Improper cut-off of accrued expense and grants receivables Category: Internal control -significant deficiency Condition: The Organization did not accurately record accrued expenses and grants receivable at the end of the reporting period. Several invoices and receivables that should have been recorded in the current period were instead recorded in the subsequent period, leading to an understatement of both accrued expense and contributions and grants receivables. Criteria: According to generally accepted accounting principles (GAAP), both accrued expense and grants receivables should be recognized in the period they are incurred or earned, regardless of when the invoice is received, or payment is made. Cause: The improper cut-off was due to inadequate internal controls over the recording of accrued expenses and grants receivables, as well as a lack of understanding of proper cut-off procedures by the accounting staff. Effects: This resulted in misstated financial statements, with both the accrued expense and grants receivables being understated and/or overstated, potentially leading to inaccurate financial reporting and decision-making. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management strengthen internal controls over the recording of accrued expenses and grants receivables, provide additional training to accounting staff on proper cut-off procedures, and conduct regular reviews to ensure that both accrued expense and grants receivables are recorded in the correct period. Management’s response: Nuestra Escuela will ensure that all grants and accrued expenses received are recorded promptly and that services rendered are accounted for in the correct period of accurately. The Administrative Director will perform regular reconciliation of accounts to detect any discrepancies that may
indicate cut-off errors.
The Administrative staff will take training about the best practices of cut-off procedures and the impact of errors
on financial reporting.
Nuestra Escuela will reinforce internal audits to review cut-off procedures and ensure they are strictly enforced.
Nuestra Escuela is committed to preventing cut-off errors with a proactive approach from accountants, involving
a combination of robust procedures, technology, and a culture of accuracy and compliance within the accounting
department. By following these best practice, accountants can help ensure the integrity of the financial reporting
Improper Accounting of Conditional and refundable advances for Federal and State Grants Category: Internal control -significant deficiency. Condition: The organization did not properly account for conditional and refundable advances received from federal and state grants totaling approximately $1,506,000. Of this amount, only $536,950 met the conditions to be recorded as revenue. Criteria: According to Accounting Standards Update (ASU) 2018-08, "Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made," not-for-profit entities must evaluate whether grants and contracts are conditional or unconditional. A contribution is considered conditional if it includes both: • A Barrier to Overcome: The recipient must meet specific performance-related conditions or other measurable barriers. • A Right of Return or Release: The grantor retains a right to reclaim the funds, or the recipient is released from the obligation if the conditions are not met. Conditional and refundable advances should be recorded as accrued expense (deferred revenue) until the conditions are substantially met or explicitly waived. Only then should they be recognized as revenue. Cause: The improper accounting was mainly due to the reports prepared for management and lead agencies being on a cash basis. Additionally, there was a lack of understanding of the relevant accounting guidance by the accounting staff. Effects: This resulted in an overstatement of income by approximately $972,600, and an overstatement of accrued expense and restricted net assets by the same amount. These misstatements could lead to inaccurate financial reporting and decision-making. Prior year’s findings:
Not identified
Questioned cost:
None
Recommendation:
We recommend that management strengthen internal controls over the accounting of conditional and refundable
advances, provide additional training to accounting staff on the proper recognition of conditional and refundable
advances, and conduct regular reviews to ensure compliance with ASU 2018-08. Additionally, reports to
management should be prepared following cash and accrual basis in order to meet the requirements for reporting
to agencies (cash basis) and compliance (accrual basis).
Management’s response:
Nuestra Escuela will design internal controls over the accounting of conditional and refundable advances. These
controls will include a rubric to determine whether the contract includes conditional contributions.
The accounting staff will take training on the proper recognition of conditional and refundable advances and
conduct regular reviews to ensure compliance with ASU 2018-08.
Additionally, Nuestra Escuela reports to management will be prepared on a cash and accrual basis in order to
meet the requirements for reporting to agencies (cash basis) and general accepted accounting principles GAAP
compliance (accrual basis).
Page
Improper cut-off of accrued expense and grants receivables Category: Internal control -significant deficiency Condition: The Organization did not accurately record accrued expenses and grants receivable at the end of the reporting period. Several invoices and receivables that should have been recorded in the current period were instead recorded in the subsequent period, leading to an understatement of both accrued expense and contributions and grants receivables. Criteria: According to generally accepted accounting principles (GAAP), both accrued expense and grants receivables should be recognized in the period they are incurred or earned, regardless of when the invoice is received, or payment is made. Cause: The improper cut-off was due to inadequate internal controls over the recording of accrued expenses and grants receivables, as well as a lack of understanding of proper cut-off procedures by the accounting staff. Effects: This resulted in misstated financial statements, with both the accrued expense and grants receivables being understated and/or overstated, potentially leading to inaccurate financial reporting and decision-making. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management strengthen internal controls over the recording of accrued expenses and grants receivables, provide additional training to accounting staff on proper cut-off procedures, and conduct regular reviews to ensure that both accrued expense and grants receivables are recorded in the correct period. Management’s response: Nuestra Escuela will ensure that all grants and accrued expenses received are recorded promptly and that services rendered are accounted for in the correct period of accurately. The Administrative Director will perform regular reconciliation of accounts to detect any discrepancies that may
indicate cut-off errors.
The Administrative staff will take training about the best practices of cut-off procedures and the impact of errors
on financial reporting.
Nuestra Escuela will reinforce internal audits to review cut-off procedures and ensure they are strictly enforced.
Nuestra Escuela is committed to preventing cut-off errors with a proactive approach from accountants, involving
a combination of robust procedures, technology, and a culture of accuracy and compliance within the accounting
department. By following these best practice, accountants can help ensure the integrity of the financial reporting
Improper Accounting of Conditional and refundable advances for Federal and State Grants Category: Internal control -significant deficiency. Condition: The organization did not properly account for conditional and refundable advances received from federal and state grants totaling approximately $1,506,000. Of this amount, only $536,950 met the conditions to be recorded as revenue. Criteria: According to Accounting Standards Update (ASU) 2018-08, "Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made," not-for-profit entities must evaluate whether grants and contracts are conditional or unconditional. A contribution is considered conditional if it includes both: • A Barrier to Overcome: The recipient must meet specific performance-related conditions or other measurable barriers. • A Right of Return or Release: The grantor retains a right to reclaim the funds, or the recipient is released from the obligation if the conditions are not met. Conditional and refundable advances should be recorded as accrued expense (deferred revenue) until the conditions are substantially met or explicitly waived. Only then should they be recognized as revenue. Cause: The improper accounting was mainly due to the reports prepared for management and lead agencies being on a cash basis. Additionally, there was a lack of understanding of the relevant accounting guidance by the accounting staff. Effects: This resulted in an overstatement of income by approximately $972,600, and an overstatement of accrued expense and restricted net assets by the same amount. These misstatements could lead to inaccurate financial reporting and decision-making. Prior year’s findings:
Not identified
Questioned cost:
None
Recommendation:
We recommend that management strengthen internal controls over the accounting of conditional and refundable
advances, provide additional training to accounting staff on the proper recognition of conditional and refundable
advances, and conduct regular reviews to ensure compliance with ASU 2018-08. Additionally, reports to
management should be prepared following cash and accrual basis in order to meet the requirements for reporting
to agencies (cash basis) and compliance (accrual basis).
Management’s response:
Nuestra Escuela will design internal controls over the accounting of conditional and refundable advances. These
controls will include a rubric to determine whether the contract includes conditional contributions.
The accounting staff will take training on the proper recognition of conditional and refundable advances and
conduct regular reviews to ensure compliance with ASU 2018-08.
Additionally, Nuestra Escuela reports to management will be prepared on a cash and accrual basis in order to
meet the requirements for reporting to agencies (cash basis) and general accepted accounting principles GAAP
compliance (accrual basis).
