Auditing a Negative Balance

[allenjpl]

I just got called as an auditor, so as I'm preparing for next month, I looked at LUFAS for the wards that I'm assigned to audit so that I have some feel for what issues have cropped up in the past. One thing concerns me: according to the Other Account reconciliations that I can view, one of my wards has had a rather large negative balance in an Other subcategory that dates back to mid-year 2011 (the amount hasn't changed in any of the Reconciliations I can see). I think I've talked with this ward's financial clerk in previous meetings, and the negative balance may even date back to the CUBS conversion.

This negative balance has been offset by other subcategories, including one that is possibly a parent category of the negative subcategory, but at least once, the positive balance of the parent was less than the negative, so the only way the entire Other account was positive was through offsets by clearly unrelated subcategories. The whole thing strikes me as something that should have been corrected in past audits, but it hasn't been marked as an exception. Is there something I'm missing or overlooking (entirely possible)? Should I talk with them before the audit, bring my concerns to the stake clerk, or should I do both?

[aebrown]

The time period you will be auditing has closed, so there's nothing the ward can do now that will affect the audit. I see no reason to talk to the ward before the audit, but I suppose it wouldn't hurt if you chose to.

Talking to the stake clerk is a good idea. He might know if this issue has been raised previously, or what training in this area the stake might have provided to the ward. That will help you as you discuss this issue during the audit and help with recommendations on corrective action.

It does seem that any negative (or positive, for that matter) balance that runs for a long time in an AMFA subcategory runs afoul of the audit question: "25. Are funds in the “Other” category spent for their intended purpose within a reasonable time period?" So if I were an auditor, I would have marked that as an exception. If you mark it as an exception this time around, it will at least start getting attention so that the ward financial clerk (possibly with help from the stake clerk) can do a proper analysis of the source of the problem and make the needed corrections.

[johnshaw]

This is an item that I struggue with in our audits as well. Many of our Auditors are former Bishops or Financial Clerks who mis-understood the Other account usage, and so they do not see the Other account as an issue to deal with. They are concerned that a positive balance exists in the overall category or that the balances match the financial statement:

I've been training the ward/branch finance clerks to treat everything in Other as if it were a single entity to account for itself regardless of the overall balance - We use the year in naming the account to help know how recent or old the account may be.

I've also been pushing our auditors to be more aggressive in addressing the Other Account. We have slowly been making great progress. This year, they will be assigning exceptions to the Other account regardless of the over-all positive/negative balance of a sub-category.