AMERICAN INDIAN ALASKA NATIVE TOURISM ASSOCIATIONNon-Profit

B. FINDINGS - FINANCIAL STATEMENTS AUDIT 2020-001 Internal Controls Over Financial Reporting Type of Finding: Material Weakness in Internal Controls Over Financial Reporting As discussed in detail in Part C, Finding #2020-001, adjustments considered material to the financial statements were identified during the audit process. C. FINDINGS AND QUESTIONED COSTS ? MAJOR FEDERAL AWARD PROGRAMS AUDIT 2020-001 Internal Controls Over Financial Reporting U.S. Department of Interior, Bureau of Indian Affairs - CFDA No. 15.032 - Award Periods: March 1, 2019 through April 30, 2024 Type of Finding: Material Weakness in Internal Controls Over Compliance, Other Matters Condition: The trial balance had inaccuracies, and during the audit process, material adjustments were required for the overall financial statements, as well as the individual grant funds, to be correctly stated. Specifically, the following conditions were identified: 1. Adjustments were required for deferred revenue, accounts payable, and payroll-related liabilities in order for the financial statements to be fairly stated according to generally accepted accounting principles. These adjustments increased expenses for the fiscal year by approximately $41,000. 2. Appropriately, the Association maintains federal and other private grants in separate funds in the general ledger. However, revenue and expense were not properly recognized in total, as well as at the fund level. Total federal grant revenue, as provided in the unadjusted trial balance, was $756,862 with federal expenses totaling $774,172. After requesting that the Association make adjustments so that the federal cost-reimbursement grants? revenue and expense would balance, the adjusted total federal expenditures was $727,408, which is below the $750,000 threshold for a Single Audit. After further audit procedures, additional adjustments were identified (including those described #1), that resulted in a total of $790,511 in federal expenditures. Had additional audit procedures not been completed, the Association was at risk of failing to conduct a Single Audit, even though expenditures during the fiscal year exceeded $750,000. Criteria: According to Uniform Guidance, recipients of federal awards must: ? Maintain a financial management system that accurately identifies and accounts for all Federal awards received and expended. ? Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the Federal award is managed in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. When material adjustments are required during the audit process, this is an indication that internal controls over financial reporting were not effective. Cause: The Association?s general ledger did not accurately represent activities during the fiscal year ended 2020, from both an overall financial statement perspective, as well as at the individual Federal grant level. This was likely due to a change in accountants during fiscal year 2020, and an inadequate process for recording and reviewing closing entries for the Association as a whole and at the grant level. Effect: The Association?s financial and grant reports may not be accurate when revenue and expense are not recorded as required by Federal grant agreements and generally accepted accounting principles. Recommendation: The Association should establish monthly and year-end closing processes that provide increased confidence that Federal grant and other revenues are reported according to applicable standards, including: 1. Review grant-specific profit/loss reports to ensure revenue for cost-reimbursement grants equals expense. 2. Ensure all month-end and year-end accruals are recorded so that the financial statements are reported and presented according to generally accepted accounting principles. Views of Responsible Officials and Planned Corrective Actions: The Association will develop and adopt a written month-end and year-end close checklist. These will be provided to management for review in the same frequency. The Association?s existing monthly reports will be expanded to reflect information itemized by grant, in addition to information presented at the organization-level of detail. This will be true for the organization?s Statement of Activities and relevant balances on the Statement of Position, both prepared by its accounting services provider. This will facilitate analysis and review at the grant-level.