Finding Text
Finding 2023-004 Accounting for Revenues and Accrued Receivables
Type of Finding:
Significant Deficiency in Internal Control over Financial Reporting
Criteria:
According to Generally Accepted Accounting Principles (GAAP), revenues must be recorded in the period in which they are earned, even if the claims or payments are received in a subsequent period.
Condition:
Revenues earned during the fiscal year but claimed in the following fiscal year were inconsistently accrued as receivables. Specifically, revenues related to reimbursement-based grants were not recognized, despite expenses being recorded, and revenues were excluded even though costs of goods sold were included.
Cause:
The deficiency stemmed from inadequate internal controls and procedures for accruing revenues and receivables, reflecting a failure to adhere to proper revenue recognition practices.
Possible or Known Effect:
While the adjustments required were not material, they were significant and warrant the attention of those charged with governance. Improper accrual of revenues could mislead financial statement users and impact financial decision-making.
Questioned Costs:
There are no specific questioned costs identified in this finding. The issue pertains to revenue recognition practices rather than direct disallowed costs.
Repeat Finding:
This finding is not a repeat finding from the prior year.
Recommendation:
It is recommended that the organization improve its internal controls and procedures for accruing revenues. This should involve refining procedures for recognizing revenues from reimbursement-based grants and sales of supplies, enhancing staff training on GAAP revenue recognition, and regularly reviewing and reconciling accrued revenues and receivables to ensure they are recorded in the correct period. Significant discrepancies should be reviewed by those charged with governance to ensure timely resolution.
Views of Responsible Officials:
The Organizations’ Board and Executive Team consisting of the Chief Executive Officer (CEO) and the Chief Operating Officer (COO) and key Overdose Lifeline (ODL) Staff to include the independent bookkeeper and Grant and Finance Manager recognize the need to further refine the internal controls and procedures for accruing revenues. This will be accomplished through the completion of a formal course that covers performing a single audit and consultation with the Independent Public Accounting Firm (Pile CPAs) Additionally staff will regularly meet with the independent bookkeeper to review and reconcile accrued revenues ands receivables.