Page
Improper cut-off of accrued expense and grants receivables Category: Internal control -significant deficiency Condition: The Organization did not accurately record accrued expenses and grants receivable at the end of the reporting period. Several invoices and receivables that should have been recorded in the current period were instead recorded in the subsequent period, leading to an understatement of both accrued expense and contributions and grants receivables. Criteria: According to generally accepted accounting principles (GAAP), both accrued expense and grants receivables should be recognized in the period they are incurred or earned, regardless of when the invoice is received, or payment is made. Cause: The improper cut-off was due to inadequate internal controls over the recording of accrued expenses and grants receivables, as well as a lack of understanding of proper cut-off procedures by the accounting staff. Effects: This resulted in misstated financial statements, with both the accrued expense and grants receivables being understated and/or overstated, potentially leading to inaccurate financial reporting and decision-making. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management strengthen internal controls over the recording of accrued expenses and grants receivables, provide additional training to accounting staff on proper cut-off procedures, and conduct regular reviews to ensure that both accrued expense and grants receivables are recorded in the correct period. Management’s response: Nuestra Escuela will ensure that all grants and accrued expenses received are recorded promptly and that services rendered are accounted for in the correct period of accurately. The Administrative Director will perform regular reconciliation of accounts to detect any discrepancies that may
indicate cut-off errors.
The Administrative staff will take training about the best practices of cut-off procedures and the impact of errors
on financial reporting.
Nuestra Escuela will reinforce internal audits to review cut-off procedures and ensure they are strictly enforced.
Nuestra Escuela is committed to preventing cut-off errors with a proactive approach from accountants, involving
a combination of robust procedures, technology, and a culture of accuracy and compliance within the accounting
department. By following these best practice, accountants can help ensure the integrity of the financial reporting
Improper Accounting of Conditional and refundable advances for Federal and State Grants Category: Internal control -significant deficiency. Condition: The organization did not properly account for conditional and refundable advances received from federal and state grants totaling approximately $1,506,000. Of this amount, only $536,950 met the conditions to be recorded as revenue. Criteria: According to Accounting Standards Update (ASU) 2018-08, "Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made," not-for-profit entities must evaluate whether grants and contracts are conditional or unconditional. A contribution is considered conditional if it includes both: • A Barrier to Overcome: The recipient must meet specific performance-related conditions or other measurable barriers. • A Right of Return or Release: The grantor retains a right to reclaim the funds, or the recipient is released from the obligation if the conditions are not met. Conditional and refundable advances should be recorded as accrued expense (deferred revenue) until the conditions are substantially met or explicitly waived. Only then should they be recognized as revenue. Cause: The improper accounting was mainly due to the reports prepared for management and lead agencies being on a cash basis. Additionally, there was a lack of understanding of the relevant accounting guidance by the accounting staff. Effects: This resulted in an overstatement of income by approximately $972,600, and an overstatement of accrued expense and restricted net assets by the same amount. These misstatements could lead to inaccurate financial reporting and decision-making. Prior year’s findings:
Not identified
Questioned cost:
None
Recommendation:
We recommend that management strengthen internal controls over the accounting of conditional and refundable
advances, provide additional training to accounting staff on the proper recognition of conditional and refundable
advances, and conduct regular reviews to ensure compliance with ASU 2018-08. Additionally, reports to
management should be prepared following cash and accrual basis in order to meet the requirements for reporting
to agencies (cash basis) and compliance (accrual basis).
Management’s response:
Nuestra Escuela will design internal controls over the accounting of conditional and refundable advances. These
controls will include a rubric to determine whether the contract includes conditional contributions.
The accounting staff will take training on the proper recognition of conditional and refundable advances and
conduct regular reviews to ensure compliance with ASU 2018-08.
Additionally, Nuestra Escuela reports to management will be prepared on a cash and accrual basis in order to
meet the requirements for reporting to agencies (cash basis) and general accepted accounting principles GAAP
compliance (accrual basis).
Page
Improper cut-off of accrued expense and grants receivables Category: Internal control -significant deficiency Condition: The Organization did not accurately record accrued expenses and grants receivable at the end of the reporting period. Several invoices and receivables that should have been recorded in the current period were instead recorded in the subsequent period, leading to an understatement of both accrued expense and contributions and grants receivables. Criteria: According to generally accepted accounting principles (GAAP), both accrued expense and grants receivables should be recognized in the period they are incurred or earned, regardless of when the invoice is received, or payment is made. Cause: The improper cut-off was due to inadequate internal controls over the recording of accrued expenses and grants receivables, as well as a lack of understanding of proper cut-off procedures by the accounting staff. Effects: This resulted in misstated financial statements, with both the accrued expense and grants receivables being understated and/or overstated, potentially leading to inaccurate financial reporting and decision-making. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management strengthen internal controls over the recording of accrued expenses and grants receivables, provide additional training to accounting staff on proper cut-off procedures, and conduct regular reviews to ensure that both accrued expense and grants receivables are recorded in the correct period. Management’s response: Nuestra Escuela will ensure that all grants and accrued expenses received are recorded promptly and that services rendered are accounted for in the correct period of accurately. The Administrative Director will perform regular reconciliation of accounts to detect any discrepancies that may
indicate cut-off errors.
The Administrative staff will take training about the best practices of cut-off procedures and the impact of errors
on financial reporting.
Nuestra Escuela will reinforce internal audits to review cut-off procedures and ensure they are strictly enforced.
Nuestra Escuela is committed to preventing cut-off errors with a proactive approach from accountants, involving
a combination of robust procedures, technology, and a culture of accuracy and compliance within the accounting
department. By following these best practice, accountants can help ensure the integrity of the financial reporting
Improper Accounting of Conditional and refundable advances for Federal and State Grants Category: Internal control -significant deficiency. Condition: The organization did not properly account for conditional and refundable advances received from federal and state grants totaling approximately $1,506,000. Of this amount, only $536,950 met the conditions to be recorded as revenue. Criteria: According to Accounting Standards Update (ASU) 2018-08, "Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made," not-for-profit entities must evaluate whether grants and contracts are conditional or unconditional. A contribution is considered conditional if it includes both: • A Barrier to Overcome: The recipient must meet specific performance-related conditions or other measurable barriers. • A Right of Return or Release: The grantor retains a right to reclaim the funds, or the recipient is released from the obligation if the conditions are not met. Conditional and refundable advances should be recorded as accrued expense (deferred revenue) until the conditions are substantially met or explicitly waived. Only then should they be recognized as revenue. Cause: The improper accounting was mainly due to the reports prepared for management and lead agencies being on a cash basis. Additionally, there was a lack of understanding of the relevant accounting guidance by the accounting staff. Effects: This resulted in an overstatement of income by approximately $972,600, and an overstatement of accrued expense and restricted net assets by the same amount. These misstatements could lead to inaccurate financial reporting and decision-making. Prior year’s findings:
Not identified
Questioned cost:
None
Recommendation:
We recommend that management strengthen internal controls over the accounting of conditional and refundable
advances, provide additional training to accounting staff on the proper recognition of conditional and refundable
advances, and conduct regular reviews to ensure compliance with ASU 2018-08. Additionally, reports to
management should be prepared following cash and accrual basis in order to meet the requirements for reporting
to agencies (cash basis) and compliance (accrual basis).
Management’s response:
Nuestra Escuela will design internal controls over the accounting of conditional and refundable advances. These
controls will include a rubric to determine whether the contract includes conditional contributions.
The accounting staff will take training on the proper recognition of conditional and refundable advances and
conduct regular reviews to ensure compliance with ASU 2018-08.
Additionally, Nuestra Escuela reports to management will be prepared on a cash and accrual basis in order to
meet the requirements for reporting to agencies (cash basis) and general accepted accounting principles GAAP
compliance (accrual basis).
Page
Improper cut-off of accrued expense and grants receivables Category: Internal control -significant deficiency Condition: The Organization did not accurately record accrued expenses and grants receivable at the end of the reporting period. Several invoices and receivables that should have been recorded in the current period were instead recorded in the subsequent period, leading to an understatement of both accrued expense and contributions and grants receivables. Criteria: According to generally accepted accounting principles (GAAP), both accrued expense and grants receivables should be recognized in the period they are incurred or earned, regardless of when the invoice is received, or payment is made. Cause: The improper cut-off was due to inadequate internal controls over the recording of accrued expenses and grants receivables, as well as a lack of understanding of proper cut-off procedures by the accounting staff. Effects: This resulted in misstated financial statements, with both the accrued expense and grants receivables being understated and/or overstated, potentially leading to inaccurate financial reporting and decision-making. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management strengthen internal controls over the recording of accrued expenses and grants receivables, provide additional training to accounting staff on proper cut-off procedures, and conduct regular reviews to ensure that both accrued expense and grants receivables are recorded in the correct period. Management’s response: Nuestra Escuela will ensure that all grants and accrued expenses received are recorded promptly and that services rendered are accounted for in the correct period of accurately. The Administrative Director will perform regular reconciliation of accounts to detect any discrepancies that may
indicate cut-off errors.
