Finding 2024-003 Improper Revenue Recognition (Material Weakness)
Assistance Listing Number and Title: 84.010 Title I
Name of Federal Agency: U.S. Department of Education
Assistance Listing Number and Title: 10.553 and 10.555 National School Lunch Breakfast and Lunch
Name of Federal Agency: U...
Finding 2024-003 Improper Revenue Recognition (Material Weakness)
Assistance Listing Number and Title: 84.010 Title I
Name of Federal Agency: U.S. Department of Education
Assistance Listing Number and Title: 10.553 and 10.555 National School Lunch Breakfast and Lunch
Name of Federal Agency: U.S. Department of Agriculture
Criteria: Management is responsible for establishing and maintaining effective internal control over financial report-ing. Internal controls should allow management or employees in the normal course of performing their assigned func-tions to prevent or detect material misstatements in the financial reporting of all district funds.
2 CFR Part 200.302(b)(1) The financial management system of each non-federal entity must provide for the following: Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. 200.302(b)(2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in 200.328 and 200.329.
Condition: During our audit, it was noted that revenue from certain grant-funded programs was not accurately recog-nized between state and federal sources. Specifically:
• Some payments of federal revenue was recorded as state revenue, and some payments of state revenue was rec-orded as federal revenue.
• In some cases, revenue was not recognized in the correct reporting period. This caused under recognition of current year federal revenue, and grant reimbursement to be therefore to be claimed in duplicate.
Cause: Lack of clear procedures for distinguishing and recording revenue streams for blended funding sources.
Internal controls to prevent, detect and correct accounting entries for grant revenues were weak or nonexistent allowing errors in reporting of revenues, overclaiming of federal revenues, and distinguishing revenue between state and federal sources. The lack of timely recognition of revenues caused the overclaiming of Title I.
The accounting records were retroactively revised during the audit, for federal award and other reporting purposes. Dis-trict management did not have sufficient training or monitoring policies to recognize and correct the deficiency during the fiscal year.
Effect or Potential Effect: Not accurately recording transactions timely into the general ledger, may result in transac-tions not being properly reported in the district’s financial statements and the ability to rely on the general ledger for correct and timely information. This may cause misstatement of financial statements, and inappropriate reporting of federal awards.
Questioned Cost: No
Context: Due to improper recording of financial activity, Title I grant revenues were overclaimed, and general ledger required adjustment for proper state and federal presentation of grant revenues for National School Lunch Program.
Repeat of a Prior-Year Finding: No.
Recommendation: We recommend that Willamina School District implement accounting staff training programs, and implement a standardized revenue recognition policy that clearly distinguishes between state and federal funding sources.
Additionally, we recommend that a reconciliation process be established to ensure all federal, state and matching funds are recorded timely and accurately.
District's Response: The District concurs with the recommendation.
Corrective Action Plan: The District will provide training for staff in order to devise and implement appropriate poli-cies and procedures for accurately recording all financial transactions, including federal award revenues and expendi-tures. Additional internal control policies will be adopted and procedures implemented as on-going improvement efforts are made.
Planned Implementation Date: August 1, 2025
Responsible Person: District Business Manager