A lack of adequate internal controls at the Louisiana Land Trust resulted in numerous misstatements and errors in the nonprofit’s Annual Fiscal Report for 2021, according to the Louisiana Legislative Auditor.
Louisiana Legislative Auditor Mike Waguespack issued a report in late April outlining the finances of the Louisiana Land Trust (LLT), a state nonprofit created to help communities manage storm damaged properties, as well as issues with inaccurate reporting to state officials.
“For the second consecutive year, LLT did not have adequate controls over financial reporting to ensure its financial statements were accurate and complete,” according to the report. “As a result, LLT submitted an inaccurate Annual Fiscal Report (AFR) to the Division of Administration, Office of Statewide Reporting and Accounting Policy (OSRAP).”
Auditors found LLT’s non-depreciable capital assets balance was overstated by nearly $1 million, due to understating deletions for land improvements on properties that were sold or transferred to local governments, as well as understating additions for certain properties.
LLT’s accounts receivables, operating grants, and contributions were also understated by $68,594, while accounts payable were overstated by $37,371, according to the report.
The nonprofit also understated what it owes in unaccrued vacation leave for one employee by $21,766.
“As a result of these misstatements, expenses were understated by $953,919, capital grants and contributions were understated by $11,585, and beginning net position was overstated by $15,120,” auditors wrote.
“These errors occurred because management did not have an adequate process to review journal entries recorded in the general ledger to ensure the entries were accurate, based on sufficient support, and, where applicable, based on reasonable estimation methods,” according to the report.
“In addition, management did not perform an adequate review of the AFR, financial statements, and note disclosures, which were prepared by a contracted CPA. Failure to implement adequate internal controls over the financial reporting process increases the likelihood that errors and omissions, either intentional or unintentional, may occur and remain undetected.”
LLT Executive Director Michael Taylor responded to the audit findings in a letter to the Louisiana Legislative Auditor on April 25 that included a corrective action plan.
Taylor acknowledged the issues in the report and promised to work with state officials to correct issues with the administration and CPA that led to the errors.
“Management will work closely with the contracted CPA to prevent the careless errors from happening in the future,” he wrote. “Management will conduct a thorough review of the completed AFR, financial statements, and note disclosures before they are submitted to Division of Administration and Office of Statewide Reporting and Accounting Policy by the CPA. Management will take additional steps by reviewing the current internal controls and making any necessary adjustments.”
Taylor wrote that the issue with the employee’s vacation leave was due to an oversight of benefits offered to the part-time employee and “an error on the part of management” in setting up the employee’s profile in the LLT’s attendance system. LLT officials fixed the situation and promised to “be sure to note all benefits offered to any new hires to ensure proper setup in its attendance system.”
Taylor blamed the lack of adequate internal controls on personnel changes in LLT’s accounting department and vowed to improve training to prevent future problems.
“Management acknowledges that appropriate training on internal controls is necessary to prevent the risk of misstatement and fraud,” Taylor wrote. “LLT will ensure that internal controls are followed by all accounting staff to ensure that expense transactions in the future are recorded accurately and paid in a timely manner.”
This article was originally posted on Audit finds issues with Louisiana nonprofit that helps communities manage storm damaged properties