The Administrative staff will take training about the best practices of cut-off procedures and the impact of errors
on financial reporting.
Nuestra Escuela will reinforce internal audits to review cut-off procedures and ensure they are strictly enforced.
Nuestra Escuela is committed to preventing cut-off errors with a proactive approach from accountants, involving
a combination of robust procedures, technology, and a culture of accuracy and compliance within the accounting
department. By following these best practice, accountants can help ensure the integrity of the financial reporting
Improper Accounting of Conditional and refundable advances for Federal and State Grants Category: Internal control -significant deficiency. Condition: The organization did not properly account for conditional and refundable advances received from federal and state grants totaling approximately $1,506,000. Of this amount, only $536,950 met the conditions to be recorded as revenue. Criteria: According to Accounting Standards Update (ASU) 2018-08, "Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made," not-for-profit entities must evaluate whether grants and contracts are conditional or unconditional. A contribution is considered conditional if it includes both: • A Barrier to Overcome: The recipient must meet specific performance-related conditions or other measurable barriers. • A Right of Return or Release: The grantor retains a right to reclaim the funds, or the recipient is released from the obligation if the conditions are not met. Conditional and refundable advances should be recorded as accrued expense (deferred revenue) until the conditions are substantially met or explicitly waived. Only then should they be recognized as revenue. Cause: The improper accounting was mainly due to the reports prepared for management and lead agencies being on a cash basis. Additionally, there was a lack of understanding of the relevant accounting guidance by the accounting staff. Effects: This resulted in an overstatement of income by approximately $972,600, and an overstatement of accrued expense and restricted net assets by the same amount. These misstatements could lead to inaccurate financial reporting and decision-making. Prior year’s findings:
Not identified
Questioned cost:
None
Recommendation:
We recommend that management strengthen internal controls over the accounting of conditional and refundable
advances, provide additional training to accounting staff on the proper recognition of conditional and refundable
advances, and conduct regular reviews to ensure compliance with ASU 2018-08. Additionally, reports to
management should be prepared following cash and accrual basis in order to meet the requirements for reporting
to agencies (cash basis) and compliance (accrual basis).
Management’s response:
Nuestra Escuela will design internal controls over the accounting of conditional and refundable advances. These
controls will include a rubric to determine whether the contract includes conditional contributions.
The accounting staff will take training on the proper recognition of conditional and refundable advances and
conduct regular reviews to ensure compliance with ASU 2018-08.
Additionally, Nuestra Escuela reports to management will be prepared on a cash and accrual basis in order to
meet the requirements for reporting to agencies (cash basis) and general accepted accounting principles GAAP
compliance (accrual basis).
Page
Improper cut-off of accrued expense and grants receivables Category: Internal control -significant deficiency Condition: The Organization did not accurately record accrued expenses and grants receivable at the end of the reporting period. Several invoices and receivables that should have been recorded in the current period were instead recorded in the subsequent period, leading to an understatement of both accrued expense and contributions and grants receivables. Criteria: According to generally accepted accounting principles (GAAP), both accrued expense and grants receivables should be recognized in the period they are incurred or earned, regardless of when the invoice is received, or payment is made. Cause: The improper cut-off was due to inadequate internal controls over the recording of accrued expenses and grants receivables, as well as a lack of understanding of proper cut-off procedures by the accounting staff. Effects: This resulted in misstated financial statements, with both the accrued expense and grants receivables being understated and/or overstated, potentially leading to inaccurate financial reporting and decision-making. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management strengthen internal controls over the recording of accrued expenses and grants receivables, provide additional training to accounting staff on proper cut-off procedures, and conduct regular reviews to ensure that both accrued expense and grants receivables are recorded in the correct period. Management’s response: Nuestra Escuela will ensure that all grants and accrued expenses received are recorded promptly and that services rendered are accounted for in the correct period of accurately. The Administrative Director will perform regular reconciliation of accounts to detect any discrepancies that may
indicate cut-off errors.
The Administrative staff will take training about the best practices of cut-off procedures and the impact of errors
on financial reporting.
Nuestra Escuela will reinforce internal audits to review cut-off procedures and ensure they are strictly enforced.
Nuestra Escuela is committed to preventing cut-off errors with a proactive approach from accountants, involving
a combination of robust procedures, technology, and a culture of accuracy and compliance within the accounting
department. By following these best practice, accountants can help ensure the integrity of the financial reporting
Improper Accounting of Conditional and refundable advances for Federal and State Grants Category: Internal control -significant deficiency. Condition: The organization did not properly account for conditional and refundable advances received from federal and state grants totaling approximately $1,506,000. Of this amount, only $536,950 met the conditions to be recorded as revenue. Criteria: According to Accounting Standards Update (ASU) 2018-08, "Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made," not-for-profit entities must evaluate whether grants and contracts are conditional or unconditional. A contribution is considered conditional if it includes both: • A Barrier to Overcome: The recipient must meet specific performance-related conditions or other measurable barriers. • A Right of Return or Release: The grantor retains a right to reclaim the funds, or the recipient is released from the obligation if the conditions are not met. Conditional and refundable advances should be recorded as accrued expense (deferred revenue) until the conditions are substantially met or explicitly waived. Only then should they be recognized as revenue. Cause: The improper accounting was mainly due to the reports prepared for management and lead agencies being on a cash basis. Additionally, there was a lack of understanding of the relevant accounting guidance by the accounting staff. Effects: This resulted in an overstatement of income by approximately $972,600, and an overstatement of accrued expense and restricted net assets by the same amount. These misstatements could lead to inaccurate financial reporting and decision-making. Prior year’s findings:
Not identified
Questioned cost:
None
Recommendation:
We recommend that management strengthen internal controls over the accounting of conditional and refundable
advances, provide additional training to accounting staff on the proper recognition of conditional and refundable
advances, and conduct regular reviews to ensure compliance with ASU 2018-08. Additionally, reports to
management should be prepared following cash and accrual basis in order to meet the requirements for reporting
to agencies (cash basis) and compliance (accrual basis).
Management’s response:
Nuestra Escuela will design internal controls over the accounting of conditional and refundable advances. These
controls will include a rubric to determine whether the contract includes conditional contributions.
The accounting staff will take training on the proper recognition of conditional and refundable advances and
conduct regular reviews to ensure compliance with ASU 2018-08.
Additionally, Nuestra Escuela reports to management will be prepared on a cash and accrual basis in order to
meet the requirements for reporting to agencies (cash basis) and general accepted accounting principles GAAP
compliance (accrual basis).
Page
Improper cut-off of accrued expense and grants receivables Category: Internal control -significant deficiency Condition: The Organization did not accurately record accrued expenses and grants receivable at the end of the reporting period. Several invoices and receivables that should have been recorded in the current period were instead recorded in the subsequent period, leading to an understatement of both accrued expense and contributions and grants receivables. Criteria: According to generally accepted accounting principles (GAAP), both accrued expense and grants receivables should be recognized in the period they are incurred or earned, regardless of when the invoice is received, or payment is made. Cause: The improper cut-off was due to inadequate internal controls over the recording of accrued expenses and grants receivables, as well as a lack of understanding of proper cut-off procedures by the accounting staff. Effects: This resulted in misstated financial statements, with both the accrued expense and grants receivables being understated and/or overstated, potentially leading to inaccurate financial reporting and decision-making. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management strengthen internal controls over the recording of accrued expenses and grants receivables, provide additional training to accounting staff on proper cut-off procedures, and conduct regular reviews to ensure that both accrued expense and grants receivables are recorded in the correct period. Management’s response: Nuestra Escuela will ensure that all grants and accrued expenses received are recorded promptly and that services rendered are accounted for in the correct period of accurately. The Administrative Director will perform regular reconciliation of accounts to detect any discrepancies that may
indicate cut-off errors.
The Administrative staff will take training about the best practices of cut-off procedures and the impact of errors
on financial reporting.
Nuestra Escuela will reinforce internal audits to review cut-off procedures and ensure they are strictly enforced.
