Criteria: Applicable standards state that management is responsible for having internal controls in place to provide appropriate and reliable financial reports, and to select and apply appropriate accounting principles. Management is not required to prepare their financial reports, but management needs to demonstrate the level of qualifications and controls to prepare their financial reports without significant deficiencies in these controls.
Condition: During the current year audit, the University did not have adequate controls in place over financial reporting to allow for timely, accurate financial reporting. We noted that not all general ledger accounts had been reconciled to subsidiary ledgers or other supporting detail on at least a quarterly basis.
Context: During the current year audit, multiple adjustments were posted as a result of audit procedures to adjust accounts payable and accrued liabilities, net OPEB liability, and the deferred outflows of resources and deferred inflows outflows of resources related to the net pension liabilities and net OPEB liabilities. The net effect of the posted adjustments resulted in a decrease in the change in net position by approximately $2,185,000 for the year ended June 30, 2019.
Effect: The existence of inaccurate transaction postings, as well as unreconciled accounts can affect the financial statement information that is available for making informed business decisions and supervision of operations. This weakness in the financial reporting controls infrastructure increases the risk of errors in the financial records and is less likely to detect irregularities, including fraud, on a timely basis. A periodic reconciliation process allows for the preparation of accurate and timely financial statements.
Cause: The above condition appears to be the result of the inability to fully implement a timely review and reconciliation process.
Recommendation: We recommend the University implement internal control procedures, which require general ledger accounts to be reconciled at least quarterly.
Views of responsible officials and planned corrective action: Management agrees with the finding. See corrective action plan.
72.