Date Issued
Report Number
19-02
Report Type
Audit
Description
For the second year in a row, an independent audit of CNCS’s National Service Trust Fund Fiscal Year 2018 financial statements resulted in a disclaimer of opinion, the worst possible outcome for a financial statement audit. CNCS did not cure the three material weaknesses and one significant deficiency identified in the FY 2017 audit. This year, the auditors reported another new material weakness.
In layman’s terms, the financial statements were unauditable and likely subject to pervasive material errors. CNCS’s financial transaction recording, processing and reporting are not sufficiently reliable to produce reliable financial statements.
Key audit findings were:
•Disclaimer of Opinion: CNCS was unable to provide adequate evidential matter to support a significant number of transactions and account balances due to inadequate processes and controls to support transactions and estimates, and incomplete records to support accounting for transactions in accordance with generally accepted accounting principles. We were unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.
•Four material weaknesses and one significant deficiency in CNCS’s internal control over financial reporting. These issues included:
◦Material Weaknesses:
◾Internal Controls Program: The system of internal controls failed to identify numerous and pervasive material weaknesses that the auditors found in financial reporting and in specific material line items on the financial statements;
◾Financial System and Reporting: CNCS’s financial reporting was hindered by limitations in its financial system and the timing and difficulties arising from a system upgrade, accounting staff turnover, and inadequate internal controls;
◾Trust Fund Unpaid Obligations: CNCS significantly overstated its Trust obligation balance and obligated substantially more than is necessary to pay its anticipated liabilities; and
◾Trust Service Award Liability: The model used to establish the liability included calculation errors and lacked quality controls, which impair significantly the accuracy of the reported liability;
◦Significant Deficiency:
◾Information Technology Security Controls: There were new and continued control weaknesses in the information security program that need to be addressed in configuration management, access control and security management.
We made 45 recommendations to CNCS. The recommendations include immediate corrective actions to address pervasive material weaknesses and significant deficiency.
CNCS responds that it “does not entirely concur” with the findings and recommendations, but does not specify its disagreements or the basis for them. CNCS provides various reasons aned explanations for the difficulties that it encountered, but the auditors have not audited and cannot validate these explanations.
The independent accounting firm of CliftonLarsonAllen LLP, performed the audit of the CNCS’s National Service Trust Fund FY 2018 financial statements, under contract with CNCS-OIG.
Joint Report
No
Agency Wide
Yes
Questioned Costs
$0
Funds for Better Use
$0