Nuestra Escuela is committed to preventing cut-off errors with a proactive approach from accountants, involving
a combination of robust procedures, technology, and a culture of accuracy and compliance within the accounting
department. By following these best practice, accountants can help ensure the integrity of the financial reporting
Improper Accounting of Conditional and refundable advances for Federal and State Grants Category: Internal control -significant deficiency. Condition: The organization did not properly account for conditional and refundable advances received from federal and state grants totaling approximately $1,506,000. Of this amount, only $536,950 met the conditions to be recorded as revenue. Criteria: According to Accounting Standards Update (ASU) 2018-08, "Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made," not-for-profit entities must evaluate whether grants and contracts are conditional or unconditional. A contribution is considered conditional if it includes both: • A Barrier to Overcome: The recipient must meet specific performance-related conditions or other measurable barriers. • A Right of Return or Release: The grantor retains a right to reclaim the funds, or the recipient is released from the obligation if the conditions are not met. Conditional and refundable advances should be recorded as accrued expense (deferred revenue) until the conditions are substantially met or explicitly waived. Only then should they be recognized as revenue. Cause: The improper accounting was mainly due to the reports prepared for management and lead agencies being on a cash basis. Additionally, there was a lack of understanding of the relevant accounting guidance by the accounting staff. Effects: This resulted in an overstatement of income by approximately $972,600, and an overstatement of accrued expense and restricted net assets by the same amount. These misstatements could lead to inaccurate financial reporting and decision-making. Prior year’s findings:
Not identified
Questioned cost:
None
Recommendation:
We recommend that management strengthen internal controls over the accounting of conditional and refundable
advances, provide additional training to accounting staff on the proper recognition of conditional and refundable
advances, and conduct regular reviews to ensure compliance with ASU 2018-08. Additionally, reports to
management should be prepared following cash and accrual basis in order to meet the requirements for reporting
to agencies (cash basis) and compliance (accrual basis).
Management’s response:
Nuestra Escuela will design internal controls over the accounting of conditional and refundable advances. These
controls will include a rubric to determine whether the contract includes conditional contributions.
The accounting staff will take training on the proper recognition of conditional and refundable advances and
conduct regular reviews to ensure compliance with ASU 2018-08.
Additionally, Nuestra Escuela reports to management will be prepared on a cash and accrual basis in order to
meet the requirements for reporting to agencies (cash basis) and general accepted accounting principles GAAP
compliance (accrual basis).
Page
Federal Program: ALN 93.558- Temporary Assistance for Needy Families (TANF) Category: Compliance /internal control Compliance Requirement: Reporting Criteria: The agreement between the lead agency and the Organization required that monthly reports, which include invoices, narratives, and other documents, should be submitted within 10 days after the end of each month. Condition: The Organization failed to submit six (6) out of eleven (11) monthly reports on time, as stipulated by the agreement. Cause: The delay in submitting reports was due to the unavailability of the participant list required to be included in the monthly reports. Effects: Condition may result in noncompliance with the requirements of reporting. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management automate data collection to ensure timely availability of information, set clear internal deadlines earlier than the actual submission date, conduct regular audits to verify data accuracy, maintain effective communication channels with all involved parties, provide comprehensive training and support to staff, and develop contingency plans to address unexpected issues. Management’s response:
Nuestra Escuela’s Program Director will use an automatized data collection software to ensure timely availability
of participants’ information.
Nuestra Escuela strengthens internal controls to ensure the compliance with the reporting.
Nuestra Escuela will conduct regular audits to verify data accuracy, maintaining effective communication
channels with all involved parties.
Nuestra Escuela Management Staff will take specialized training in participant qualification and proper time
management.
The Executive President will develop a contingency plan to address unexpected issues with the compliance.
Improper cut-off of accrued expense and grants receivables Category: Internal control -significant deficiency Condition: The Organization did not accurately record accrued expenses and grants receivable at the end of the reporting period. Several invoices and receivables that should have been recorded in the current period were instead recorded in the subsequent period, leading to an understatement of both accrued expense and contributions and grants receivables. Criteria: According to generally accepted accounting principles (GAAP), both accrued expense and grants receivables should be recognized in the period they are incurred or earned, regardless of when the invoice is received, or payment is made. Cause: The improper cut-off was due to inadequate internal controls over the recording of accrued expenses and grants receivables, as well as a lack of understanding of proper cut-off procedures by the accounting staff. Effects: This resulted in misstated financial statements, with both the accrued expense and grants receivables being understated and/or overstated, potentially leading to inaccurate financial reporting and decision-making. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management strengthen internal controls over the recording of accrued expenses and grants receivables, provide additional training to accounting staff on proper cut-off procedures, and conduct regular reviews to ensure that both accrued expense and grants receivables are recorded in the correct period. Management’s response: Nuestra Escuela will ensure that all grants and accrued expenses received are recorded promptly and that services rendered are accounted for in the correct period of accurately. The Administrative Director will perform regular reconciliation of accounts to detect any discrepancies that may
indicate cut-off errors.
The Administrative staff will take training about the best practices of cut-off procedures and the impact of errors
on financial reporting.
Nuestra Escuela will reinforce internal audits to review cut-off procedures and ensure they are strictly enforced.
Nuestra Escuela is committed to preventing cut-off errors with a proactive approach from accountants, involving
a combination of robust procedures, technology, and a culture of accuracy and compliance within the accounting
department. By following these best practice, accountants can help ensure the integrity of the financial reporting
Improper Accounting of Conditional and refundable advances for Federal and State Grants Category: Internal control -significant deficiency. Condition: The organization did not properly account for conditional and refundable advances received from federal and state grants totaling approximately $1,506,000. Of this amount, only $536,950 met the conditions to be recorded as revenue. Criteria: According to Accounting Standards Update (ASU) 2018-08, "Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made," not-for-profit entities must evaluate whether grants and contracts are conditional or unconditional. A contribution is considered conditional if it includes both: • A Barrier to Overcome: The recipient must meet specific performance-related conditions or other measurable barriers. • A Right of Return or Release: The grantor retains a right to reclaim the funds, or the recipient is released from the obligation if the conditions are not met. Conditional and refundable advances should be recorded as accrued expense (deferred revenue) until the conditions are substantially met or explicitly waived. Only then should they be recognized as revenue. Cause: The improper accounting was mainly due to the reports prepared for management and lead agencies being on a cash basis. Additionally, there was a lack of understanding of the relevant accounting guidance by the accounting staff. Effects: This resulted in an overstatement of income by approximately $972,600, and an overstatement of accrued expense and restricted net assets by the same amount. These misstatements could lead to inaccurate financial reporting and decision-making. Prior year’s findings:
Not identified
Questioned cost:
None
Recommendation:
We recommend that management strengthen internal controls over the accounting of conditional and refundable
advances, provide additional training to accounting staff on the proper recognition of conditional and refundable
advances, and conduct regular reviews to ensure compliance with ASU 2018-08. Additionally, reports to
management should be prepared following cash and accrual basis in order to meet the requirements for reporting
to agencies (cash basis) and compliance (accrual basis).
Management’s response:
Nuestra Escuela will design internal controls over the accounting of conditional and refundable advances. These
controls will include a rubric to determine whether the contract includes conditional contributions.
The accounting staff will take training on the proper recognition of conditional and refundable advances and
conduct regular reviews to ensure compliance with ASU 2018-08.
Additionally, Nuestra Escuela reports to management will be prepared on a cash and accrual basis in order to
meet the requirements for reporting to agencies (cash basis) and general accepted accounting principles GAAP
compliance (accrual basis).
Page
Federal Program: ALN 93.558- Temporary Assistance for Needy Families (TANF) Category: Compliance /internal control Compliance Requirement: Reporting Criteria: The agreement between the lead agency and the Organization required that monthly reports, which include invoices, narratives, and other documents, should be submitted within 10 days after the end of each month. Condition: The Organization failed to submit six (6) out of eleven (11) monthly reports on time, as stipulated by the agreement. Cause: The delay in submitting reports was due to the unavailability of the participant list required to be included in the monthly reports. Effects: Condition may result in noncompliance with the requirements of reporting. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management automate data collection to ensure timely availability of information, set clear internal deadlines earlier than the actual submission date, conduct regular audits to verify data accuracy, maintain effective communication channels with all involved parties, provide comprehensive training and support to staff, and develop contingency plans to address unexpected issues. Management’s response:
Nuestra Escuela’s Program Director will use an automatized data collection software to ensure timely availability
of participants’ information.
Nuestra Escuela strengthens internal controls to ensure the compliance with the reporting.
Nuestra Escuela will conduct regular audits to verify data accuracy, maintaining effective communication
channels with all involved parties.
Nuestra Escuela Management Staff will take specialized training in participant qualification and proper time
management.
The Executive President will develop a contingency plan to address unexpected issues with the compliance.
