THE FOUNDATION FOR MANAGEMENT EDUCATION IN CENTRAL AMERICA

Finding 2021-001: Accounting System Federal Programs: All Programs Criteria: As stated in 2 CFR Subpart D, ?200.302 ?Financial Management?, the non-Federal entity's (i.e. the Foundation) financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Our audit procedures disclosed that the Foundation currently does not have a double-entry accounting system designed to support the needs for financial reporting, as required when receiving direct Federal funding. We further noted that the Foundation used the cash basis of accounting during the year under audit. Consequently, several entries were posted to the unaudited financial statements to be in compliance with U.S. GAAP. Cause: The Foundation did not have the adequate accounting system in place to ensure proper and accurate financial reporting. Effect or Potential Effect: Without the adequate accounting system, there exists the potential for undetected errors or misappropriation of funds, as well as internal financial statements that are incomplete, inaccurate and unreliable. Context: The Foundation did not have the adequate accounting system in place. The issue is considered systemic in nature. Recommendation: While a formal accounting software package is expected to be implemented, we recommend this occur as soon as possible. The Accounting system of the Foundation must provide the following: Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements. Records that identify adequately the source and application of funds for Federally-funded activities. Effective control over, and accountability for, all funds, property, and other assets. Comparison of expenditures with budget amounts for each Federal award. We also recommend that the implementation of the new accounting software be formalized in writing and incorporated into the accounting policies and procedures manual.

Finding 2021-002: Subrecipient Monitoring Federal Programs: All Programs Criteria: The Foundation, as a pass-through entity, is required under 2 CFR ? 200.332(d) to "Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring". Condition: During our current year compliance testing under Uniform Guidance requirements, while we noted that subrecipient was approved by the grantor, we noted certain monitoring practices were not in compliance. Cause: The Foundation did not adhere to its subrecipient monitoring policy in that it failed to perform the prescribed monitoring procedures throughout the fiscal year. Effect or Potential Effect: Without adequate subrecipient monitoring, the Foundation becomes at risk that noncompliance could take place with the Federal funding they receive and pass-through to subrecipients, thereby making costs or activities unallowable with the potential for funding to be required to be repaid to the Federal Government. Questioned Costs: Undetermined. Context: The Foundation failed to perform and/or properly document its due diligence with respect to these requirements. The issue is considered systemic in nature. Recommendation: In order to ensure this condition is mitigated in the future, we believe the Foundation should implement certain enhancements with respect to monitoring of its subgrantee that value in ensuring it has exercised timely due diligence with respect to its grant making process. Following are our recommendations (of activities/documents that should be performed/ maintained by the accounting team, in the Finance office): An evaluation of the financial (and programmatic) risk associated with the intended recipient for the purpose of determining the expected level of oversight during the grant period. Documentation of the grantee?s internal controls, accounting system, sophistication of financial personnel. A regularly documented review process with respect to periodic financial reports received from grantees, with a reconciliation of cumulative cash sent against cash reports (and any bank statements) furnished by the grantee. Payment requests made by grantees should be accompanied by supporting documentation such as profit and loss statement for the grant period, and receipts. Receipt of the grantee?s annual audit reports, if available (to ensure there are no weaknesses or deficiencies in internal control during the grant period).