft the financial statements and related disclosures. Recommendation: We recommend the Organization adopt policies and procedures to ensure the accounting records are in compliance with generally accepted accounting principles. Additionally, procedures should remain for requiring the Organization’s management to review the drafted financial statements with the accounting firm and take responsibility for the finalized financial statements. Views of Responsible Officials and Planned Corrective Action: The Organization is recording more activity on the accrual basis of accounting and will continue to review its policies and procedures related to producing accounting records in accordance with generally accepted accounting principles. The Organization recognizes management’s responsibility for the financial statements despite being drafted by an accounting firm due the Organization’s small size and limited staff.

Condition: The size of the office staff precludes optimal segregation of accounting functions to assure adequate internal control. The condition is not unusual in non-profit entities this size. Criteria: Internal controls should be in place so no one person handles a transaction from beginning to end and incompatible duties between functions are not handled by the same person. Context: The Organization has limited office staff performing multiple accounting duties. Cause: The Organization finds it unnecessary, due to its size, to have a large office staff in place to segregate all of the accounting functions. The cost does not outweigh the benefit at this time. Effect: Because of the small office staff, the entity relies on a limited number of individuals to handle all the accounting functions. Recommendation: Management and Board of Directors should remain aware of this situation and continue to monitor the various functions of the office staff and review detail reports to improve reliance on information prepared. Views of Responsible Officials and Planned Corrective Action: Management and the Board of Directors will continue to monitor the accounting function. Management and Board of Directors review financial transactions at board meetings.