Finding Text
Finding Number:2024-004 Instance of Non-Compliance:Reporting Assistance Listing # 66.466 Questioned Cost $0 Repeat Finding: No Condition: The Organization recorded federal grant revenue for certain grants related to FY2023 activities in FY2024, based on the timing of reimbursement receipts rather than when the underlying expenditures were incurred. As a result, grant revenue was not recognized in the proper fiscal period. Criteria: According to U.S. GAAP, 2 CFR Part 200, and the accrual basis of accounting, nonfederal entities must maintain accounting records that accurately reflect the financial results of federal awards and recognize expenditures and related revenues in the period in which the allowable costs are incurred. For cost-reimbursement grants, revenue should be recognized as eligible expenditures are incurred, regardless of when reimbursement is received. Cause: The Organization’s current process for recording certain grant revenues appears to rely on cash receipt timing rather than a formal review of period-end revenue cutoff. Effect: As a result, federal grant revenue and related receivables for FY2023 were understated, while revenue in FY2024 was overstated for the related amounts. This condition resulted in a prior period adjustment to beginning net assets as disclosed in Note 8 to the financial statements. In addition, this may lead to misstatements in financial reporting if similar cutoff issues occur in future periods. Recommendation: We recommend that the Organization strengthen its period-end revenue cutoff procedures, including reviewing grant and contract agreements near year-end to determine whether revenue has been earned but not yet received and recording the appropriate accounts receivable and revenue entries in the correct reporting period. Views of Responsible Officials: Management acknowledges the finding and agrees that revenue cutoff procedures need to be strengthened. The issue resulted from reliance on reimbursement timing rather than recognizing revenue based on when eligible expenditures were incurred. To address this, the organization will implement enhanced period-end cutoff procedures, including reviewing grant activity and agreements at year-end to identify incurred but unreimbursed costs and recording the appropriate receivables and revenue. Grant tracking schedules and reconciliation processes will also be improved to ensure accurate and timely revenue recognition in accordance with accrual accounting and federal requirements. Responsible Official: Abel Olivo, Executive Director, in coordination with the organization’s outsourced accounting firm Anticipated Completion Date: December 31, 2025