Audit 361029

Finding 2024-001: Material Weakness – Period of Performance Federal Grantor: U.S. Department of Health and Human Services Compliance Requirement: Period of PerformanceCondition: We identified expenditures totaling $273,298 that were charged to the 93.464 program but were incurred after year-end. As a result, these costs were recorded in an incorrect accounting period, causing an overbilling of the grantor for expenses not properly attributable to the fiscal year under audit. Criteria: Cost is allowable only if it is consistently treated in accordance with generally accepted accounting principles (GAAP). Costs must be recorded in the correct accounting period to ensure accurate reporting and prevent overstatement or understatement of grant expenditures. Cause: The expenses were recorded based on the purchase order date of September 30, which coincided with the fiscal year-end. However, the actual expenses were incurred after year-end, in the subsequent accounting period. The Foundation’s procedures did not ensure that expenses were recognized based on when the costs were actually incurred, resulting in misclassification of expenses in the wrong accounting period. Effect: The overbilling may result in questioned costs and noncompliance with federal regulations, potentially requiring reimbursement to the grantor. This misstatement also affects the accuracy of financial reporting for the fiscal year. Recommendation: We recommend that CFILC strengthen its expense recognition procedures to ensure that costs are recorded in the accounting period in which services are actually received or performed, regardless of the purchase order date. This should include implementing a review process at fiscal yearend to identify and properly accrue expenses incurred after year-end. Additionally, staff responsible for financial reporting and grant billing should be trained on the importance of accurate period cutoff to prevent overbilling and ensure compliance with federal cost principles. Response: We concur with the finding and will develop policies and processes to correct this issue.

Finding 2024-001: Material Weakness – Period of Performance Federal Grantor: U.S. Department of Health and Human Services Compliance Requirement: Period of PerformanceCondition: We identified expenditures totaling $273,298 that were charged to the 93.464 program but were incurred after year-end. As a result, these costs were recorded in an incorrect accounting period, causing an overbilling of the grantor for expenses not properly attributable to the fiscal year under audit. Criteria: Cost is allowable only if it is consistently treated in accordance with generally accepted accounting principles (GAAP). Costs must be recorded in the correct accounting period to ensure accurate reporting and prevent overstatement or understatement of grant expenditures. Cause: The expenses were recorded based on the purchase order date of September 30, which coincided with the fiscal year-end. However, the actual expenses were incurred after year-end, in the subsequent accounting period. The Foundation’s procedures did not ensure that expenses were recognized based on when the costs were actually incurred, resulting in misclassification of expenses in the wrong accounting period. Effect: The overbilling may result in questioned costs and noncompliance with federal regulations, potentially requiring reimbursement to the grantor. This misstatement also affects the accuracy of financial reporting for the fiscal year. Recommendation: We recommend that CFILC strengthen its expense recognition procedures to ensure that costs are recorded in the accounting period in which services are actually received or performed, regardless of the purchase order date. This should include implementing a review process at fiscal yearend to identify and properly accrue expenses incurred after year-end. Additionally, staff responsible for financial reporting and grant billing should be trained on the importance of accurate period cutoff to prevent overbilling and ensure compliance with federal cost principles. Response: We concur with the finding and will develop policies and processes to correct this issue.