Audit 40745

Small Business Administration Program Name: Shuttered Venue Operators Grant (SVOG) CFDA No(s) 59.075 Grant Number: SBAHQ21SV001236.2 Finding 2022-001 SIGNIFICANT DEFICIENCY Period of Performance Criteria: The Theatre should review contributions for donor restrictions and other recognition requirements, maintain a schedule of the restricted contributions and when conditions for recognition have been met. Condition: The Theatre reported the full Shuttered Venues Operators Grant (SVOG) when it was awarded, however, it was an expense reimbursement grant and therefore should not have been recognized as revenue until expenditure had been incurred. Context: When reviewing restricted net assets the auditor noted that the SVOG was recorded as a donor restricted net asset. Upon review of the award agreement it was determined that this award was for expense reimbursement and should only be recognized when appropriate expenses had been incurred. Cause: The Theatre was not aware of the different revenue recognition methods for pledges and expense reimbursement arrangements. Effect: Contributions and grant revenue was overstated in fiscal 2021 and understated in fiscal 2022 by $1,387,193. Recommendation: We recommend that the Theatre review ASU 2018-08, Not-for-Profit Entities (Topic 958) to understand the requirements related to the recognition of pledges and contributions. Questioned Costs: None Management?s Response: We agree with the finding. The Theatre will incorporate training on ASU 2018-08, Not-for-Profit Entities (Topic 958) related to revenue recognition of pledges and contributions for the appropriate personnel.

Small Business Administration Program Name: Shuttered Venue Operators Grant (SVOG) CFDA No(s) 59.075 Grant Number: SBAHQ21SV001236.2 Finding 2022-002 SIGNIFICANT DEFICIENCY Allowable Cost / Cost Principles and Allowable Activity Criteria: The Theatre?s policy is to have approval for any new salary or change noted on each salary authorization form, weekly payroll timecards should be approved by each department head and payroll registers be approved by the Director of Finance and Administration. Condition: Salary authorization forms for testing of payroll transactions charged to the SVOG (major federal program) were lacking approval of the authorized salary and there were four payroll periods tested where documented approval of the payroll run by the Director of Finance and Administration was missing. Context: Salary forms were initially provided during testing that had no approvals noted. The Theatre subsequently provided forms with the proper approvals. Four payroll periods tested had no documented approval of payroll by the Director of Finance and Administration noted. The Director of Finance subsequently affirmed approval. Through additional procedures and inquires, the auditor was able to determine that the payroll transactions in question were correct and approved by the appropriate responsible party. Cause: Controls surrounding approval of payroll were not operating properly. The approval of timecards is carried out in different ways depending on the department. Some department heads sign the timecards to approve them, some over email, and others approve over teams. There is no standard universal approval method. Effect: Multiple payroll forms were lacking documentation of approval. Recommendation: We recommend that the Theatre use a standardized method of authorized salary approval across the organization. Questioned Costs: None Management?s Response: We agree with the finding. Due to unexpected turnover in accounting personnel some procedures were not followed consistently. The Theatre will update their procedures and training to have consistent procedures followed.

Small Business Administration Program Name: Shuttered Venue Operators Grant (SVOG) CFDA No(s) 59.075 Grant Number: SBAHQ21SV001236.2 Finding 2022-003 SIGNIFICANT DEFICIENCY Allowable Cost / Cost Principles and Allowable Activity Criteria: Uniform guidance requires a Single Audit for organizations with over $750,000 of expenditures of federal awards and preparation of a Schedule of Expenditures of Federal Awards. Condition: The Theatre was not aware of the Single Audit requirement for fiscal 2022. Context: When the Auditor initiated the engagement it became aware of the SVOG and inquired if the Theatre was aware that a Single Audit would be required if grant expenditures exceeded $750,000 in the year. The Theatre was unaware of the Single Audit requirement and the required preparation of a Schedule of Expenditures of Federal Awards. Cause: Not having previous experience with federal awards of this magnitude The Theatre lacked knowledge relating to federal award programs and specific requirements for receiving and reporting federal funds. Effect: The Theatre was not prepared for a single audit and needed assistance in understanding the requirements. Recommendation: We recommend that the Theatre gain knowledge regarding the requirements involved when receiving federal grant funds so that if they expend a sufficient amount to trigger a single audit again, they will be prepared. Questioned Costs: None Management?s Response: We agree with the finding. The Theatre will incorporate federal grant compliance training for appropriate personnel.

