1. YEAR-END GAAP TRAINING
MAY 2016
Discretely presented component units Summary of Audit Findings for FY14/15 and Corrective Action Plan
In this presentation, we’ll talk about some subjects related to audit findings and corrective action plan.
This topic was introduced last year. As you are aware, every year the SFSR GAAP team keeps track of the findings up to the completion of the corrective action plans. We hope sharing the findings to all component units will be beneficial to prevent similar findings in the future and can be used as a tool in evaluating whether or not internal controls are in place to address them.
At the end of the presentation, we’ll go over the corrective action plan template.
Su Chen, Financial Reporting Analyst, SFSR
Chancellor’s Office

2. YEAR-END GAAP TRAINING
MAY 2016
YEAR-END GAAP TRAINING
MAY 2016
Learning Objectives
At the end of the presentation, the participants will know:
The deadlines for component unit reporting relating to corrective action plan
3-year audit findings statistics for component units
The necessary actions to be taken when there is an audit finding for the component unit
How to complete the corrective action plan template
The process flow of monitoring and reporting component units with audit findings
After the presentation, the participants will know:
The deadlines for component unit reporting relating to corrective action plan
3-year audit findings statistics for component units
The necessary actions to be taken when there is an audit finding for the component unit
How to complete the corrective action plan template
The process flow of monitoring and reporting component units with audit findings.

3. Deadlines Related to Corrective Action Plan
YEAR-END GAAP TRAINING
MAY 2016
YEAR-END GAAP TRAINING
MAY 2016
Deadlines Related to Corrective Action Plan
10/28/2016 (G-140)
Submission of single audit A-133 reports (if required).
Submission of auditors' communications to management indicating whether or not there are any significant deficiency or material weakness on the financial statement audit.
11/18/2016 (G-141)
SFSR will provide the Corrective Action Plan Template for component units with significant deficiency or material weakness.
12/2/ (G-146)
Submit the completed Corrective Action Plan template and evidence of completion of action plan to SFSR.
To begin this presentation, let’s quickly go over the deadlines related to the submission of Correction Action Plan.
At the completion of year-end audit, campuses and component units must develop correction action plans to address each finding reported by the auditors.
October 28th is the deadline for submission of single audit reports and auditors’ communications to management indicating whether or not here are any significant deficiency or material weakness on the financial statement audit.
SFSR will provide the correction Action Plan template on November 18th. The template will be updated to include auditor’s communication to Management.
December 2nd is the deadline to submit the completed the corrective plan template and evidence of completion of action plan to SFSR.

4. Audit Findings: 3-Year Statistics
YEAR-END GAAP TRAINING
MAY 2016
YEAR-END GAAP TRAINING
MAY 2016
Audit Findings: 3-Year Statistics
The Office of the Chancellor monitors the audit findings such as material weakness and significant deficiency either from financial statement audits or single audits. The audit finding review and corrective action plan implementation improve financial reporting process and assure compliance with Federal Awards requirement. The results are reported to the Board of Trustees.
The bar chart on this slide shows, from fiscal year 2012/13 through fiscal year 2014/2015, number of component units had audit findings and number of audit findings in two categories of deficiencies, material weakness and significant deficiency.
During fiscal year 2014/2015, in financial statement audit, they’ve identified two material weakness and one significant deficiency. And there’s one significant deficiency in single audit.
Although material weakness and significant deficiency were identified, the number of the audit findings are relatively lower comparing to FY2013/14.

