Nutrition Services, Inc.Non-Profit

Condition: During our audit, a material adjustment was needed to adjust accounts to correct balances at year end. Significant accounts affected include grants receivable and federal revenue accounts. Management should have procedures in place to identify misstatements in the financial statements. As a result of the processes and procedures in place, the financials were not being properly updated for grants receivable and federal revenue accounts. Accounts were materially misstated. The audit firm noted the misstatement and presented an adjusting journal entry to correct the misstatement during the audit. We recommend the Organization review and update its year-end processes to ensure all accounts are current at year end. Management agrees with the finding.

Condition: During our audit, we noted that management did not implement internal controls over volunteer time. It was noted while testing key controls over the sampled population of volunteer time used to meet the matching requirement for the major program tested. The sampled population was deteremined to be statistically valid. Criteria: The Organization must establish and maintain effective internal controls over the financial award that provides reasonable assurance that the non-Federal entity is managing the Federal Award in compliance with Federal Statutes, regulations, and the terms and conditions of the Federal award per CFR § 200.303. These requirements detail the information that must be included in the Organization's internal controls. Cause: Management did not design and implement internal controls to review and reconcile volunteer time. Effect: The absence of controls over volunteer time incurred lead to an increase risk of errors and noncompliance in the financial statements which could misrepresent the Organization's financial statements. Reccomendation: We recommend that the Organization perform and document a monthly review and/or reconciliation over the volunteer time recorded to ensure the volunteer time is complete and accurate. Views of Responsible Officials: Management agrees with the finding.

Context: This is a repeat finding from the prior year. During our audit procedures, we obtained an understanding of the Organization'sinternal control procedures and identified cash disbursements and cash receipts as areas with limited segregation of duties. Recomendation: We recognize the staff is not large enough to eliminate this deficienvy. It is important hat the Board of Directors be aware of this condition and monitors all financial statements. Views of Responsible Officals: Management agrees with the finding.

Condition: During our audit, we noted errors related to calculations of federal expenditures on the Schedule of Expenditures of Federal Awards. Critera: Uniform Guidance requires proper reporting of federal expenditures. Cause: Management did not have the information needed to properly prepare the Schedule of Expenditures of Federal Awards. Effect: As a result, federal expenditures were understated by $196,086 on the Schedule of Expenditures of Federal Awards. Context: This is not a repeat finding from the prior year. During our audit procedures, we found that the expenditures reported on the Schedule of Expenditures of Federal Awards did not agree with the underlying support. The Schedule of Expenditures of Federal Awards has been corrected. Recommendation:We recommend that the Organization implement a review process to ensure correct reporting on the Schedule of Expenditures of Federal Awards prior to the audit, including a reconciliation between the Schedule of Expenditures of Federal Awards and the accounting system. Views of Responsible Officals: Management agrees with the finding.

Condition: Supplemental information on the financial reports, including program income and program expenditures, did not agree with the underlying financial information. Criteria: Uniform Guidance requires that information reported on the financial reports agrees to the underlying financial information. Cause: There was no internal process to ensure the accuracy of the supplemental information on the financial reports. Effect: As a result, grantor records may contain inaccurate information based on the submitted financial reports. Context: This is a repeat finding from the prior year. During our audit procedures, we compared financial reports to the underlying financial information and found that the amounts did not agree. Recomendation: We recommend that the Organization implements a review process to tie the monthly, quarterly, and annual financial reports to the underlying financial records as the reports are prepared. Views of REsponsbile Officals: Management agrees with the finding.

Condition: During our audit we reviewed internal control procedures over cash disbursements and cash receipts and found the Organization to have limited segregation of duties in these areas. Criteria: There are four general categories of duties: authorization, custody, record keeping and reconciliation. In an ideal system, different employees perform each of these four major functions. In other words, no one person has control of two or more of these responsibilities. Cause: As a result of the small staff, the bookkeeper is responsible for performing, recording, custody of assets and reconciling activities and the president is responsible for performing authorization, custody of assets and reconciling activities. Effect: The existence of this limited segregation of duties increases the risk of fraud. Recommendation: We recognize the staff is not large enough to eliminate this deficiency. It is important that the Board of Directors be aware of this condition and monitors all financial statements.

Condition: Supplemental information on the financial reports, including program income and program expenditures, did not agree with the underlying financial information. Criteria: Uniform Guidance requires that information reported on the financial reports agrees to the underlying financial information. Cause: There was no internal process to ensure the accuracy of the supplemental information on the financial reports. Effect: As a result, grantor records may contain inaccurate information based on the submitted financial reports. Recommendation: We recommend that the Organization implements a review process to tie the monthly, quarterly and annual financial reports to the underlying financial records as the reports are prepared.

Condition: During our audit we reviewed internal control procedures over cash disbursements and cash receipts and found the Organization to have limited segregation of duties in these areas. Criteria: There are four general categories of duties: authorization, custody, record keeping and reconciliation. In an ideal system, different employees perform each of these four major functions. In other words, no one person has control of two or more of these responsibilities. Cause: As a result of the small staff, the bookkeeper is responsible for performing, recording, custody of assets and reconciling activities and the president is responsible for performing authorization, custody of assets and reconciling activities. Effect: The existence of this limited segregation of duties increases the risk of fraud. Recommendation: We recognize the staff is not large enough to eliminate this deficiency. It is important that the Board of Directors be aware of this condition and monitors all financial statements.