Beacon Inc.Non-Profit

Finding Reference Number: 2024-001 (repeat of 2023-001) – Preparation of Financial Statements Criteria: Management is responsible for establishing and maintaining effective internal controls over financial reporting. Effective internal controls are an important component of a system that supports the preparation of external year-end financial statements and related note disclosures, as well as the oversight of the external financial reporting process by those charged with governance. Condition and Context: Beacon, Inc. (“Beacon”) does not currently have in place the processes and controls that would assure the preparation of external year-end financial statements and related note disclosures in accordance with the modified cash basis of accounting. Cause: Preparation of the external financial statements and related note disclosures, with a closing process to identify and correct material misstatements in the financial statements would require the in-house ability to maintain appropriate technical knowledge and to research current and changing accounting standards as well as unique industry considerations. Beacon has not allocated sufficient resources toward developing these capabilities because management believes the cost of doing so outweighs the benefits. Effect: Beacon engages the auditors to draft the year-end external financial statements and to perform the necessary steps to ensure the disclosures are complete. Once drafted, the financial statements are submitted to management for review and approval. While this practice is common and practical, it must be reported as a material weakness in internal control over financial reporting in internal control over financial reporting since the year-end external financial statement preparation cannot be carried out in-house. Recommendation: Beacon, Inc. should review and consider enhancements to the external financial reporting procedures and controls in place to make improvements as they are practical to do so. Responsible Official’s Response: Management concurs with the reported finding. The current economics of the organization does not allow us to correct this weakness. We believe our current accounting capacity is sufficient for routine day-to-day needs. We will continue to seek outside guidance through our annual independent audit to correct minor errors that sometimes occur or to perform other accounting needs.

2023-001: Preparation of Financial Statements and Financial Review (previously reported as 2022-001) ConditionBeacon, Inc. does not have in place the processes and controls that would assure the preparation of external year-end financial statements and related note disclosures in accordance with accounting principles generally accepted in the United States of America (GAAP). Criteria Management is responsible for establishing and maintaining effective internal controls over financial reporting. Effective internal controls are an important component of a system that supports the preparation of external year-end financial statements and related note disclosures, as well as the oversight of the external financial reporting process by those charged with governance. Cause Preparation of the external financial statements and related note disclosures, with a closing process to identify and correct material misstatements in the financial statements would require the in-house ability to maintain appropriate technical knowledge and to research current and changing accounting standards as well as unique industry considerations. Adequate efforts have not been devoted to Beacon, Inc.’s accounting processes because management believes that the cost of doing so outweighs the benefits. Management feels that this matter is addressed in conjunction with the annual independent audit. Effect Beacon, Inc. engages the auditors to draft the year-end external financial statements and to perform the necessary steps to ensure the disclosures are complete. Once drafted, the financial statements are submitted to management for review and approval. While this practice is common and practical, we must inform those charged with governance that this must be considered a material weakness in internal control over financial reporting since the year-end external financial statement preparation cannot be performed in-house. Recommendation Beacon, Inc. should review and consider enhancements to the external financial reporting procedures and controls in place to make incremental improvements as they are practical to do so. Views of Responsible Officials and Planned Corrective Actions Management concurs with the reported finding. The current economics of the organization do not allow for us to correct this weakness. We believe our current accounting capacity is sufficient for routine day to day needs. We will continue to seek outside guidance through our annual independent audit to correct minor errors that sometimes occur or to perform other accounting needs.

2022-001: Accounting capacity (previously reported as 2021-001) Condition Several areas of Beacon, Inc.?s operations require significant accounting time, effort or expertise that Beacon, Inc. has not committed. The same or greater level of capability would be needed to prepare the financial statements. Criteria A complete system of internal control includes the ability to properly recognize all accounting matters on a routine basis. It also includes the ability to prepare a materially complete and correct set of financial statements, including all required disclosure items typically found in the footnotes of the audited financial statements. Cause Adequate efforts have not been devoted to Beacon, Inc.?s accounting processes because management believes that the cost of doing so outweighs the benefits and because these matters can be effectively determined in conjunction with the annual independent audit and other year-end analysis. Effect Errors or incomplete reporting could occur without timely detection. Recommendation Beacon, Inc. should be watchful and cognizant of occasions to make incremental improvements as they are practical to do so. Views of Responsible Officials and Planned Corrective Actions Management concurs with the reported finding. The current economics of the organization do not allow for us to correct this weakness. We believe our current accounting capacity is sufficient for routine day to day needs. We will continue to seek outside guidance through our annual independent audit to correct minor errors that sometimes occur or to perform other accounting needs.