5. YEAR-END GAAP TRAINING
MAY 2016
YEAR-END GAAP TRAINING
MAY 2016
Audit Findings – FY
Material Weakness
Financial Statement
Corrective Action Plan
Lack of internal communication between departments to ensure pledge receivable is recorded on a timely basis.
Create a new process whereby all deferred gifts will be reviewed by the designated team members and include review items in the Schedule of Approved Deferred Gifts.
At the end of the year, a reconciliation between approved schedule and recorded entries is conducted.
Lack of control procedures to identify that payroll accruals are properly recorded in the correct accounting period interval.
Increase control over payroll accrual review to assure accrued payroll is recorded properly and timely.
Provide individuals preparing and recording accrued payroll with written payroll accrual procedure.
There are two material weaknesses identified in financial statement audit.
One is miscommunication between departments on a pledge agreement. The document did not reach to the accounting department to be recorded timely.
To response to this audit finding, the component unit implement
* a new process whereby all deferred gifts will be reviewed by the designated team members and include review items in the Schedule of Approved Deferred Gifts.
* At the end of the year, a reconciliation between approved schedule and recorded entries is conducted.
The other one is accrued payroll expenses was recorded for incorrect period.
To prevent this error, the following controls have been put in place
* Increase control over payroll accrual review to assure accrued payroll is recorded properly and timely.
* Provide individuals preparing and recording accrued payroll with written payroll accrual procedure.

6. Audit Findings – FY 2014-15 (cont.)
YEAR-END GAAP TRAINING
MAY 2016
YEAR-END GAAP TRAINING
MAY 2016
Audit Findings – FY (cont.)
Significant Deficiencies
Financial Statement
Corrective Action Plan
Missing internal control to prevent, detect and correct misstatement related to pledge on a timely basis.
Conduct donation reconciliation between donor management system and general ledger
Agree Pledge Receivable Rollforward Schedule with general ledger.
Management reviews cash receipts transactions above $5K that have been recorded using other revenue accounts.
Perform additional research on revenue and receivable items that are $5K and above and are NOT coded as pledge receivable, Sponsorships, Donations or Scholarships.
The two identified significant deficiencies include one in Financial Statement audit and one in Sing Audit.
For Financial Statement audit, the finding is related to misclassification of a pledge payment.
The following controls have been taken into action:
A reconciliation between donor management system and general ledger
Ensure that the total in the Pledge Receivable Rollforward Schedule agrees to general ledger
All cash receipts transaction above $5000 recorded in Other Revenue account are reviewed by management
Perform additional research on revenue and receivable items that are $5K and above and are NOT coded as pledge receivable, Sponsorships, Donations or Scholarships.

7. Audit Findings – FY 2014-15 (cont.)
YEAR-END GAAP TRAINING
MAY 2016
YEAR-END GAAP TRAINING
MAY 2016
Audit Findings – FY (cont.)
Significant Deficiencies
Single Audit (Federal Awards)
Corrective Action Plan
Lack of internal control to ensure timely review and approval as part of the eligibility requirements in accordance with Federal Awards and other specific requirements.
Create a “Signature Card” system tracks each Federal Award to ensure approval is done on a timely basis
Implement procedures to have designated signing authority in the absence of the program director.
For Single Audit, the finding is lack of internal control to ensure timely review and approval as part of the eligibility requirements in accordance with Federal Awards and other specific requirements.
To ensure timely review and approval of applicant files, a “Signature Card” system is created to track each Federal Award to ensure approval is done on a timely basis.
Also, in absence of the program director, additional designated singing authority is assigned to prevent delay in review/approval process.
Non-compliance with the requirements for Federal programs like sub recipient monitoring and reporting may result in loss in Federal funding that supplements in achieving the component unit’s goals and objectives.

8. Auditors’ communication
YEAR-END GAAP TRAINING
MAY 2016
YEAR-END GAAP TRAINING
MAY 2016
Auditors’ communication
The auditors’ communication is usually in the form of the following:
SAS114 Letter: The Auditor’s Communication with Those Charged with Governance
SAS115 Letter: Communicating Internal Control Related Matters Identified in an Audit
An auditor does not issue a communication stating that no significant deficiencies were found.
As part of the Office of the Chancellor’s monitoring process, the component units are asked to provide us with copies of ALL auditors’ communication that may indicate whether the component unit have internal control findings that may be considered significant deficiency and/or material weakness. Submission of auditor communications is due October 30, Friday.
Auditors’ communication may come in different forms. There are two common forms of auditors’ communication.
SAS114 letter, the Auditor’s Communication with Those Charged with Governance or the SAS115 letter, Communicating Internal Control Related Matters Identified in an Audit.
When the component unit have single audits, the auditor’s communication related to internal control is included as part of the single audit report entitled Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards and Independent Auditor’s Report on Compliance for Each Major Federal Program and on Internal Control Over Compliance in Accordance with Single Audit.
Please note that if there are any other communications from the auditors that are not listed in here and it relates to internal control findings, please provide them as well to the Office of the Chancellor.
If your component unit does not have any internal control finding, the auditors does not usually issue a letter stating that the component unit does not have a finding. If there are no communications from the auditor stating that the component unit have significant deficiencies and/or material weakness, please confirm that there are none for our tracking purposes.

