Finding Text
Criteria: Internal control processes should include procedures to ensure that expenses incurred within the fiscal year are recorded and recognized in that period.Condition/Context: During our review of expenses, two invoices totaling $ 21,728 had a period of performance in fiscal year 2024 but were recorded in fiscal year 2025. This resulted in a prior period adjustment to the previously reported amounts for 2024. This impacted the schedule of expenditures of federal awards for fiscal year 2024 by understating expenses during the period. This resulted in revenue being understated for 2024 as revenue would have been recognized for a receivable since the revenue was earned. The Federal program impacted was assistance listing number 66.466 – Action For Clean Water grant. This was not a major program for 2024 and the exclusion of these items did not result in insufficient testing of federal awards.Cause: This was caused by expenses not being recorded in the period of performance.Effect: The above issue resulted in an understatement of revenues and expenses and assets and liabilities by $ 21,728. This impacted the Schedule of Expenditures of Federal Awards by understating federal expenses for one program. This resulted in the restatement of the prior year financial statements and reissuance of the prior year Data Collection Form.Questioned Costs: NoneRecommendation: For service agreements or contracts signed, there should be a follow-up process near year-end with those vendors to obtain an estimate of the costs incurred to date if they have not invoiced at year end. If this is not feasible, the Organization should make a good faith effort to estimate the unbilled costs at year-end using vendor information such as project schedules, quotes, and interim billings.Views of Responsible Officials and Planned Corrective Actions: Management will include as part of the approval of invoices, a process of follow-up with vendors near the end of the fiscal year to make sure all outstanding invoices or an estimate of costs incurred to date are received. If this is not feasible, management will estimate the unbilled costs at year end using vendor information