THE CHILDREN'S CENTER OF THE ANTELOPE VALLEY

Criteria: The Organization’s internal control policy requires that all invoices involving related parties to be approved with two signatures-one from the Project Manager and one from the Director. This control is designed to ensure proper authorization, prevent improper payments, and comply with GAAP disclosure requirements for related-party transactions (ASC 850) and Uniform Guidance allowable-cost rules (2 CFR 200.403) Condition: During our test of 12 invoices selected from the major federal program (all related to related-party transactions), we noted the following: • 5 invoices (42%) had no signatures from either the Project Manager or the Director. • 3 invoices (25%) were signed only by the Project Manager (missing the Director’s Approval). Cause: Management did not consistently enforce the two-signature policy. Effect: The lack of required approvals increases the risk of: • Unauthorized or improper disbursements, • Misstatement of expenses and related party disclosures in the financial statements, and • Noncompliance with federal allowable-cost requirements Recommendation: We recommend that Organization immediately reinforce the two-signature approval policy through: 1. Mandatory training for all program and finance staff, 2. Implementation of a pre-payment checklist or system flag that prevents processing of invoices missing both approvals, and 3. Periodic monitoring by the Director or Finance Committee. Repeated Findings: This is not a repeated finding.

Explanation of Disagreement with Audit Findings: There is no disagreement with the audit finding. Actions Planned in Response to Finding: Management acknowledges the significant deficiency in internal control related to the two-signature approval policy for invoices involving related-party transactions in the major federal program. To prevent recurrence and strengthen both financial-statement and federal-award controls, management will: 1. Conduct mandatory training for all program staff, finance personnel, and approvers on the two-signature policy (Project Manager + Director) and its importance for allowable costs, related-party disclosures. 2. Implement a pre-payment checklist that requires both signatures before any invoice can be processed or recorded. 3. Require the Director to perform and document monthly spot-checks of a sample of paid invoices to verify compliance with the policy. Official Responsible for Ensuring CAP: The Finance Manager, in coordination with the Program Director, will be responsible for overseeing the implementation of corrective actions. Planned Completion Date for CAP: The planned completion date is June 30, 2026. Plan to Monitor Completion of CAP: Management will maintain a detailed corrective-action tracking log with milestone dates for training completion, checklist/system implementation, and initial monitoring reviews. The Finance Manager will report progress to the Board’s Finance Committee on a quarterly basis and will perform ongoing monthly invoice-sample testing to confirm sustained compliance. Any deviations will be immediately addressed and documented.