Small Business Administration Program Name: Shuttered Venue Operators Grant (SVOG) CFDA No(s) 59.075 Grant Number: SBAHQ21SV001236.2 Finding 2022-001 SIGNIFICANT DEFICIENCY Period of Performance Criteria: The Theatre should review contributions for donor restrictions and other recognition requirements, maintain a schedule of the restricted contributions and when conditions for recognition have been met. Condition: The Theatre reported the full Shuttered Venues Operators Grant (SVOG) when it was awarded, however, it was an expense reimbursement grant and therefore should not have been recognized as revenue until expenditure had been incurred. Context: When reviewing restricted net assets the auditor noted that the SVOG was recorded as a donor restricted net asset. Upon review of the award agreement it was determined that this award was for expense reimbursement and should only be recognized when appropriate expenses had been incurred. Cause: The Theatre was not aware of the different revenue recognition methods for pledges and expense reimbursement arrangements. Effect: Contributions and grant revenue was overstated in fiscal 2021 and understated in fiscal 2022 by $1,387,193. Recommendation: We recommend that the Theatre review ASU 2018-08, Not-for-Profit Entities (Topic 958) to understand the requirements related to the recognition of pledges and contributions. Questioned Costs: None Management?s Response: We agree with the finding. The Theatre will incorporate training on ASU 2018-08, Not-for-Profit Entities (Topic 958) related to revenue recognition of pledges and contributions for the appropriate personnel.

Small Business Administration Program Name: Shuttered Venue Operators Grant (SVOG) CFDA No(s) 59.075 Grant Number: SBAHQ21SV001236.2 Finding 2022-002 SIGNIFICANT DEFICIENCY Allowable Cost / Cost Principles and Allowable Activity Criteria: The Theatre?s policy is to have approval for any new salary or change noted on each salary authorization form, weekly payroll timecards should be approved by each department head and payroll registers be approved by the Director of Finance and Administration. Condition: Salary authorization forms for testing of payroll transactions charged to the SVOG (major federal program) were lacking approval of the authorized salary and there were four payroll periods tested where documented approval of the payroll run by the Director of Finance and Administration was missing. Context: Salary forms were initially provided during testing that had no approvals noted. The Theatre subsequently provided forms with the proper approvals. Four payroll periods tested had no documented approval of payroll by the Director of Finance and Administration noted. The Director of Finance subsequently affirmed approval. Through additional procedures and inquires, the auditor was able to determine that the payroll transactions in question were correct and approved by the appropriate responsible party. Cause: Controls surrounding approval of payroll were not operating properly. The approval of timecards is carried out in different ways depending on the department. Some department heads sign the timecards to approve them, some over email, and others approve over teams. There is no standard universal approval method. Effect: Multiple payroll forms were lacking documentation of approval. Recommendation: We recommend that the Theatre use a standardized method of authorized salary approval across the organization. Questioned Costs: None Management?s Response: We agree with the finding. Due to unexpected turnover in accounting personnel some procedures were not followed consistently. The Theatre will update their procedures and training to have consistent procedures followed.

Small Business Administration Program Name: Shuttered Venue Operators Grant (SVOG) CFDA No(s) 59.075 Grant Number: SBAHQ21SV001236.2 Finding 2022-003 SIGNIFICANT DEFICIENCY Allowable Cost / Cost Principles and Allowable Activity Criteria: Uniform guidance requires a Single Audit for organizations with over $750,000 of expenditures of federal awards and preparation of a Schedule of Expenditures of Federal Awards. Condition: The Theatre was not aware of the Single Audit requirement for fiscal 2022. Context: When the Auditor initiated the engagement it became aware of the SVOG and inquired if the Theatre was aware that a Single Audit would be required if grant expenditures exceeded $750,000 in the year. The Theatre was unaware of the Single Audit requirement and the required preparation of a Schedule of Expenditures of Federal Awards. Cause: Not having previous experience with federal awards of this magnitude The Theatre lacked knowledge relating to federal award programs and specific requirements for receiving and reporting federal funds. Effect: The Theatre was not prepared for a single audit and needed assistance in understanding the requirements. Recommendation: We recommend that the Theatre gain knowledge regarding the requirements involved when receiving federal grant funds so that if they expend a sufficient amount to trigger a single audit again, they will be prepared. Questioned Costs: None Management?s Response: We agree with the finding. The Theatre will incorporate federal grant compliance training for appropriate personnel.