Finding Text
#2024-004 – Major Federal Award Finding - Period of Performance Nature of Finding: Period of Performance – Compliance Finding and Material Weakness in Internal Control over Compliance Criteria/Condition: The Organization recorded certain expenses upon payment of invoices rather than when the service was provided. The guidelines provided at 2 CFR 200.403(e) require that costs be determined in accordance with GAAP to be allowable. In accordance with GAAP and the accrual basis of accounting, such expenses are to be recorded when services are performed, rather than upon payment of invoice. Cause/Context: The Organization had limited accounting resources which impacted timing and frequency of processing certain transactions. In addition, the Organization has contracts with providers that include pre-determined payment terms that may not precisely correlate to the actual work performed in terms of timing. The Organization recorded certain contract costs as the invoices were processed, and not necessarily as the providers’ actual work was completed. Effect: Adjusting journal entries were proposed during the audit to record expenses in the proper period for the financial statements. Federal grant expenses of approximately $100,700 were originally recorded in 2024 that related to 2025 services. Similarly, federal grant expenses of approximately $117,100 were recorded in 2025 that related to 2024 services. These net adjustments increased federal grant revenue and expenditures by approximately $16,400 for the year ended December 31, 2024. Recommendation: We recommend that care be exercised to evaluate financial activity considering the cost factors contained in 2 CFR 200.403, the accrual basis of accounting and period of performance. Controls should be enhanced to ensure that expenses are recorded to the proper period based on when the service or work is provided. Views of Responsible Officials and Planned Corrective Actions: Contracts are recorded as prepaid or accrued expenses and are being expensed monthly. Salaries and benefits incurred before month-end will be accrued to grants at grant cutoff dates and at year-end. Estimated monthly accruals for salaries will be implemented.