Talbot House Ministries of Lakeland, Inc.

2021-001: Financial Accounting and Reporting Type of Finding: Material Weakness Criteria or specific requirement: Management is responsible for the preparation and fair presentation of its financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP); this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error. This also includes preparation of the schedule of expenditures of federal awards and state financial assistance, which is presented with the financial statements. Condition: During the current year, the organization had material audit journal entries posted in various areas of the audit to include cash bank reconciliation, accounts receivable, deferred revenue, and in-kind revenue. Also, the organization does not have a system within the general ledger designed to track and manage grant expenses. This is currently tracked in multiple Excel schedules. Tracking within the general ledger is recommended by the Uniform Guidance and would facilitate tracking of all grant expenditures in one place. Context: The above conditions were noted in multiple accounting cycles. Cause: The Organization's procedures for financial statement and schedule of expenditures of federal awards and state financial assistance preparation and review were not sufficient to identify the above conditions. Effect: The accounting records, as originally provided, were not fully completed to provide for the preparation and fair presentation of the financial statements and the schedule of expenditures of federal awards and state financial assistance without recording the material audit adjustments. Repeat Finding: No. Recommendation: We recommend the Organization review its current policies, procedures and internal controls over accounting and financial reporting including the year-end close processes. Review procedures and internal controls should be designed to identify potential GAAP departures and should include an additional focus on compiling the year-end schedule of expenditures of federal awards and state financial assistance. Views of responsible officials: Management concurs with this recommendation.

2021-002: Formal Review Process of Disbursements Type of Finding: Material Weakness Criteria or specific requirement: Management is responsible for the internal controls over the disbursement of all cash transactions. Condition: During testing of major federal program assistance payments, it was noted there is no formal review process of the rent and utility assistance payment before it is issued to the client. Context: This deficiency in internal control was detected during compliance testing of major federal program AL#14.267 rent and utility assistance payments. Cause: The internal control process is currently designed that so payment requests are formally made from the grant administrator through a form submitted to Finance. The internal control check request form has a signature line to document a formal review of the transaction prior to the check being processed and issued. In all the instances tested (8), the reviewer signature line of the check request form was not signed. Effect: Payments are being issued without a documented review process. Repeat Finding: No. Recommendation: We recommend a formal review process be documented prior to issuance of any disbursement payments. Views of responsible officials: Management concurs with this recommendation. This resulted for a limited period of time due to staffing turnover.