Improper cut-off of accrued expense and grants receivables Category: Internal control -significant deficiency Condition: The Organization did not accurately record accrued expenses and grants receivable at the end of the reporting period. Several invoices and receivables that should have been recorded in the current period were instead recorded in the subsequent period, leading to an understatement of both accrued expense and contributions and grants receivables. Criteria: According to generally accepted accounting principles (GAAP), both accrued expense and grants receivables should be recognized in the period they are incurred or earned, regardless of when the invoice is received, or payment is made. Cause: The improper cut-off was due to inadequate internal controls over the recording of accrued expenses and grants receivables, as well as a lack of understanding of proper cut-off procedures by the accounting staff. Effects: This resulted in misstated financial statements, with both the accrued expense and grants receivables being understated and/or overstated, potentially leading to inaccurate financial reporting and decision-making. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management strengthen internal controls over the recording of accrued expenses and grants receivables, provide additional training to accounting staff on proper cut-off procedures, and conduct regular reviews to ensure that both accrued expense and grants receivables are recorded in the correct period. Management’s response: Nuestra Escuela will ensure that all grants and accrued expenses received are recorded promptly and that services rendered are accounted for in the correct period of accurately. The Administrative Director will perform regular reconciliation of accounts to detect any discrepancies that may
indicate cut-off errors.
The Administrative staff will take training about the best practices of cut-off procedures and the impact of errors
on financial reporting.
Nuestra Escuela will reinforce internal audits to review cut-off procedures and ensure they are strictly enforced.
Nuestra Escuela is committed to preventing cut-off errors with a proactive approach from accountants, involving
a combination of robust procedures, technology, and a culture of accuracy and compliance within the accounting
department. By following these best practice, accountants can help ensure the integrity of the financial reporting
Improper Accounting of Conditional and refundable advances for Federal and State Grants Category: Internal control -significant deficiency. Condition: The organization did not properly account for conditional and refundable advances received from federal and state grants totaling approximately $1,506,000. Of this amount, only $536,950 met the conditions to be recorded as revenue. Criteria: According to Accounting Standards Update (ASU) 2018-08, "Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made," not-for-profit entities must evaluate whether grants and contracts are conditional or unconditional. A contribution is considered conditional if it includes both: • A Barrier to Overcome: The recipient must meet specific performance-related conditions or other measurable barriers. • A Right of Return or Release: The grantor retains a right to reclaim the funds, or the recipient is released from the obligation if the conditions are not met. Conditional and refundable advances should be recorded as accrued expense (deferred revenue) until the conditions are substantially met or explicitly waived. Only then should they be recognized as revenue. Cause: The improper accounting was mainly due to the reports prepared for management and lead agencies being on a cash basis. Additionally, there was a lack of understanding of the relevant accounting guidance by the accounting staff. Effects: This resulted in an overstatement of income by approximately $972,600, and an overstatement of accrued expense and restricted net assets by the same amount. These misstatements could lead to inaccurate financial reporting and decision-making. Prior year’s findings:
Not identified
Questioned cost:
None
Recommendation:
We recommend that management strengthen internal controls over the accounting of conditional and refundable
advances, provide additional training to accounting staff on the proper recognition of conditional and refundable
advances, and conduct regular reviews to ensure compliance with ASU 2018-08. Additionally, reports to
management should be prepared following cash and accrual basis in order to meet the requirements for reporting
to agencies (cash basis) and compliance (accrual basis).
Management’s response:
Nuestra Escuela will design internal controls over the accounting of conditional and refundable advances. These
controls will include a rubric to determine whether the contract includes conditional contributions.
The accounting staff will take training on the proper recognition of conditional and refundable advances and
conduct regular reviews to ensure compliance with ASU 2018-08.
Additionally, Nuestra Escuela reports to management will be prepared on a cash and accrual basis in order to
meet the requirements for reporting to agencies (cash basis) and general accepted accounting principles GAAP
compliance (accrual basis).
Page
Improper cut-off of accrued expense and grants receivables Category: Internal control -significant deficiency Condition: The Organization did not accurately record accrued expenses and grants receivable at the end of the reporting period. Several invoices and receivables that should have been recorded in the current period were instead recorded in the subsequent period, leading to an understatement of both accrued expense and contributions and grants receivables. Criteria: According to generally accepted accounting principles (GAAP), both accrued expense and grants receivables should be recognized in the period they are incurred or earned, regardless of when the invoice is received, or payment is made. Cause: The improper cut-off was due to inadequate internal controls over the recording of accrued expenses and grants receivables, as well as a lack of understanding of proper cut-off procedures by the accounting staff. Effects: This resulted in misstated financial statements, with both the accrued expense and grants receivables being understated and/or overstated, potentially leading to inaccurate financial reporting and decision-making. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management strengthen internal controls over the recording of accrued expenses and grants receivables, provide additional training to accounting staff on proper cut-off procedures, and conduct regular reviews to ensure that both accrued expense and grants receivables are recorded in the correct period. Management’s response: Nuestra Escuela will ensure that all grants and accrued expenses received are recorded promptly and that services rendered are accounted for in the correct period of accurately. The Administrative Director will perform regular reconciliation of accounts to detect any discrepancies that may
indicate cut-off errors.
The Administrative staff will take training about the best practices of cut-off procedures and the impact of errors
on financial reporting.
Nuestra Escuela will reinforce internal audits to review cut-off procedures and ensure they are strictly enforced.
Nuestra Escuela is committed to preventing cut-off errors with a proactive approach from accountants, involving
a combination of robust procedures, technology, and a culture of accuracy and compliance within the accounting
department. By following these best practice, accountants can help ensure the integrity of the financial reporting
Improper Accounting of Conditional and refundable advances for Federal and State Grants Category: Internal control -significant deficiency. Condition: The organization did not properly account for conditional and refundable advances received from federal and state grants totaling approximately $1,506,000. Of this amount, only $536,950 met the conditions to be recorded as revenue. Criteria: According to Accounting Standards Update (ASU) 2018-08, "Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made," not-for-profit entities must evaluate whether grants and contracts are conditional or unconditional. A contribution is considered conditional if it includes both: • A Barrier to Overcome: The recipient must meet specific performance-related conditions or other measurable barriers. • A Right of Return or Release: The grantor retains a right to reclaim the funds, or the recipient is released from the obligation if the conditions are not met. Conditional and refundable advances should be recorded as accrued expense (deferred revenue) until the conditions are substantially met or explicitly waived. Only then should they be recognized as revenue. Cause: The improper accounting was mainly due to the reports prepared for management and lead agencies being on a cash basis. Additionally, there was a lack of understanding of the relevant accounting guidance by the accounting staff. Effects: This resulted in an overstatement of income by approximately $972,600, and an overstatement of accrued expense and restricted net assets by the same amount. These misstatements could lead to inaccurate financial reporting and decision-making. Prior year’s findings:
Not identified
Questioned cost:
None
Recommendation:
We recommend that management strengthen internal controls over the accounting of conditional and refundable
advances, provide additional training to accounting staff on the proper recognition of conditional and refundable
advances, and conduct regular reviews to ensure compliance with ASU 2018-08. Additionally, reports to
management should be prepared following cash and accrual basis in order to meet the requirements for reporting
to agencies (cash basis) and compliance (accrual basis).
Management’s response:
Nuestra Escuela will design internal controls over the accounting of conditional and refundable advances. These
controls will include a rubric to determine whether the contract includes conditional contributions.
The accounting staff will take training on the proper recognition of conditional and refundable advances and
conduct regular reviews to ensure compliance with ASU 2018-08.
Additionally, Nuestra Escuela reports to management will be prepared on a cash and accrual basis in order to
meet the requirements for reporting to agencies (cash basis) and general accepted accounting principles GAAP
compliance (accrual basis).
