Condition: During our review of the December 31, 2022 Schedule of Expenditures of Federal Awards (SEFA) prepared by management, we noted that controls over revenue recognition and preparation of the SEFA were not properly designed resulting in material adjustments to several grants and to the SEFA identified during the audit.
Criteria: The Code of Federal Regulations (CFR) Section 200.510(b) states in part, “The auditee must also prepare a schedule of federal expenditures for the period covered by the auditee’s consolidated financial statements which must include the total Federal awards expended as determined in accordance with 200.502.” Also, in accordance with CFR Section 200.302(b) – Financial Management, the auditees financial management system must provide 1) identification of all federal awards received and expended;
2) accurate, current, and complete disclosure of the financial results of each federal award or program;
3) records that identify adequately the source and application of funds for federally-funded activities;
4) effective control over, and accountability for, all funds, property, and other assets; 5) comparison of expenditures with budget amounts for each Federal award; 6) written procedures to implement the requirements of section 200.305 and; 7) written procedures for determining the allowability of costs in accordance with Subpart E and the terms and conditions of the Federal award.
Further, revenue from grants is to be accounted for in accordance with ASU 2018-08 (Topic 958) Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions Made. As most of the Federal grants received are conditional upon expenditure and expenditure in accordance with cost principles, revenue should not be recognized until the relating conditions have been met and therefore right of return is overcome.
Cause: Internal controls over revenue recognition and preparation of the SEFA are not designed effectively to ensure completeness and accuracy of revenues reported and the SEFA.
Effect: As a result of the condition noted above, material audit adjustments were required to be posted to several grants and to the SEFA to properly report federal expenditures in the correct period, as well as revenues reported on the consolidated statement of activities.
Recommendation: We recommend that management review current internal controls over revenue recognition and preparation and tracking of federal expenditures to ensure that revenue is properly reported and, all federal awards are captured and reported in the correct period and that internal controls are properly designed to detect and correct errors to the SEFA.
Condition: During our review of the December 31, 2022 Accounts Receivable detail, it was noted that controls over billing and accounts receivable were not properly designed resulting in material adjustments in the reporting of Accounts Receivable and relating revenues. Per review of the Accounts Receivable detail as part of the audit procedures, there were noted to be significant unresolved credit balances as of December 31, 2022. Upon investigation by Management, it was noted that invoices entered in QuickBooks did not match the actual amounts billed through the Federal billing system. Therefore, when payment was received from the Federal agency, the cash receipt did not agree with the relating invoice in QuickBooks and therefore could not be relieved.
Criteria: Effective internal controls should be established to prevent or detect discrepancies between billing and the general ledger to ensure revenue is properly captured. Further, accounts receivable should be reconciled at a minimum annually resolving any significant credit balances.
Cause: Internal controls over billing and accounts receivable are not designed effectively to ensure completeness and accuracy of revenues and accounts receivable.
Effect: As a result of the condition noted above, material adjustments were required in the reporting of accounts receivable on the consolidated statement of financial position and revenues on the consolidated statement of activities.
Recommendation: We recommend that management review current internal controls over billing procedures and accounts receivable reconciliation to ensure that revenue is properly accounted for.
Condition: During our testing of allowable costs and reporting requirement, we noted exceptions in the ability of management to support payroll incurred for the federal program. The Institute submitted reimbursement for costs that could not be supported as relating to the federal program.
Criteria: Under Code of Federal Regulations 200.403(g) states that for costs to be allowed under Federal awards, they must be adequately documented and there must be sufficient documentation. Further under the Uniform Guidance, if a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involve, then the costs may be allocated or transferred to benefited projects on any reasonable documented basis.
Cause: Principles and procedures were not appropriately adhered to in certain instances to ensure that supporting documentation was maintained to evidence that costs were allowable and that an appropriate level of review and approval was completed prior to charging costs to a federal program.
