Finding Text
Finding: 2023-01 – Functional Classification of Income and Expenses. Criteria: Title 2, Subtitle A, Chapter II, Part 200, Subpart E of the Uniform Guidance states “The accounting practices of the recipient and subrecipient must be consistent with these cost principles and support the accumulation of costs as required by these cost principles, including maintaining adequate documentation to support costs charged to the Federal award”. This includes having an accounting system structure that effectively records receipts and expenditures of program funds separately and consistently in the appropriate functional cost category for each program, award or grant. Condition: For the fiscal year ended December 31, 2023, the Organization did not utilize their accounting system effectively in the recordation of expenditures in order to easily identify individual grant expenditures. Grant expenditures were inconsistently applied across multiple grant classes, making it difficult to determine total grant expenditures by grant. Cause: The Organization did not understand how to appropriately use the classing system in their accounting software and did not classify expenses by function in a consistent manner. Effect: Reports identifying grant expenditures did not accurately accumulate expenditures by grant. Recommendation: We recommend the Organization become familiar with the proper utilization of the accounting system’s classing function and reorganize classes such that all grant funding can be consistently classified by grant. Alternatively, the Organization may prefer to utilize the project function of the system.