Page
Improper cut-off of accrued expense and grants receivables Category: Internal control -significant deficiency Condition: The Organization did not accurately record accrued expenses and grants receivable at the end of the reporting period. Several invoices and receivables that should have been recorded in the current period were instead recorded in the subsequent period, leading to an understatement of both accrued expense and contributions and grants receivables. Criteria: According to generally accepted accounting principles (GAAP), both accrued expense and grants receivables should be recognized in the period they are incurred or earned, regardless of when the invoice is received, or payment is made. Cause: The improper cut-off was due to inadequate internal controls over the recording of accrued expenses and grants receivables, as well as a lack of understanding of proper cut-off procedures by the accounting staff. Effects: This resulted in misstated financial statements, with both the accrued expense and grants receivables being understated and/or overstated, potentially leading to inaccurate financial reporting and decision-making. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management strengthen internal controls over the recording of accrued expenses and grants receivables, provide additional training to accounting staff on proper cut-off procedures, and conduct regular reviews to ensure that both accrued expense and grants receivables are recorded in the correct period. Management’s response: Nuestra Escuela will ensure that all grants and accrued expenses received are recorded promptly and that services rendered are accounted for in the correct period of accurately. The Administrative Director will perform regular reconciliation of accounts to detect any discrepancies that may
indicate cut-off errors.
The Administrative staff will take training about the best practices of cut-off procedures and the impact of errors
on financial reporting.
Nuestra Escuela will reinforce internal audits to review cut-off procedures and ensure they are strictly enforced.
Nuestra Escuela is committed to preventing cut-off errors with a proactive approach from accountants, involving
a combination of robust procedures, technology, and a culture of accuracy and compliance within the accounting
department. By following these best practice, accountants can help ensure the integrity of the financial reporting
Improper Accounting of Conditional and refundable advances for Federal and State Grants Category: Internal control -significant deficiency. Condition: The organization did not properly account for conditional and refundable advances received from federal and state grants totaling approximately $1,506,000. Of this amount, only $536,950 met the conditions to be recorded as revenue. Criteria: According to Accounting Standards Update (ASU) 2018-08, "Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made," not-for-profit entities must evaluate whether grants and contracts are conditional or unconditional. A contribution is considered conditional if it includes both: • A Barrier to Overcome: The recipient must meet specific performance-related conditions or other measurable barriers. • A Right of Return or Release: The grantor retains a right to reclaim the funds, or the recipient is released from the obligation if the conditions are not met. Conditional and refundable advances should be recorded as accrued expense (deferred revenue) until the conditions are substantially met or explicitly waived. Only then should they be recognized as revenue. Cause: The improper accounting was mainly due to the reports prepared for management and lead agencies being on a cash basis. Additionally, there was a lack of understanding of the relevant accounting guidance by the accounting staff. Effects: This resulted in an overstatement of income by approximately $972,600, and an overstatement of accrued expense and restricted net assets by the same amount. These misstatements could lead to inaccurate financial reporting and decision-making. Prior year’s findings:
Not identified
Questioned cost:
None
Recommendation:
We recommend that management strengthen internal controls over the accounting of conditional and refundable
advances, provide additional training to accounting staff on the proper recognition of conditional and refundable
advances, and conduct regular reviews to ensure compliance with ASU 2018-08. Additionally, reports to
management should be prepared following cash and accrual basis in order to meet the requirements for reporting
to agencies (cash basis) and compliance (accrual basis).
Management’s response:
Nuestra Escuela will design internal controls over the accounting of conditional and refundable advances. These
controls will include a rubric to determine whether the contract includes conditional contributions.
The accounting staff will take training on the proper recognition of conditional and refundable advances and
conduct regular reviews to ensure compliance with ASU 2018-08.
Additionally, Nuestra Escuela reports to management will be prepared on a cash and accrual basis in order to
meet the requirements for reporting to agencies (cash basis) and general accepted accounting principles GAAP
compliance (accrual basis).
Page
Improper cut-off of accrued expense and grants receivables Category: Internal control -significant deficiency Condition: The Organization did not accurately record accrued expenses and grants receivable at the end of the reporting period. Several invoices and receivables that should have been recorded in the current period were instead recorded in the subsequent period, leading to an understatement of both accrued expense and contributions and grants receivables. Criteria: According to generally accepted accounting principles (GAAP), both accrued expense and grants receivables should be recognized in the period they are incurred or earned, regardless of when the invoice is received, or payment is made. Cause: The improper cut-off was due to inadequate internal controls over the recording of accrued expenses and grants receivables, as well as a lack of understanding of proper cut-off procedures by the accounting staff. Effects: This resulted in misstated financial statements, with both the accrued expense and grants receivables being understated and/or overstated, potentially leading to inaccurate financial reporting and decision-making. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management strengthen internal controls over the recording of accrued expenses and grants receivables, provide additional training to accounting staff on proper cut-off procedures, and conduct regular reviews to ensure that both accrued expense and grants receivables are recorded in the correct period. Management’s response: Nuestra Escuela will ensure that all grants and accrued expenses received are recorded promptly and that services rendered are accounted for in the correct period of accurately. The Administrative Director will perform regular reconciliation of accounts to detect any discrepancies that may
indicate cut-off errors.
The Administrative staff will take training about the best practices of cut-off procedures and the impact of errors
on financial reporting.
Nuestra Escuela will reinforce internal audits to review cut-off procedures and ensure they are strictly enforced.
Nuestra Escuela is committed to preventing cut-off errors with a proactive approach from accountants, involving
a combination of robust procedures, technology, and a culture of accuracy and compliance within the accounting
department. By following these best practice, accountants can help ensure the integrity of the financial reporting
Improper Accounting of Conditional and refundable advances for Federal and State Grants Category: Internal control -significant deficiency. Condition: The organization did not properly account for conditional and refundable advances received from federal and state grants totaling approximately $1,506,000. Of this amount, only $536,950 met the conditions to be recorded as revenue. Criteria: According to Accounting Standards Update (ASU) 2018-08, "Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made," not-for-profit entities must evaluate whether grants and contracts are conditional or unconditional. A contribution is considered conditional if it includes both: • A Barrier to Overcome: The recipient must meet specific performance-related conditions or other measurable barriers. • A Right of Return or Release: The grantor retains a right to reclaim the funds, or the recipient is released from the obligation if the conditions are not met. Conditional and refundable advances should be recorded as accrued expense (deferred revenue) until the conditions are substantially met or explicitly waived. Only then should they be recognized as revenue. Cause: The improper accounting was mainly due to the reports prepared for management and lead agencies being on a cash basis. Additionally, there was a lack of understanding of the relevant accounting guidance by the accounting staff. Effects: This resulted in an overstatement of income by approximately $972,600, and an overstatement of accrued expense and restricted net assets by the same amount. These misstatements could lead to inaccurate financial reporting and decision-making. Prior year’s findings:
Not identified
Questioned cost:
None
Recommendation:
We recommend that management strengthen internal controls over the accounting of conditional and refundable
advances, provide additional training to accounting staff on the proper recognition of conditional and refundable
advances, and conduct regular reviews to ensure compliance with ASU 2018-08. Additionally, reports to
management should be prepared following cash and accrual basis in order to meet the requirements for reporting
to agencies (cash basis) and compliance (accrual basis).
Management’s response:
Nuestra Escuela will design internal controls over the accounting of conditional and refundable advances. These
controls will include a rubric to determine whether the contract includes conditional contributions.
The accounting staff will take training on the proper recognition of conditional and refundable advances and
conduct regular reviews to ensure compliance with ASU 2018-08.
Additionally, Nuestra Escuela reports to management will be prepared on a cash and accrual basis in order to
meet the requirements for reporting to agencies (cash basis) and general accepted accounting principles GAAP
compliance (accrual basis).
Page
Improper cut-off of accrued expense and grants receivables Category: Internal control -significant deficiency Condition: The Organization did not accurately record accrued expenses and grants receivable at the end of the reporting period. Several invoices and receivables that should have been recorded in the current period were instead recorded in the subsequent period, leading to an understatement of both accrued expense and contributions and grants receivables. Criteria: According to generally accepted accounting principles (GAAP), both accrued expense and grants receivables should be recognized in the period they are incurred or earned, regardless of when the invoice is received, or payment is made. Cause: The improper cut-off was due to inadequate internal controls over the recording of accrued expenses and grants receivables, as well as a lack of understanding of proper cut-off procedures by the accounting staff. Effects: This resulted in misstated financial statements, with both the accrued expense and grants receivables being understated and/or overstated, potentially leading to inaccurate financial reporting and decision-making. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management strengthen internal controls over the recording of accrued expenses and grants receivables, provide additional training to accounting staff on proper cut-off procedures, and conduct regular reviews to ensure that both accrued expense and grants receivables are recorded in the correct period. Management’s response: Nuestra Escuela will ensure that all grants and accrued expenses received are recorded promptly and that services rendered are accounted for in the correct period of accurately. The Administrative Director will perform regular reconciliation of accounts to detect any discrepancies that may
indicate cut-off errors.
