Finding Text
Criteria: To maintain compliance with grant reporting requirements and ensure effective internal
control over financial reporting, grant receivables recorded in the accounting system must be
adjusted once actual amounts are confirmed and paid by the grantor. This ensures accurate
reporting despite any delays in the grantor’s review and payment processes. Additionally, internal
controls should ensure that deposits and adjustments are accurately allocated to the correct grant
codes, and that grant income is recorded in the correct accounting period.
Condition: Audit procedures identified discrepancies across multiple ARPA reimbursement
requests submitted to the passthrough entity, El Paso County. Delays in the County’s review and
approval process resulted in adjustments to invoices throughout the fiscal year. However,
management did not reflect these adjustments in their accounting software, resulting in an
unadjusted difference of $15,095. Furthermore, a duplicate grant invoice totaling $34,361 from
the prior fiscal year was recorded, overstating grant revenue in the current year. Regarding the
Permanent Supportive Housing (“PSH”) and Emergency Solutions Grants Program (“ESG”)
grants, one instance was noted where deposits were misclassified between the two grants.
Cause: Management has not implemented or adhered to adequate internal controls to ensure
accurate and complete reporting of grant receivables and revenue in the accrual basis of
accounting. In the case of the ARPA County grant discrepancies, management did not record
grantor-requested adjustments in the Organization’s accounting software. Additionally,
management did not have internal controls in place to detect and correct a duplicate grant
accounts receivable entry for $34,361. Regarding the PSH and ESG grants, management did not
adequately verify the source of deposits, leading to their misclassification.
Effect: ARPA County grant revenue was misstated by $15,095 and required an audit adjustment
to reflect the actual final grant reports approved by the County. Additionally, the duplicate entry
of $34,361 resulted in an overstatement of opening net assets in the current fiscal period and also
required an audit adjustment. For the PSH and ESG grants, an audit adjustment was necessary to
correct the misclassification. These issues indicate that the Organization does not have effective
internal controls over the reconciliation of grant income and expenses necessary to prepare the
Schedule of Expenditures of Federal Awards.
Questioned costs: None.
Recommendations: The Organization should strengthen compliance and internal control
procedures to ensure that grant reporting objectives and financial reporting accuracy are
consistently met and maintained. Management should ensure that any adjustments resulting from
the grantor’s review of submitted invoices are accurately recorded in the Organization’s
accounting software. Additionally, management should promptly record auditor-proposed
adjustments and exercise caution to avoid duplicating revenue entries when related transactions
are completed in subsequent fiscal periods. To further improve reporting accuracy, internal
controls should be implemented to properly identify and attribute incoming deposits to the correct
grant. Management should also establish a systematic and timely reconciliation process for all
grant receivable and revenue accounts on a monthly basis. This process should include close
attention to invoice sequencing and source codes, enabling prompt identification and resolution of
any discrepancies that may arise.