Casa De AmparoNon-Profit

Findings- Financial Statement Audit 2024-001 Inadequate Internal Controls over Schedule of Federal Expenditures Repeat Finding: No Type of Finding: Material Weakness Questioned Costs: $2,343,883 Criteria: The Organization is required to prepare the Schedule of Expenditures of Federal Awards (SEFA) in accordance with the Uniform Guidance and Generally Accepted Accounting Principles (GAAP). This includes accurately reporting all federal expenditures by grant and Assistance Listing Number (ALN) to ensure completeness and proper oversight. Condition: The Organization originally issued financial statements that materially misstated federal expenditures on the SEFA. Specifically, $2,343,883 in expenditures that should have been allocated to non-federal programs were incorrectly reported as federal expenditures. As a result of this error, the financial statements and SEFA were subsequently reissued to reflect the correct allocation, with the $2,343,883 reclassified from federal to non-federal spending. Cause: The misstatement occurred due to insufficient internal controls and oversight in the preparation and review of the SEFA. There was a lack of adequate review procedures to ensure that expenditures were accurately classified between federal and non-federal sources. Effect: The original SEFA materially overstated federal expenditures, which could have led to incorrect major program determination, inaccurate audit scope, and potential noncompliance with Uniform Guidance. The need to reissue the financial statements reflects the significance of the error and the impact on federal reporting. Recommendation: We recommend that the Organization strengthen its internal controls over SEFA preparation by implementing formal reconciliation and review procedures. These controls should ensure that expenditures are accurately classified and allocated between federal and non-federal sources prior to issuance of the financial statement.

Criteria Management is responsible for implementing review processes over transactions and financial statement close procedures. Condition In testing performed over several accounts, the Auditors identified multiple deficiencies that were the result of missing review processes over transactions and financial statement close procedures. These deficiencies included:  Adequate support was not reviewed and retained for contributions, journal entries, and expenses.  Evidence of timely review was not available for certain journal entries, invoices, and expense reports.  Errors were identified in the recording of several transactions. Due to lack of review these errors were not identified and corrected on a timely basis. Errors included in the release of net assets with donor restriction, allocation of expenses between departments, reconciliation of payroll expenses, and recording of grant and contributions of non-financial assets.  Evidence of timely review was not available for certain reports required to be prepared in accordance with the Organization’s grant agreements. This lack of review resulted in several errors within the reports. Cause The Organization’s policies and processes regarding review were not consistently applied. Effect Material errors may not be detected or corrected in a timely manner. Recommendation We recommend that the Organization detail review, and consistently follow, established policies and processes of detail review, including vouching to supporting documents, of expenses and reports.

Criteria Per Part 6 of the Compliance Supplement, controls need to be designed such that they would prevent or detect potential noncompliance. Management should implement control activities through policies. Condition In testing performed over several accounts, the Auditors identified multiple deficiencies that were the result of missing review processes over transactions and financial statement close procedures. Refer to finding 2023-001 for more details. Cause The Organization’s policies and processes regarding review of underlying detail of program expenses and reporting were not consistently applied. Effect Material errors may not be detected or corrected in a timely manner. Questioned Costs None reported. Context The condition noted above was identified during our procedures related to Allowable Costs/Cost Principles and Reporting. Identification as a Repeat Finding Yes. Recommendation We recommend that the Organization detail review, and consistently follow, established policies and processes of detail review, including vouching to supporting documents, of expenses and reports.

Criteria Per Part 6 of the Compliance Supplement, controls need to be designed such that they would prevent or detect potential noncompliance. Management should implement control activities through policies. Condition In testing performed over several accounts, the Auditors identified multiple deficiencies that were the result of missing review processes over transactions and financial statement close procedures. Refer to finding 2022-001 for more details. Cause The Organization?s policies and processes regarding review of underlying detail of program expenses and reporting were not consistently applied. Effect Material errors may not be detected or corrected in a timely manner. Questioned Costs None reported. Context The condition noted above was identified during our procedures related to Allowable Costs/Cost Principles and Reporting. Identification as a Repeat Finding Not a repeat finding Recommendation We recommend that the Organization detail review, and consistently follow, established policies and processes of detail review, including vouching to supporting documents, of expenses and reports. Views of Responsible Officials Management concurs with the finding. The Organization revised its review procedures so that they are not impacted by employee turnover. The revised process includes cross-training multiple employees on each critical review process. These steps should correct the deficiency.

Criteria Management is responsible for the timely preparation of year end closing procedures and reconciliation functions. Condition In testing performed over several accounts, we noted that supporting schedules did not agree to the trial balance and the accounts were not reconciled accurately or on a timely basis which resulted in multiple journal entries and delay in audit time. These accounts included cash, pledges receivable, grants receivable, accruals and prepaids. Cause It does not appear that reconciliations are being prepared or reviewed on a timely basis. Effect Audit adjustments were required to correct several accounts. Recommendation We recommended that all asset and liability accounts are reconciled monthly and those reconciliations are reviewed by someone independent from the preparer. Views of Responsible Officials Management concurs with the finding. Management has already taken steps to fill a vacant accounting position and added a CFO to oversee the department. The Organization?s Controller will complete the monthly bank reconciliations and then submit to the CFO for review and approval in accordance with the timelines set forth within its procedures. This should correct the deficiency.

Criteria Management is responsible for identifying and recording revenue in accordance with accounting principles generally accepted in the United States of America. Condition In testing performed over contributions, we noted several errors related to incorrect classification between net assets with donor restriction and net assets without donor restrictions as well as government contract revenue that was incorrectly recorded as contributions. Cause It does not appear that support for contributions is reviewed independently by the accounting department prior to recording contributions. Effect Audit adjustments were required to correctly classify revenue. Recommendation We recommend that the accounting department review all coding of contributions for accuracy prior to posting in the general ledger. Further, all journal entries booked to record revenues should be reviewed prior to posting to the GL against source documents. Views of Responsible Officials Management concurs with the finding. Contributions are recorded in the Organization?s donor database by the development team, and added to a monthly report that is submitted to accounting for entry into the Organization?s accounting software. Accounting will provide training to the Development team to ensure they understand the contribution and that proper backup is provided to the Accounting team. The Accounting team also strengthened its procedures to ensure that its contribution classification matches the corresponding classification within the Development team?s donor database. These steps should correct the deficiency.

Criteria Management is responsible for proper classification of endowment funds in accordance with accounting principles generally accepted in the United States of America. Condition In testing performed over the Organization?s endowment funds, we noted that a portion of the Board designated endowment as was improperly classified as net assets with donor restriction in the financial statements. Cause It does not appear that endowment funds were reviewed for proper classification. Effect Audit adjustments were required to correctly classify the endowment fund. Recommendation Board designated and donor restricted endowments should be properly identified and documented and the applicable guidance should be followed when recording endowments. Views of Responsible Officials Management concurs with the finding and will strengthen our procedures to ensure better support for the correct classification of its endowment funds.

GSA_MIGRATION

GSA_MIGRATION

GSA_MIGRATION

GSA_MIGRATION