2022-002: Accounting software system (previously reported as 2021-002) Condition Beacon, Inc. utilizes QuickBooks as its accounting system. This system has significant advantages, including cost and ease of use; it also has certain weaknesses, including the possibility that records could be altered without timely detection by management. Criteria An effective system of internal control includes permanency in accounting records that precludes the possibility of changes to previously recorded transactions except where approved and subject to oversight. Cause Beacon, Inc. selected this accounting package because of its reasonable cost and ease of use. Effect Errors or unauthorized changes could occur without timely detection by management. Recommendation Management should consider implementing oversight where it is possible and practical to do so to reduce potential for error or unauthorized changes. Views of Responsible Officials and Planned Corrective Actions Management concurs with the reported finding. Beacon, Inc. utilizes QuickBooks as its accounting system because of its ease of use and its capability to fulfill the needs of the organization. A more robust system is cost-prohibitive for a small organization. In order to ensure that management is made aware of any unauthorized changes in a timely manner, Beacon, Inc. shall implement procedures within its monthly reconciliation and closing process to review cumulative financial balances and audit trail reports for any changes made to previously reported totals. Beacon, Inc. will also close each accounting year within QuickBooks after the annual audit so that changes to prior year audited financial information are unable to be made without management approval.

2021-001: Accounting capacity (previously reported as 2020-001) Condition Several areas of Beacon, Inc.?s operations require significant accounting time, effort or expertise that Beacon, Inc. has not committed. The same or greater level of capability would be needed to prepare the financial statements. Criteria A complete system of internal control includes the ability to properly recognize all accounting matters on a routine basis. It also includes the ability to prepare a materially complete and correct set of financial statements, including all required disclosure items typically found in the footnotes of the audited financial statements. Cause Adequate efforts have not been devoted to Beacon, Inc.?s accounting processes because management believes that the cost of doing so outweighs the benefits and because these matters can be effectively determined in conjunction with the annual independent audit and other year-end analysis. Effect Errors or incomplete reporting could occur without timely detection. Recommendation Beacon, Inc. should be watchful and cognizant of occasions to make incremental improvements as they are practical to do so.

2021-002: Accounting software system (previously reported as 2020-002) Condition Beacon, Inc. utilizes QuickBooks as its accounting system. This system has significant advantages, including cost and ease of use; it also has certain weaknesses, including the possibility that records could be altered without timely detection by management. Criteria An effective system of internal control includes permanency in accounting records that precludes the possibility of changes to previously recorded transactions except where approved and subject to oversight. Cause Beacon, Inc. selected this accounting package because of its reasonable cost and ease of use. Effect Errors or unauthorized changes could occur without timely detection by management. Recommendation Management should consider implementing oversight where it is possible and practical to do so to reduce potential for error or unauthorized changes.

2021-003: Submission of the data collection form and reporting package to the Federal Audit Clearinghouse Condition The data collection form and reporting package was not submitted by the earlier of 30 days after the reports were received from the auditors or nine months after the end of the audit period. Criteria 2 CFR Section 200.512(a) requires the data collection form and reporting package to be submitted by the earlier of 30 days after the reports are received from the auditors or nine months after the end of the audit period. Cause Internal controls were not in place to ensure the timely submission of the data collection form and reporting package to the Federal Audit Clearinghouse per 2 CFR Section 200.512(a). Effect Beacon, Inc. is not in compliance with 2 CFR Section 200.512(a). Recommendation Beacon, Inc. should ensure that internal controls are in place to complete the submission of the data collection form and reporting package to the Federal Audit Clearinghouse by no later than nine months after the end of the audit period per 2 CFR Section 200.512(a).

2020-001: Accounting capacity (previously reported as 2019-001) Condition Several areas of Beacon, Inc.?s operations require significant accounting time, effort or expertise that Beacon, Inc. has not committed. The same or greater level of capability would be needed to prepare the financial statements. Criteria A complete system of internal control includes the ability to properly recognize all accounting matters on a routine basis. It also includes the ability to prepare a materially complete and correct set of financial statements, including all required disclosure items typically found in the footnotes of the audited financial statements. Cause Adequate efforts have not been devoted to Beacon, Inc.?s accounting processes because management believes that the cost of doing so outweighs the benefits and because these matters can be effectively determined in conjunction with the annual independent audit and other year-end analysis. Effect Errors or incomplete reporting could occur without timely detection. Recommendation Beacon, Inc. should be watchful and cognizant of occasions to make incremental improvements as they are practical to do so.

2020-002: Accounting software system (previously reported as 2019-002) Condition Beacon, Inc. has adopted QuickBooks as its accounting system. This system has significant advantages, including cost and ease of use; it also has certain weaknesses, including the possibility that records could be altered without timely detection by management. Criteria An effective system of internal control includes permanency in accounting records that precludes the possibility of changes to previously recorded transactions except where approved and subject to oversight. Cause Beacon, Inc. selected this accounting package because of its reasonable cost and ease of use. Effect Errors or unauthorized changes could occur without timely detection by management. Recommendation Management should consider implementing oversight where it is possible and practical to do so to reduce potential for error or unauthorized changes.

