Finding Text
Finding 2023-001: Inadequate Financial Reporting
Condition: The tracking of eligible (billable) costs within the accounting system was inadequate
and required a significant amount of work to generate reconciliations of billable costs to contract
billings. In additional certain grants were inconsistently reflected as restricted or conditional
compared to similar grants. As part of the process to review year end, management identified
errors which required adjustments, the most common of which was adjusting revenue between
restricted and conditional revenue.
Criteria: CFR 200.303, Internal Controls, states that the non-Federal entity must: Establish and
maintain effective internal control over the Federal award that provides reasonable assurance that
the non-Federal entity is managing the Federal award in compliance with Federal statutes,
regulations, and the terms and conditions of the Federal award. These internal controls should be
in compliance with guidance in “Standards for Internal Control in the Federal Government”
issued by the Comptroller General of the United States or the “Internal Control Integrated
Framework”, issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Additionally, management is responsible for the preparation and fair
presentation of the financial statements in accordance with accounting principles generally
accepted in the United States of America; this includes the design, implementation and
maintenance of internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error.
Cause: The Organization did not have in place a formal, clear system which reconciled the
billings to the funders and related eligible costs or releases related to certain restricted grants.
Effect: Significant adjustments were proposed by management during the audit, principally
between conditional and restricted revenue.
Recommendation: We strongly recommend that all costs are coded directly to a contract within
the accounting system and on a monthly or quarterly (at a minimum) basis there is a
reconciliation of the billings between the funders and the revenue/costs related to the contracts to
assure that all costs have been capture for billings and releases from restrictions. We also
recommend detailed reviews/approvals of such reconciliations be performed.
Questioned Costs: None identified.
Context: While performing initial audit procedures, we requested management to perform a
reconciliation of billings and related costs and review its recording of restricted and conditional
grants. During management review, errors were identified by management and requested to be
corrected. The condition noted is deemed to be systemic in nature. We did not identify any
misstatements during our audit once the review was completed by management.
Identification as a Repeat Finding: This is not a repeat finding
Management Views and Corrective Action Plan: Management agrees with the finding and
recommendation. The Organization implemented a new accounting system effective July 1,
2023, in which substantially all costs are now coded to respective contracts which will provide
much easily generatable support for billings. Management is working with the accounting team
to implement a new process as part of the monthly closing procedures in which for cost
reimbursement contacts there will be a review of revenue compared to costs to ascertain that the
billing is accurate and complete.