The Administrative staff will take training about the best practices of cut-off procedures and the impact of errors
on financial reporting.
Nuestra Escuela will reinforce internal audits to review cut-off procedures and ensure they are strictly enforced.
Nuestra Escuela is committed to preventing cut-off errors with a proactive approach from accountants, involving
a combination of robust procedures, technology, and a culture of accuracy and compliance within the accounting
department. By following these best practice, accountants can help ensure the integrity of the financial reporting
Improper Accounting of Conditional and refundable advances for Federal and State Grants Category: Internal control -significant deficiency. Condition: The organization did not properly account for conditional and refundable advances received from federal and state grants totaling approximately $1,506,000. Of this amount, only $536,950 met the conditions to be recorded as revenue. Criteria: According to Accounting Standards Update (ASU) 2018-08, "Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made," not-for-profit entities must evaluate whether grants and contracts are conditional or unconditional. A contribution is considered conditional if it includes both: • A Barrier to Overcome: The recipient must meet specific performance-related conditions or other measurable barriers. • A Right of Return or Release: The grantor retains a right to reclaim the funds, or the recipient is released from the obligation if the conditions are not met. Conditional and refundable advances should be recorded as accrued expense (deferred revenue) until the conditions are substantially met or explicitly waived. Only then should they be recognized as revenue. Cause: The improper accounting was mainly due to the reports prepared for management and lead agencies being on a cash basis. Additionally, there was a lack of understanding of the relevant accounting guidance by the accounting staff. Effects: This resulted in an overstatement of income by approximately $972,600, and an overstatement of accrued expense and restricted net assets by the same amount. These misstatements could lead to inaccurate financial reporting and decision-making. Prior year’s findings:
Not identified
Questioned cost:
None
Recommendation:
We recommend that management strengthen internal controls over the accounting of conditional and refundable
advances, provide additional training to accounting staff on the proper recognition of conditional and refundable
advances, and conduct regular reviews to ensure compliance with ASU 2018-08. Additionally, reports to
management should be prepared following cash and accrual basis in order to meet the requirements for reporting
to agencies (cash basis) and compliance (accrual basis).
Management’s response:
Nuestra Escuela will design internal controls over the accounting of conditional and refundable advances. These
controls will include a rubric to determine whether the contract includes conditional contributions.
The accounting staff will take training on the proper recognition of conditional and refundable advances and
conduct regular reviews to ensure compliance with ASU 2018-08.
Additionally, Nuestra Escuela reports to management will be prepared on a cash and accrual basis in order to
meet the requirements for reporting to agencies (cash basis) and general accepted accounting principles GAAP
compliance (accrual basis).
Page
Improper cut-off of accrued expense and grants receivables Category: Internal control -significant deficiency Condition: The Organization did not accurately record accrued expenses and grants receivable at the end of the reporting period. Several invoices and receivables that should have been recorded in the current period were instead recorded in the subsequent period, leading to an understatement of both accrued expense and contributions and grants receivables. Criteria: According to generally accepted accounting principles (GAAP), both accrued expense and grants receivables should be recognized in the period they are incurred or earned, regardless of when the invoice is received, or payment is made. Cause: The improper cut-off was due to inadequate internal controls over the recording of accrued expenses and grants receivables, as well as a lack of understanding of proper cut-off procedures by the accounting staff. Effects: This resulted in misstated financial statements, with both the accrued expense and grants receivables being understated and/or overstated, potentially leading to inaccurate financial reporting and decision-making. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management strengthen internal controls over the recording of accrued expenses and grants receivables, provide additional training to accounting staff on proper cut-off procedures, and conduct regular reviews to ensure that both accrued expense and grants receivables are recorded in the correct period. Management’s response: Nuestra Escuela will ensure that all grants and accrued expenses received are recorded promptly and that services rendered are accounted for in the correct period of accurately. The Administrative Director will perform regular reconciliation of accounts to detect any discrepancies that may
indicate cut-off errors.
The Administrative staff will take training about the best practices of cut-off procedures and the impact of errors
on financial reporting.
Nuestra Escuela will reinforce internal audits to review cut-off procedures and ensure they are strictly enforced.
Nuestra Escuela is committed to preventing cut-off errors with a proactive approach from accountants, involving
a combination of robust procedures, technology, and a culture of accuracy and compliance within the accounting
department. By following these best practice, accountants can help ensure the integrity of the financial reporting
Improper Accounting of Conditional and refundable advances for Federal and State Grants Category: Internal control -significant deficiency. Condition: The organization did not properly account for conditional and refundable advances received from federal and state grants totaling approximately $1,506,000. Of this amount, only $536,950 met the conditions to be recorded as revenue. Criteria: According to Accounting Standards Update (ASU) 2018-08, "Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made," not-for-profit entities must evaluate whether grants and contracts are conditional or unconditional. A contribution is considered conditional if it includes both: • A Barrier to Overcome: The recipient must meet specific performance-related conditions or other measurable barriers. • A Right of Return or Release: The grantor retains a right to reclaim the funds, or the recipient is released from the obligation if the conditions are not met. Conditional and refundable advances should be recorded as accrued expense (deferred revenue) until the conditions are substantially met or explicitly waived. Only then should they be recognized as revenue. Cause: The improper accounting was mainly due to the reports prepared for management and lead agencies being on a cash basis. Additionally, there was a lack of understanding of the relevant accounting guidance by the accounting staff. Effects: This resulted in an overstatement of income by approximately $972,600, and an overstatement of accrued expense and restricted net assets by the same amount. These misstatements could lead to inaccurate financial reporting and decision-making. Prior year’s findings:
Not identified
Questioned cost:
None
Recommendation:
We recommend that management strengthen internal controls over the accounting of conditional and refundable
advances, provide additional training to accounting staff on the proper recognition of conditional and refundable
advances, and conduct regular reviews to ensure compliance with ASU 2018-08. Additionally, reports to
management should be prepared following cash and accrual basis in order to meet the requirements for reporting
to agencies (cash basis) and compliance (accrual basis).
Management’s response:
Nuestra Escuela will design internal controls over the accounting of conditional and refundable advances. These
controls will include a rubric to determine whether the contract includes conditional contributions.
The accounting staff will take training on the proper recognition of conditional and refundable advances and
conduct regular reviews to ensure compliance with ASU 2018-08.
Additionally, Nuestra Escuela reports to management will be prepared on a cash and accrual basis in order to
meet the requirements for reporting to agencies (cash basis) and general accepted accounting principles GAAP
compliance (accrual basis).
Page
Improper cut-off of accrued expense and grants receivables Category: Internal control -significant deficiency Condition: The Organization did not accurately record accrued expenses and grants receivable at the end of the reporting period. Several invoices and receivables that should have been recorded in the current period were instead recorded in the subsequent period, leading to an understatement of both accrued expense and contributions and grants receivables. Criteria: According to generally accepted accounting principles (GAAP), both accrued expense and grants receivables should be recognized in the period they are incurred or earned, regardless of when the invoice is received, or payment is made. Cause: The improper cut-off was due to inadequate internal controls over the recording of accrued expenses and grants receivables, as well as a lack of understanding of proper cut-off procedures by the accounting staff. Effects: This resulted in misstated financial statements, with both the accrued expense and grants receivables being understated and/or overstated, potentially leading to inaccurate financial reporting and decision-making. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management strengthen internal controls over the recording of accrued expenses and grants receivables, provide additional training to accounting staff on proper cut-off procedures, and conduct regular reviews to ensure that both accrued expense and grants receivables are recorded in the correct period. Management’s response: Nuestra Escuela will ensure that all grants and accrued expenses received are recorded promptly and that services rendered are accounted for in the correct period of accurately. The Administrative Director will perform regular reconciliation of accounts to detect any discrepancies that may
indicate cut-off errors.
The Administrative staff will take training about the best practices of cut-off procedures and the impact of errors
on financial reporting.
Nuestra Escuela will reinforce internal audits to review cut-off procedures and ensure they are strictly enforced.