2020-003: Lease documentation (previously reported as 2019-005) Condition Although client files contain documentation regarding items that were not able to be obtained, as well as requests for missing documentation, current leases for persons served were not always received by Beacon, Inc. Criteria An effective system of accounting includes complete documentation of legal documents relating to services provided to persons served. Cause Leases for persons served by Beacon, Inc. are executed by and in the possession of the property managers. Part of the responsibility of the property managers is to provide all new leases to Beacon, Inc.; however, not all leases were able to be obtained by Beacon, Inc. despite clearly documented efforts requesting them. Effect Beacon, Inc. lacks complete documentation of legal obligations relative to its clients, which could compromise services provided. Context A sample of 8 clients served were selected for audit from a population of 38. The test found two files that did not contain current lease agreements. No questioned costs were related to this finding. Recommendation Beacon, Inc. should continue its efforts to obtain all leases in force regarding all persons served. Additionally, updates to internal control procedures should be implemented to include receiving a copy of each lease at signing. Beacon, Inc. could potentially explore alternative procedures, such as withholding rent until leases are provided.

2019-002 Accounting software system Criteria An effective system of internal control includes permanency in accounting records that precludes the possibility of changes to previously recorded transactions except where approved and subject to oversight. Condition Shalom Community Center, Inc. has adopted QuickBooks as its accounting system. This system has significant advantages such as cost and ease of use. It also has certain weaknesses including the possibility that records could be altered without detection and without a clear record of the change or correction that was made. Questioned Costs There were no questioned costs related to this finding. Cause Shalom Community Center, Inc. selected this accounting package because of its reasonable cost and ease of use for staff involved. Effect or Potential Effect Errors or other incorrect transactions could occur or be recorded without timely detection. Recommendation While it is unlikely that economics makes correction of this weakness possible in the near future, the organization should consider oversight where it is most practicable or most sensitive to possible error. Management Views and Corrective Action Plan Refer to Management's Views and Corrective Action Plan at the end of the report.

2019-003 Segregation of duties Criteria An effective system of internal control includes segregation of duties in receipts, disbursements and other accounting areas. Condition Segregation of duties is limited at Shalom Community Center, Inc. In some cases a single employee has near exclusive handling of receipts. Questioned Costs There were no questioned costs related to this finding. Cause Shalom Community Center, Inc. is a small organization with limited staff. Effect or Potential Effect Errors or other incorrect transactions could occur or be recorded without timely detection. Recommendation While it is unlikely that economics makes complete correction of this weakness possible in the near future, the organization should continue to utilize segregation of duties in areas where it is most practicable or most sensitive to possible error. Management Views and Corrective Action Plan Refer to Management's Views and Corrective Action Plan at the end of the report.

2019-004 Bank Reconciliations Criteria An effective system of internal control includes routine, complete and accurate reconciliations of the entity?s bank account. Condition Bank reconciliations prepared do not reconcile the differences between the bank balance and the general ledger. Entries are made to the general ledger cash account that have no existence for the actual bank balance. Cash as reflected on QuickBooks reports reflects significantly erroneous amounts. Ultimately as of December 31, 2019 the difference between the actual available cash and cash per the general ledger is approximately $338,800. Questioned Costs There were no questioned costs related to this finding. Cause Shalom Community Center, Inc. is a small organization with limited staff. Some of the difficulty in this regard occurred in connection with the introduction of the new General Ledger system at January 1, 2019. Additional errors were introduced through inappropriate journal entries. Other issues including incorrect entries were not discovered because persons involved did not resolve the issues or prepare actual reconciliations. Effect or Potential Effect Errors or other incorrect transactions could occur or be recorded without timely detection. Persons could rely on incorrect information from the general ledger system. Recommendation Differences between the cash balance per bank and balance per general ledger should be detailed or eliminated. Later reconciliations should be timely, complete and accurate. Inappropriate reconciling items should be corrected or eliminated. Management Views and Corrective Action Plan Refer to Management's Views and Corrective Action Plan at the end of the report.

2019-005 Lease Documentation Criteria An effective system of accounting includes complete documentation of legal documents, in this case leases, relating to services provided to persons served. Condition In many cases leases for persons served were not obtained for inclusion in client files. The files do contain documentation of all other related matters as well as documentation of requests for the missing documents. Questioned Costs There were no questioned costs related to this finding. Cause Upon completion leases are in the possession of the property management representative / provider. It is their responsibility to make a copy and provide it to Shalom, Inc. This was not done. Theories as to why this wasn't done include misfiling, general disorganization or other causes not involving Shalom, Inc. personnel. Effect or Potential Effect Shalom, Inc. lacks complete documentation of legal obligations relative to these tenants which could compromise standing in a variety of ways. Recommendation Shalom, Inc. should continue its efforts to obtain former leases. In addition, changes in process should be made so that a copy of a lease is obtained at signing. At a minimum, a camera image could be easily made. Shalom, Inc. could explore additional legal rights such as withholding rent until a lease is provided. Management Views and Corrective Action Plan Refer to Management's Views and Corrective Action Plan at the end of the report.

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