Finding 1123404 (2024-002)

Reference Number: 2024-002 (Significant Deficiency – Grant Revenue Accounting) Finding: Criteria: Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 958 (ASC 958) requires unconditional contribution revenue for non-profit organizations to be recognized upon receipt of the gift notification and for conditional contribution revenue to be recognized upon satisfaction of the underlying condition. Condition: Jewish Family Services was accounting for certain unconditional contribution revenue totals upon either the submission of periodic invoices or incurrence of related contribution expenditures rather than when the contribution was received. Cause: Using the submission of reimbursement requests or incurrence of expenditures as the condition necessary to be satisfied to recognize revenue on unconditional contributions rather than the receipt of the contribution. Effect: Accounting for revenue from unconditional contributions upon submission of reimbursement requests to the grantor or incurrence of expenditures rather than when the contribution was received resulted in an understatement of revenue, prior to adjustment, of $173,218. The revenue was not omitted entirely and was reclassified from the subsequent fiscal year. Recommendation: We recommend that management continue to evaluate current processes and practices. This can include building out and utilizing certain flowcharts/checklists to identify the appropriate timing of revenue recognition as well as adding indicators into their assessment which will result in additional clarity regarding donor restrictions, what conditions are present in each grant agreement and what conditions preclude revenue recognition until the condition is met. Views of Responsible Official and Planned Corrective Action: Refer to accompanying corrective action plan.