Effect: An ineffective control system related to charging of costs to federal programs in order to ensure that only hours work relating the program is charged and requested for reimbursement can lead to noncompliance with law and regulations and possible loss of funding for the related program.
Questioned Costs: $202
Context: We sampled 40 items and found 2 exceptions resulting in over reimbursement of $202. This is a condition identified per review of the Institute’s compliance with specified requirements using a statistically valid sample.
Recommendation: We recommend that the Institute ensure its policies and procedures are followed on a consistent basis.
Condition: During our testing of eligibility, it was noted an individual was receiving services under the federal contract beyond the allowable period of eligibility outlined in the program guidance.
Criteria: In accordance with the federal contract, clients may not receive services under the federal contract past 5 years from the date of entry.
Cause: Principles and procedures were not appropriately adhered to in this instance resulting in services being rendered to an ineligible participant.
Effect: An ineffective control system related to ensuring those who become ineligible after entry date are properly removed from the program can lead to noncompliance with law and regulations and possible loss of funding for the related program.
Context: We sampled 40 individuals and found 1 exception resulting in 1 ineligible participant. This is a condition identified per review of the Institute’s compliance with specified requirements using a statistically valid sample.
Recommendation: We recommend that the Institute ensure its policies and procedures are followed on a consistent basis.
Condition: During our testing of cash management, it was noted an individual received their disbursement of remaining funds 91 days after the date of entry.
Criteria: In accordance with the federal contract, all client funds must be expended within 90 days of arrival.
Cause: Principles and procedures were not appropriately adhered to in this instance resulting in expenditures occurring after the 90-day period.
Effect: An ineffective control system related to ensuring expenditures occur within the required 90 days period which could result in noncompliance with law and regulations and possible loss of funding for the related program.
Context: We sampled 40 items and found 1 exception. This is a condition identified per review of the Institute’s compliance with specified requirements using a statistically valid sample.
Recommendation: We recommend that the Institute ensure its policies and procedures are followed on a consistent basis.
Condition: During our review of the December 31, 2022 Schedule of Expenditures of Federal Awards (SEFA) prepared by management, we noted that controls over revenue recognition and preparation of the SEFA were not properly designed resulting in material adjustments to several grants and to the SEFA identified during the audit.
Criteria: The Code of Federal Regulations (CFR) Section 200.510(b) states in part, “The auditee must also prepare a schedule of federal expenditures for the period covered by the auditee’s consolidated financial statements which must include the total Federal awards expended as determined in accordance with 200.502.” Also, in accordance with CFR Section 200.302(b) – Financial Management, the auditees financial management system must provide 1) identification of all federal awards received and expended;
2) accurate, current, and complete disclosure of the financial results of each federal award or program;
3) records that identify adequately the source and application of funds for federally-funded activities;
4) effective control over, and accountability for, all funds, property, and other assets; 5) comparison of expenditures with budget amounts for each Federal award; 6) written procedures to implement the requirements of section 200.305 and; 7) written procedures for determining the allowability of costs in accordance with Subpart E and the terms and conditions of the Federal award.
Further, revenue from grants is to be accounted for in accordance with ASU 2018-08 (Topic 958) Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions Made. As most of the Federal grants received are conditional upon expenditure and expenditure in accordance with cost principles, revenue should not be recognized until the relating conditions have been met and therefore right of return is overcome.
Cause: Internal controls over revenue recognition and preparation of the SEFA are not designed effectively to ensure completeness and accuracy of revenues reported and the SEFA.
Effect: As a result of the condition noted above, material audit adjustments were required to be posted to several grants and to the SEFA to properly report federal expenditures in the correct period, as well as revenues reported on the consolidated statement of activities.
Recommendation: We recommend that management review current internal controls over revenue recognition and preparation and tracking of federal expenditures to ensure that revenue is properly reported and, all federal awards are captured and reported in the correct period and that internal controls are properly designed to detect and correct errors to the SEFA.
