Finding Text
#2024‐001 – Material Weakness – Operating Deficiency – Classification of Expenses
Coronavirus State and Local Fiscal Recovery Funds, ALN #21.027
Criteria
Expenses incurred during normal operations are required to be recorded in accordance with their natural classification.
Condition
During the course of the audit, it was determined that expenses related to administrative fees charged to certain grants
were reclassified out of their natural classification and into a program specific line item.
Cause
Accounting staff and outsourced consultants were unclear about the recognition of administrative fees within the
Foundation’s accounting system.
Effect
The potential effects of misclassifying the administrative expenses resulted in an adjustment of $73,053 to record expenses
in accordance with natural classifications.
Questioned Costs
None
Perspective Information
The finding noted related to each of the four (4) quarterly administrative billings charged to the grant.
Identification as a repeat finding
There was no similar finding in the prior year.
Recommendation
We recommend that administrative expenses be recorded in accordance to the natural classification of the underlying
expense, but be allocated to the grant award by reclassifying the expense to the correct class within the accounting system.
View of Responsible Official
Management acknowledges deficiencies in the process of recording administrative expenses. The Foundation records
expenses in their natural classification at the time of initial recognition. In the current period, management later reclassified
certain expenses (e.g. Payroll) from natural class to functional class (e.g. program expenses) to address an accounting
recommendation made by the auditor during the prior audit. Upon identifying the error, management restored the impacted
expenses to their natural classifications. The adjustment had no effect on net assets or total expenses and did not impact
any disbursement of federal grant funds. The Foundation will continue to record expenses by natural classification at point
of entry and will not make any subsequent reclassifications to the underlying expense.