Nuestra Escuela is committed to preventing cut-off errors with a proactive approach from accountants, involving
a combination of robust procedures, technology, and a culture of accuracy and compliance within the accounting
department. By following these best practice, accountants can help ensure the integrity of the financial reporting
Improper Accounting of Conditional and refundable advances for Federal and State Grants Category: Internal control -significant deficiency. Condition: The organization did not properly account for conditional and refundable advances received from federal and state grants totaling approximately $1,506,000. Of this amount, only $536,950 met the conditions to be recorded as revenue. Criteria: According to Accounting Standards Update (ASU) 2018-08, "Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made," not-for-profit entities must evaluate whether grants and contracts are conditional or unconditional. A contribution is considered conditional if it includes both: • A Barrier to Overcome: The recipient must meet specific performance-related conditions or other measurable barriers. • A Right of Return or Release: The grantor retains a right to reclaim the funds, or the recipient is released from the obligation if the conditions are not met. Conditional and refundable advances should be recorded as accrued expense (deferred revenue) until the conditions are substantially met or explicitly waived. Only then should they be recognized as revenue. Cause: The improper accounting was mainly due to the reports prepared for management and lead agencies being on a cash basis. Additionally, there was a lack of understanding of the relevant accounting guidance by the accounting staff. Effects: This resulted in an overstatement of income by approximately $972,600, and an overstatement of accrued expense and restricted net assets by the same amount. These misstatements could lead to inaccurate financial reporting and decision-making. Prior year’s findings:
Not identified
Questioned cost:
None
Recommendation:
We recommend that management strengthen internal controls over the accounting of conditional and refundable
advances, provide additional training to accounting staff on the proper recognition of conditional and refundable
advances, and conduct regular reviews to ensure compliance with ASU 2018-08. Additionally, reports to
management should be prepared following cash and accrual basis in order to meet the requirements for reporting
to agencies (cash basis) and compliance (accrual basis).
Management’s response:
Nuestra Escuela will design internal controls over the accounting of conditional and refundable advances. These
controls will include a rubric to determine whether the contract includes conditional contributions.
The accounting staff will take training on the proper recognition of conditional and refundable advances and
conduct regular reviews to ensure compliance with ASU 2018-08.
Additionally, Nuestra Escuela reports to management will be prepared on a cash and accrual basis in order to
meet the requirements for reporting to agencies (cash basis) and general accepted accounting principles GAAP
compliance (accrual basis).
Page
Federal Program: ALN 93.558- Temporary Assistance for Needy Families (TANF) Category: Compliance /internal control Compliance Requirement: Reporting Criteria: The agreement between the lead agency and the Organization required that monthly reports, which include invoices, narratives, and other documents, should be submitted within 10 days after the end of each month. Condition: The Organization failed to submit six (6) out of eleven (11) monthly reports on time, as stipulated by the agreement. Cause: The delay in submitting reports was due to the unavailability of the participant list required to be included in the monthly reports. Effects: Condition may result in noncompliance with the requirements of reporting. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management automate data collection to ensure timely availability of information, set clear internal deadlines earlier than the actual submission date, conduct regular audits to verify data accuracy, maintain effective communication channels with all involved parties, provide comprehensive training and support to staff, and develop contingency plans to address unexpected issues. Management’s response:
Nuestra Escuela’s Program Director will use an automatized data collection software to ensure timely availability
of participants’ information.
Nuestra Escuela strengthens internal controls to ensure the compliance with the reporting.
Nuestra Escuela will conduct regular audits to verify data accuracy, maintaining effective communication
channels with all involved parties.
Nuestra Escuela Management Staff will take specialized training in participant qualification and proper time
management.
The Executive President will develop a contingency plan to address unexpected issues with the compliance.
Improper cut-off of accrued expense and grants receivables Category: Internal control -significant deficiency Condition: The Organization did not accurately record accrued expenses and grants receivable at the end of the reporting period. Several invoices and receivables that should have been recorded in the current period were instead recorded in the subsequent period, leading to an understatement of both accrued expense and contributions and grants receivables. Criteria: According to generally accepted accounting principles (GAAP), both accrued expense and grants receivables should be recognized in the period they are incurred or earned, regardless of when the invoice is received, or payment is made. Cause: The improper cut-off was due to inadequate internal controls over the recording of accrued expenses and grants receivables, as well as a lack of understanding of proper cut-off procedures by the accounting staff. Effects: This resulted in misstated financial statements, with both the accrued expense and grants receivables being understated and/or overstated, potentially leading to inaccurate financial reporting and decision-making. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management strengthen internal controls over the recording of accrued expenses and grants receivables, provide additional training to accounting staff on proper cut-off procedures, and conduct regular reviews to ensure that both accrued expense and grants receivables are recorded in the correct period. Management’s response: Nuestra Escuela will ensure that all grants and accrued expenses received are recorded promptly and that services rendered are accounted for in the correct period of accurately. The Administrative Director will perform regular reconciliation of accounts to detect any discrepancies that may
indicate cut-off errors.
The Administrative staff will take training about the best practices of cut-off procedures and the impact of errors
on financial reporting.
Nuestra Escuela will reinforce internal audits to review cut-off procedures and ensure they are strictly enforced.
Nuestra Escuela is committed to preventing cut-off errors with a proactive approach from accountants, involving
a combination of robust procedures, technology, and a culture of accuracy and compliance within the accounting
department. By following these best practice, accountants can help ensure the integrity of the financial reporting
Improper Accounting of Conditional and refundable advances for Federal and State Grants Category: Internal control -significant deficiency. Condition: The organization did not properly account for conditional and refundable advances received from federal and state grants totaling approximately $1,506,000. Of this amount, only $536,950 met the conditions to be recorded as revenue. Criteria: According to Accounting Standards Update (ASU) 2018-08, "Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made," not-for-profit entities must evaluate whether grants and contracts are conditional or unconditional. A contribution is considered conditional if it includes both: • A Barrier to Overcome: The recipient must meet specific performance-related conditions or other measurable barriers. • A Right of Return or Release: The grantor retains a right to reclaim the funds, or the recipient is released from the obligation if the conditions are not met. Conditional and refundable advances should be recorded as accrued expense (deferred revenue) until the conditions are substantially met or explicitly waived. Only then should they be recognized as revenue. Cause: The improper accounting was mainly due to the reports prepared for management and lead agencies being on a cash basis. Additionally, there was a lack of understanding of the relevant accounting guidance by the accounting staff. Effects: This resulted in an overstatement of income by approximately $972,600, and an overstatement of accrued expense and restricted net assets by the same amount. These misstatements could lead to inaccurate financial reporting and decision-making. Prior year’s findings:
Not identified
Questioned cost:
None
Recommendation:
We recommend that management strengthen internal controls over the accounting of conditional and refundable
advances, provide additional training to accounting staff on the proper recognition of conditional and refundable
advances, and conduct regular reviews to ensure compliance with ASU 2018-08. Additionally, reports to
management should be prepared following cash and accrual basis in order to meet the requirements for reporting
to agencies (cash basis) and compliance (accrual basis).
Management’s response:
Nuestra Escuela will design internal controls over the accounting of conditional and refundable advances. These
controls will include a rubric to determine whether the contract includes conditional contributions.
The accounting staff will take training on the proper recognition of conditional and refundable advances and
conduct regular reviews to ensure compliance with ASU 2018-08.
Additionally, Nuestra Escuela reports to management will be prepared on a cash and accrual basis in order to
meet the requirements for reporting to agencies (cash basis) and general accepted accounting principles GAAP
compliance (accrual basis).
Page
Federal Program: ALN 93.558- Temporary Assistance for Needy Families (TANF) Category: Compliance /internal control Compliance Requirement: Reporting Criteria: The agreement between the lead agency and the Organization required that monthly reports, which include invoices, narratives, and other documents, should be submitted within 10 days after the end of each month. Condition: The Organization failed to submit six (6) out of eleven (11) monthly reports on time, as stipulated by the agreement. Cause: The delay in submitting reports was due to the unavailability of the participant list required to be included in the monthly reports. Effects: Condition may result in noncompliance with the requirements of reporting. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management automate data collection to ensure timely availability of information, set clear internal deadlines earlier than the actual submission date, conduct regular audits to verify data accuracy, maintain effective communication channels with all involved parties, provide comprehensive training and support to staff, and develop contingency plans to address unexpected issues. Management’s response:
Nuestra Escuela’s Program Director will use an automatized data collection software to ensure timely availability
of participants’ information.
Nuestra Escuela strengthens internal controls to ensure the compliance with the reporting.
Nuestra Escuela will conduct regular audits to verify data accuracy, maintaining effective communication
channels with all involved parties.
Nuestra Escuela Management Staff will take specialized training in participant qualification and proper time
management.
The Executive President will develop a contingency plan to address unexpected issues with the compliance.