Finding Text
Condition: The Town did not adjust the financials to report on the proper amount of earned Coronavirus State and Local Fiscal Recovery Funds. Criteria: Accounting standard ASC 606 requires recognizing revenue when it is earned. Grant funds received in advance are recorded in "unearned revenue" and as the funds are earned, the amounts are moved to "earned grant revenue". Cause: The Town's procedures did not allow for the proper classification or timely reporting of information required for financial reporting. The Town's process did not allow for evidence to support internal controls in place over the preparation of the Schedule of Federal Expenditures. Effect: Adjustments were made to the financial statements in order to fairly present the amount of Coronavirus State and Local Fiscal Recovery Funds earned in the financial statements. Further, the internal control environment is weakened. Recommendation: We recommend the Town review its closing policiies and procedures in place to ensure amounts are properly captured, reconciled, classifed, and reported in a timely manner. Further, the Town should review its procedures over the preparation of the Schedule of Expenditures of Federal Awards to ensure there is a documented review and approval. or other appropriate internal controls.