FAC Explorer

Finding 1220089 (2025-002)

Material Weakness Repeat Finding
Requirement
L
Questioned Costs
-
Year
2025
Accepted
2026-06-29
Audit: 405299
Organization: Northeastern Regional Association of Coastal Ocean Observing Systems (NH)
Auditor: RUBINO & COMPANY

AI Summary

  • Core Issue: NERACOOS improperly recorded federal grant revenue for FY2025 in FY2026, violating accounting standards.
  • Impacted Requirements: U.S. GAAP and 2 CFR Part 200 require accurate revenue recognition based on incurred expenditures, not reimbursement timing.
  • Recommended Follow-Up: Enhance year-end procedures to ensure all allowable expenditures are identified and recorded accurately before closing accounts.

Finding Text

2025 – 002: Revenue cutoff Material Weakness Instance of Non-Compliance: Reporting Assistance Listing Number:11.012 Repeat Finding: No Questioned Costs: $0 Condition: NERACOOS recorded federal grant revenue for certain grants related to FY2025 activities in FY2026, 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, non-federal 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: NERACOOS’ year-end financial reporting procedures did not include a sufficiently detailed review of federal awards to identify expenditures incurred before year-end for which reimbursement had not yet been received or recorded. Effect: As a result, federal grant revenue and related receivables for FY2025 were understated, while revenue in FY2026 was overstated for the related amounts. In addition, this may lead to misstatements in financial reporting if similar cutoff issues occur in future periods. Recommendation: We recommend that NERACOOS strengthen its period-end revenue cutoff procedures, including reviewing grant and contract agreements near year-end to identify allowable expenditures incurred prior to year-end that have not yet been reimbursed and record appropriate grant receivables and revenue accruals before closing the accounting records. Views of Responsible Officials: Management concurs with this finding. NERACOOS acknowledges that period-end grant revenue cutoff procedures were not sufficient to identify all allowable expenditures incurred prior to year-end for which reimbursement had not yet been received. Responsible Official: Emily Silva, Administrative Director Anticipated Completion Date: September 30, 2026

Corrective Action Plan

Audit Finding Reference Number: 2025 – 002 Finding: NERACOOS recorded federal grant revenue for certain grants related to FY2025 activities in FY2026, based on the timing of reimbursement receipts rather than when the underlying expenditures were incurred. As a result, federal grant revenue and related receivables for FY2025 were understated, while revenue in FY2026 was overstated for the related amounts. In addition, this may lead to misstatements in financial reporting if similar cutoff issues occur in future periods. Corrective Action Plan: Develop and implement a formal year-end revenue cutoff checklist specifically for federal grants. The checklist will require a review of all active federal awards within 60 days and then again in 30 days of fiscal year-end to identify allowable expenditures incurred but not yet reimbursed. Establish a procedure to record grant receivables and revenue accruals for identified unbilled costs prior to closing the accounting records each fiscal year. Train the Finance staff responsible for grant accounting on the accrual basis requirements under 2 CFR Part 200 and proper cutoff procedures. Incorporate a supervisory review step into the year-end close process to verify that all grant-related receivables and revenue accruals have been posted before the books are closed. Incorporate the cutoff review into the annual audit preparation timeline and document results for auditor review. Review the FY2025 federal financial reports submitted for CFDA 11.012 to determine whether any amendments or corrections are required, and coordinate with the federal agency as appropriate. Prior to submission of any federal financial reports (e.g., SF-425 Federal Financial Reports), confirm that recorded grant revenue and expenditures reflect all accrued amounts throughout the reporting period. Review draft federal financial reports against the general ledger before submission to verify consistency between reported and recorded amounts. Responsible Official: Jake Kritzer, Executive Director Anticipated Completion Date: September 30, 2026

Categories

Allowable Costs / Cost Principles Cash Management Material Weakness Reporting Matching / Level of Effort / Earmarking

Other Findings in this Audit

  • 1220090 2025-003
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
11.431 CLIMATE AND ATMOSPHERIC RESEARCH $190,776
12.300 BASIC AND APPLIED SCIENTIFIC RESEARCH $113,319
66.456 NATIONAL ESTUARY PROGRAM $109,968
47.041 ENGINEERING $102,991
11.478 CENTER FOR SPONSORED COASTAL OCEAN RESEARCH COASTAL OCEAN PROGRAM $65,544
11.432 NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION (NOAA) COOPERATIVE INSTITUTES $59,198
11.417 SEA GRANT SUPPORT $46,907
15.423 BUREAU OF OCEAN ENERGY MANAGEMENT (BOEM) ENVIRONMENTAL STUDIES (ES) $17,547
11.012 INTEGRATED OCEAN OBSERVING SYSTEM (IOOS) $8,874