Finding Text
2025-001: Accounting Records Not Maintained on the Accrual Basis Condition: Overall recordkeeping procedures and the Organization’s accounting records are not maintained on the accrual basis of accounting. Material adjustments were required as part of the audit to reverse prior period receivables and accrued expenses, and to record current year receivables and accrued expenses. A material adjustment was also necessary to correct for payroll expenses recorded in duplicate that resulted in an overstatement of payroll expenses and accrued expenses. Criteria: The presentation of financial statements in accordance with accounting principles generally accepted in the United States of America must be done on the accrual basis. The Uniform Guidance, 2 CFR Section 200, also requires that recipients of federal awards must account for and track expenditures using the accrual basis of accounting. Expenses must be recorded when goods are received or services are provided, or when the obligation is incurred, regardless of when cash is actually disbursed. Cause: Internal control procedures in place were not adequate to provide for financial reporting on the accrual basis of accounting. Effect: In absence of adequate internal controls over accounting and financial reporting on the accrual basis of accounting, expenditures allocated to federally funded programs may be misstated. Recommendation: Procedures should be implemented to provide for accounting and financial reporting on the accrual basis of accounting. Response: Management accepts the recommendation and is working to develop updated financial policies and procedures to maintain accounting records on the accrual basis of accounting.