Finding Text
Criteria – Organizations are required to maintain their accounting records in accordance with generally accepted accounting principles (GAAP).
Condition – During the audit, significant adjusting entries were proposed and made:
• An entry to reverse $40,000 in contributions revenue for recognized in the prior year.
• An entry to record $100,430 in in-kind contributions received in 2023.
• An entry to record $40,000 in accrued interest on the SBA loan.
• An entry to record $106,222 to record government grants receivable and revenue.
• An entry to record a $50,000 foundation pledge.
• An entry to capitalize $41,190 of equipment purchase in accordance with Listening House’s capitalization policy.
• An entry of $25,000 to record the second half of a two-year pledge.
• An entry to record two capital campaign pledges totaling $681,980.
Cause – There was a breakdown in the internal controls over the review of internal financial statements.
Effect – A material misstatement of the consolidated financial statements occurred and was not detected.
Repeat Finding – Yes.
Recommendation – Management and the board should establish a process for regular review of its consolidated financial statements with its contracted accountant to ensure activity is recorded in accordance with GAAP.
Auditee's comments and response – Management and its contracted accounting staff will monitor financial reports and activities of Listening House to ensure proper recording.
Responsible party for the corrective action – Molly Jalma, Executive Director