Community Action of Napa ValleyNon-Profit

Finding is for the following federal award Federal Assistance Listing Number Program Name Expenditures 93.569 Community Service Block Grant $ 374,651 Type of Compliance Requirement: Other Finding 2023-001: Internal Control Over Financial Reporting – Fiscal Agency Accounting - Material Weakness Criteria: Internal control over financial reporting requires that personnel with adequate skill, knowledge and experience in Nonprofit accounting and financial reporting oversee the maintenance of an entity's general ledger accounting system, subsidiary records, and external financial reporting processes. Condition: Community Action of Napa Valley is a participant in a fiscal representative agreement with another California nonprofit 501(c)(3) corporation, (an Administrator). Community Action of Napa Valley recorded all revenue and expenses related to the fiscal representative agreement rather than just fees earned for providing these services. Context: Per the agreement, Community Action of Napa Valley has been selected to promptly disburse funds in order to assist the Administrator’s beneficiaries in the applicable counties served, and to be separately compensated by the Administrator for any necessary service fees or agreed upon reimbursements. The accounting for fiscal agency arrangements serving as agent: Community Action of Napa Valley, records the assets received on the Statement of Net Position, along with an offsetting liability. Community Action of Napa Valley does not record any revenues or expenses for the activity, except for the fees received for providing the agency services as required by generally accepted accounting principles for nonprofits using the accrual basis of accounting. Effect: The effect was that the organization did not have controls and procedures in place to prevent the recording of the activity of the California nonprofit 501(c)(3) corporation administering the program in accordance with generally accepted governmental accounting practices. The impact was that revenue and expenses were overstated on the financial reports. Cause: The cause, the auditor’s judgment, was turnover of the financial management staff with adequate skill, knowledge and experience to maintain the organization’s general ledger accounting system, reconciling the account balances on a regular basis, and preparing its annual financial statements. Recommendation: We recommend Community Action of Napa Valley reconcile the asset and offsetting liability to supporting schedules and documentation each month. Views of Responsible Officials and Corrective Actions: Community Action of Napa Valley has participated in the season of sharing program for more than 10 years. So far the practice has been to recognize revenue when funding is received and at the end of the year credit any unused funds to deferred revenue. Per auditor recommendation, CANV will only record assets and offsetting liabilities, not the expense and revenue of any season of sharing activities.

Finding is for the following federal award Federal Assistance Listing Number Program Name Expenditures 93.569 Community Service Block Grant $ 374,651 Type of Compliance Requirement: Other Finding 2023-002: Internal Control Over Financial Reporting – Insufficient Review of Accounting Records - Significant Deficiency Criteria: Internal control over financial reporting requires that personnel with adequate skill, knowledge and experience in Nonprofit accounting and financial reporting oversee the maintenance of an entity's general ledger accounting system, subsidiary records, and external financial reporting processes. Condition: Community Action of Napa Valley‘s internal controls were not operating as designed to detect material misstatements in accounting records, including estimates before submission of financial information for audit. Context: The accounting records are maintained using MIP general ledger accounting system. Cash receipts and cash disbursements are entered into the MIP general ledger system from source documents, and the bank accounts are reconciled monthly to the system cash balances. However, MIP accounts were not updated for accrued unemployment payable as required by generally accepted accounting principles for nonprofits using the accrual basis of accounting. There were other observations including unreconciled trial balance to prior audit report, omission of construction in progress and revenue recognition from restriction once condition was met or matching expense incurred. Effect: The effect of the internal controls not operating as designed was that the organization’s normal closing and balancing of its accounts was not in accordance with generally accepted governmental accounting practices. The impact was that some account balances were not accurate and reliable and hindered the timely preparation of both internal and external financial reports Cause: The cause, the auditor’s judgment, was turnover of the financial management staff with adequate skill, knowledge and experience to maintain the organization’s general ledger accounting system, reconciling the account balances on a regular basis, and preparing its annual financial statements. Recommendation: We recommend Community Action of Napa Valley reconcile all assets, liability, and net asset accounts to supporting schedules and documentation each month. Views of Responsible Officials and Corrective Actions: Community Action of Napa Valley records all accounting records. This year was unique due to a big capital purchase. We sent the journal entries to the auditor to review before posting in the GL. We were missing entries due to lack of support we received from the auditor during her departure from the organization. We have a process for year end closing to make sure all the entries are sufficiently entered.