An audit of the Connecticut Heritage Foundation, a not-for-profit foundation that supports the Connecticut State Library and the Museum of Connecticut History, found it had deficiencies over financial reporting in its internal controls during the fiscal year ending June 30, 2022.
The foundation was established through state law to accept private donations to fund projects and both the state library and the museum. Donations received by the foundation are its assets, rather than the state’s.
According to the audit, state statute also requires foundations to use generally accepted accounting principles (GAAP) in financial reporting. “Separation of duties is a best practice that requires one person should not be in control of all parts of a transaction or business process. Additionally, sound business practices require monthly reconciliations to ensure complete and accurate accounting records.” the audit notes as part of its findings.
However, the audit found the foundation does not utilize an accounting information system and instead tracks activity using Excel spreadsheets.
“There is no supervisory review over the accounting and financial reporting process to ensure the accounting ledger enables the financial statements to be presented in accordance with GAAP.” the audit report states.
The audit found that on June 30, 2022, the Department of Administrative Services
“erroneously” deposited $14,774 in online donations for the foundation into the state’s bank account. Those funds were not properly classified as receivables in the foundation’s accounting.
The audit also revealed that the foundation’s cash balance for the period included $36,591 in receipts that should have been remitted to the state but were instead deposited in the foundation’s checking account.
As a result, the foundation’s net asset balance was improperly inflated by approximately $40,000—standing at $187,949 when it should have been $149,874.
Those issues were still outstanding at the conclusion of the audit.
The report also notes that the “same individual was responsible for maintaining the accounting ledger, reconciling the bank account, and preparing financial information,” resulting in insufficient controls over the foundation’s accounting process.
The error means unaudited financial reports presented to the foundation’s board of directors were incorrect, which “could impact operational decisions.” Foundation and state funds were also comingled, the audit notes.
This is not the first time an audit of the foundation has revealed these issues. The previous three audits of the foundation, covering fiscal years ending in June 30, 2013; 2016; and 2019 identified the same issues.
The audit report recommends the foundation strengthen its internal controls to “ensure compliance with generally accepted accounting principles and consider utilizing an accounting information system.” It also recommends the foundation return any state funds in its possession and ask the state to return online donations that may have been deposited in error.
The foundation agreed with the findings and said it will work with the state library, which maintains its records, to implement the recommendations.