Condition: During our review of the December 31, 2022 Accounts Receivable detail, it was noted that controls over billing and accounts receivable were not properly designed resulting in material adjustments in the reporting of Accounts Receivable and relating revenues. Per review of the Accounts Receivable detail as part of the audit procedures, there were noted to be significant unresolved credit balances as of December 31, 2022. Upon investigation by Management, it was noted that invoices entered in QuickBooks did not match the actual amounts billed through the Federal billing system. Therefore, when payment was received from the Federal agency, the cash receipt did not agree with the relating invoice in QuickBooks and therefore could not be relieved.
Criteria: Effective internal controls should be established to prevent or detect discrepancies between billing and the general ledger to ensure revenue is properly captured. Further, accounts receivable should be reconciled at a minimum annually resolving any significant credit balances.
Cause: Internal controls over billing and accounts receivable are not designed effectively to ensure completeness and accuracy of revenues and accounts receivable.
Effect: As a result of the condition noted above, material adjustments were required in the reporting of accounts receivable on the consolidated statement of financial position and revenues on the consolidated statement of activities.
Recommendation: We recommend that management review current internal controls over billing procedures and accounts receivable reconciliation to ensure that revenue is properly accounted for.
Condition: During our testing of allowable costs and reporting requirement, we noted exceptions in the ability of management to support payroll incurred for the federal program. The Institute submitted reimbursement for costs that could not be supported as relating to the federal program.
Criteria: Under Code of Federal Regulations 200.403(g) states that for costs to be allowed under Federal awards, they must be adequately documented and there must be sufficient documentation. Further under the Uniform Guidance, if a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involve, then the costs may be allocated or transferred to benefited projects on any reasonable documented basis.
Cause: Principles and procedures were not appropriately adhered to in certain instances to ensure that supporting documentation was maintained to evidence that costs were allowable and that an appropriate level of review and approval was completed prior to charging costs to a federal program.
Effect: An ineffective control system related to charging of costs to federal programs in order to ensure that only hours work relating the program is charged and requested for reimbursement can lead to noncompliance with law and regulations and possible loss of funding for the related program.
Questioned Costs: $202
Context: We sampled 40 items and found 2 exceptions resulting in over reimbursement of $202. This is a condition identified per review of the Institute’s compliance with specified requirements using a statistically valid sample.
Recommendation: We recommend that the Institute ensure its policies and procedures are followed on a consistent basis.
Condition: During our testing of eligibility, it was noted an individual was receiving services under the federal contract beyond the allowable period of eligibility outlined in the program guidance.
Criteria: In accordance with the federal contract, clients may not receive services under the federal contract past 5 years from the date of entry.
Cause: Principles and procedures were not appropriately adhered to in this instance resulting in services being rendered to an ineligible participant.
Effect: An ineffective control system related to ensuring those who become ineligible after entry date are properly removed from the program can lead to noncompliance with law and regulations and possible loss of funding for the related program.
Context: We sampled 40 individuals and found 1 exception resulting in 1 ineligible participant. This is a condition identified per review of the Institute’s compliance with specified requirements using a statistically valid sample.
Recommendation: We recommend that the Institute ensure its policies and procedures are followed on a consistent basis.
Condition: During our testing of cash management, it was noted an individual received their disbursement of remaining funds 91 days after the date of entry.
Criteria: In accordance with the federal contract, all client funds must be expended within 90 days of arrival.
Cause: Principles and procedures were not appropriately adhered to in this instance resulting in expenditures occurring after the 90-day period.
Effect: An ineffective control system related to ensuring expenditures occur within the required 90 days period which could result in noncompliance with law and regulations and possible loss of funding for the related program.
Context: We sampled 40 items and found 1 exception. This is a condition identified per review of the Institute’s compliance with specified requirements using a statistically valid sample.
Recommendation: We recommend that the Institute ensure its policies and procedures are followed on a consistent basis.