HAWAII YOUTH SERVICE NETWORK

Criteria: Management is responsible for properly recording revenue to bring the Organization's books to fairly present the financial statements in accordance with accounting principles generally accepted in the United States of America. Condition: Revenue was understated at September 30, 2021 as a result of an incorrect entry booked by the Organization to recognize grant income as deferred revenue. The incorrect entry affected the revenue accounts balance. Auditors proposed an adjusting entry to correct the misstatement. Cause: The accounting staff did not correctly recognize a grant received as revenue during the year ended September 30, 2021.Effect: Failure to recognize revenue properly could result in undetected errors, irregularities and misstated financial reports. Recommendation: We recommend the Organization implements year-end procedures to properly recognize revenue. Views of Responsible Officials: Management agrees with the audit findings. The Organization will receive refresher training on revenue recognition and the Executive Director will make a report to the Finance Committee when training is completed. The Finance Committee will monitor to ensure proper procedures are followed

Criteria: Management is responsible for insuring purchase orders are created correctly and payments should match to invoices received for each expense disbursement with the proper authorization. Condition: Management was unable to provide the purchase order and authorization for payment and backup for some select expenses. Cause: Stronger controls are needed in relation to purchase orders. Effect: Failure to create purchase orders and provide proper authorization for expenses paid could result in fraudulent activity and misstated financial reports. Recommendation: Management should communicate and properly follow internal control procedures before making payments. Views of Responsible Officials: Management agrees with the audit findings. At the time that the check was issued, the purchase order and backup documentation were reviewed by the Accountant and the Executive Director. The purchase order and related documentation was misfiled after the check was issued. An electronic filing system is being developed to ensure availability of documentation at all times.

Criteria: Management is responsible for reconciling accounts to bring the Organization's books to fairly present the financial statements in accordance with accounting principles generally accepted in the United States of America. Condition: Auditors noted outstanding unreconciled prior year entries in the cash account. Cause: The accounting staff did not clear unreconciled journal entries in the cash account at year end. Effect: Failure to reconcile the books properly could result in undetected errors, irregularities and misstated financial reports. Recommendation: We recommend that the Organization reconciles its books and records to ensure a proper year end closing. Views of Responsible Officials: Management agrees with the audit findings. The Organization's Administrative Manager will make the correcting journal entries and the Executive Director will follow-up to ensure that the entries are completed and will report to the Finance Committee. For the next audit, the Administrative Manager will be responsible for following up with accounting staff to ensure that any journal entries are completed.

Criteria: Management is responsible for proper classification of grants received to accurately prepare the Schedule of Expenditures of Federal Awards (SEFA). Condition: Changes to the SEFA were required to properly state federal funds received thru state grants. Effect: Failure to maintain records of the federal funds flowing thru the State of Hawaii grants could result in incorrect reporting. Recommendation: We recommend that the Organization inquires from the State of Hawaii about federal funding as an internal control step every time each grant is received to determine that the correct audit is performed. Views of Responsible Officials: Management agrees with the audit findings. The Organization recognizes the need to track on a monthly rather than annual basis the exact amount of federal funds used thru state government grants. The Organization's staff has created a spreadsheet to track the exact amount of federal funds. While the Organization did not track the exact amount on a monthly basis, management was fully aware that some of the funding was federal. When expending the fund, the Organization followed federal grant rules and restrictions on allowable use of funds and accounting practices.

GSA_MIGRATION