9. Corrective Action Plan Template
YEAR-END GAAP TRAINING
MAY 2016
YEAR-END GAAP TRAINING
MAY 2016
Corrective Action Plan Template
(the “Organization”)
Progress Report on Corrective Action Plan
in Response to Findings Relating to the Financial Statements
and/or to the Schedule of Findings and Questioned Costs
June 30, 20XX 1
Material Weakness or Significant Deficiency
Select one 2
Type:
Related to Financial Statements or the Single Audit 3*
Program:
*Only be applicable to the Single Audit. CFDA # and the relevant program name 4
Criteria:
The standard or standards that measures the activity or performance 5
Condition/Context:
What is actually happening vs. What should be happening from the criteria 6
Cause:
Why the condition exists 7
Effect:
What is (the condition) vs. What Should be (the criteria) 8
Recommendation:
Actions 9
Corrective Action Plan:
Details of the actions
In the next two slides, we’ll go over the content of the corrective action plan template. This probably will be useful for those who are new to the CSU.
In cases where a component unit have audit findings that are either significant deficiency or material weakness, a corrective action plan is required to be completed. As mentioned earlier, the corrective action plan template should be provided by the campuses to the component unit on November 18, Wednesday. SFSR will use the information in the Auditor’s Communication to Management to update the template before sending out the template to campus GAAP coordinators.
Note that a component unit does not need to complete a corrective action plan if the audit finding is just a control deficiency. The SFSR also do not track internal control deficiency that are NOT significant deficiency or material weakness.
Sometimes, the auditor’s communication to management includes some of the information required in the corrective action plan template, if it does, the SFSR team fills out the sections on behalf of the component unit.
On the slide you will see the different sections of the corrective action plan template. Similar to last year, I’ll go over the sections one by one:
The first part is to identify whether the noted finding is either a significant deficiency or a material weaknesses. There may be instances when the component unit may have more than one internal control finding that needs to be documented, so number them accordingly in the template.
The second is TYPE. For the type, identify whether it is a finding related to financial statements or the Single Audit.
Next is the PROGRAM. This will only be applicable if the finding is related to the Single Audit. If this is applicable, state the CFDA # and the relevant program name, otherwise state N/A or Not Applicable.
Next is the CRITERIA. The criteria is the standard or standards that measures the activity or performance. It is the expected condition based on policy, law or best practice. This section answers the question: WHAT SHOULD BE?
Next is the CONDITION/CONTEXT. The condition/context describes what is actually happening which is in deviation from what should be happening from the criteria. This answers the question, WHAT IS THE PROBLEM?
Next is the CAUSE. The Cause is intended to explain why the condition exists. This answers the question WHY DID THE CONDITION HAPPEN?
Next is the EFFECT. The Effect is the difference and significance between what is (or the condition) and what should be (the criteria). This explains what negative things have happened as a result of the condition. This answers the question, WHAT IS THE IMPACT OF THE CONDITION?
Next is the RECOMMENDATION. Recommendations are the actions needed to correct the cause This is usually the statement of the auditor of the action that must be taken to correct the problem identified in the audit and this usually answers the question HOW DO WE SOLVE THE CONDITION?
Next is the CORRECTIVE ACTION PLAN. The corrective action plan should clearly describe the steps or the actions that the component unit will execute or perform which is usually a detailed description of the procedures that the company will implement to address the audit finding.

10. Corrective Action Plan Template (cont.)
YEAR-END GAAP TRAINING
MAY 2016
YEAR-END GAAP TRAINING
MAY 2016
Corrective Action Plan Template (cont.)
(the “Organization”)
Progress Report on Corrective Action Plan
in Response to Findings Relating to the Financial Statements
and/or to the Schedule of Findings and Questioned Costs
June 30, 20XX 10
Status: (indicate your response by using “X” mark)
Select one - Implemented or Not Yet Implemented
___Correction Plan Implemented
____Correction Plan Not Yet Implemented 11
Completion Date:
(indicate completion or anticipated completion date -mm/dd/yyyy.)
Actual or expected date when management will be able to remediate the internal control finding 12
Documentary Evidence:
All supporting documents
(List the documentary evidence below and provide a copy to
Provide a copy to SFSR team via 13
Contact person(s):
Contact person for additional inquires
Name:
_______________________
Title:
Phone: 14
Reviewed and approved by:
The Vice President for Finance and Administration should review and approve the template
Print Name and Sign
Vice President for Finance & Administration (or equivalent)
Date
 Please provide a more detailed information for the corrective action plan.
The STATUS should identify whether the corrective action plan has already been implemented or is not yet implemented as of the date of submission.
Next is the COMPLETION DATE. The completion date is the actual or expected date when management will be able to remediate the audit finding. Typically, since the audit finding have been communicated to the management early on by the auditors, the remediation should be completed by the time the corrective action plan is provided to the CO.
In cases where more time is needed, or if there is an extended remediation period, an explanation should be provided. A status update should be provided upon the completion of the corrective action plan and the template should be updated accordingly.
The DOCUMENTARY EVIDENCE section should list out all the support that will provide proof that the internal control deficiency have been addressed by management. A copy of the actual documents should also be provided to SFSR for our review purposes.
In case there may be additional inquiries or clarifications related to the corrective action plan, a contact person should be provided with their information like the title, contact number and .
After completion, the Vice President for Finance and Administration should review and approve the template.
The completed corrective action plan template with the necessary signatures should be submitted to SFSR by the campuses on behalf of the component units together with the appropriate supporting documentation. The deadline to submit is on December 2, Friday.

11. Audit Findings – Process Flow
YEAR-END GAAP TRAINING
MAY 2016
YEAR-END GAAP TRAINING
MAY 2016
Audit Findings – Process Flow
Submission of completed corrective action plan and documentary evidence on or before 12/2/16
SFSR Review
Office of Audit and Advisory Services Review
Finance Management review
Presentation to the Board of Trustees
(Jan. & Mar. 2017)
After submission of the completed corrective action plan and documentary evidence to SFSR, we will perform review to make sure that the template has been completed accordingly, the documentary evidence and the corrective action plan addresses the audit finding and that the template has the appropriate signatures.
If the corrective action plan has been completed accordingly and addresses the internal control finding, we provide a copy of the completed corrective action plan and the documentary evidence to the Finance Management and the Office of Audit and Advisory Services for their review and approval.
If there are no follow-up questions from the Finance Management and the Office of Audit and Advisory Services, they will concur and will deem the audit finding is fully remediated.
The status of the corrective action plan is presented by the Finance Management to the Board of Trustees meeting in January and in March.

12. Knowledge Check Question
YEAR-END GAAP TRAINING
MAY 2016
YEAR-END GAAP TRAINING
MAY 2016
Knowledge Check Question
What type of audit finding should NOT be reported to the SFSR GAAP team? A. Control Deficiency B. Material Weakness C. Significant Deficiency
We have one knowledge check question.
Please select one answer in response to the question, What type of audit finding that is NOT to be reported to the SFSR GAAP team?

13. Knowledge Check Answer
YEAR-END GAAP TRAINING
MAY 2016
YEAR-END GAAP TRAINING
MAY 2016
Knowledge Check Answer
Answer: What type of audit finding should NOT be reported to the SFSR GAAP team? A. Control Deficiency
The answer is A, Control Deficiency. The SFSR GAAP Team do not track control deficiencies identified by the auditor that are neither significant deficiencies nor material weaknesses.
Hope you answered it correctly.

14. YEAR-END GAAP TRAINING
MAY 2016
YEAR-END GAAP TRAINING
MAY 2016