Finding Text
Finding 2026-001 – Failure to Accrue Grant Receivables and Pass-Through Liabilities – Stable Families Program (TANF, ALN 93.558) Significant Deficiency in Internal Control over Financial Reporting Federal Program Information • Federal agency: U.S. Department of Health and Human Services • Program: Temporary Assistance for Needy Families (TANF) • ALN number: 93.558 • Program name: Stable Families Grant Criteria • GAAP requires that contribution revenues be recognized when they become unconditional, which in the case of federal grants is typically when the associated expenditures have been made. • The Organization is responsible for accurately accounting for and reporting federal funds passed through to subrecipients, including the recognition of related expenditures and liabilities in the period in which the subrecipient costs are incurred. • Internal control frameworks and governmental auditing standards require that management design and implement controls to ensure that financial reporting and SEFA information for federal programs is complete and accurate, and that significant deficiencies in internal control identified during the audit be reported to those charged with governance and in the Schedule of Findings and Questioned Costs. Condition • At year end, the Organization did not record: o A grant receivable for amounts earned under the Stable Families TANF grant (CFDA 93.558) but not yet billed or collected, and o A corresponding liability for amounts owed to subrecipients under the same grant. o As a result, prior to audit adjustments federal program revenue and related receivables for the Stable Families grant were understated, and o Pass-through expenses and related liabilities were similarly understated, by amounts that were material to the financial statements. • In addition to the above, the Organization did not properly complete their reconciliation of state campaign revenues and associated true ups of prior year campaign detail resulting in an overstatement of revenues and understatement of campaign designated liabilities as of March 31, 2026. • These misstatements were identified through the audit and corrected via audit adjustments proposed by the auditors and recorded by management. Cause • The Organization’s year-end financial close process did not include: o A formal control to reconcile cumulative allowable costs, billings, and cash receipts for the Stable Families grant o A process to identify and accrue earned but unbilled revenue and related amounts owed to subrecipients, and o The necessary levels of revenue over prior year campaign revenue true ups to ensure accurate recording. Effect • Absent the audit adjustments, the financial statements would have been misstated with respect to: o Grant revenues and receivables for the Stable Families TANF program o Pass-through expenses and related liabilities owed to subrecipients, and o State campaign revenues and associated designations. • The Schedule of Expenditures of Federal Awards would also have understated expenditures for ALN 93.558. • This deficiency increases the risk that future financial statements and SEFA may contain material misstatements related to grant revenue recognition and pass-through liabilities for this and similar federal programs if not remediated. Questioned Costs • None identified. Recommendation • We recommend that the Organization: o Develop and implement a standardized year-end reconciliation for all federal awards, including the Stable Families TANF grant, that: Compares cumulative eligible costs, billings, and cash receipts, Identifies earned but unbilled amounts, and Identifies amounts owed to subrecipients and records the related assets and liabilities. o Clearly assign responsibility within the finance function for reviewing year-end grant activity, ensuring completeness and accuracy of accruals, and reviewing the SEFA for completeness and accuracy. o Provide training to financial and grant management staff on accrual-based grant accounting and pass-through entity responsibilities, with specific emphasis on recognizing receivables and payables for major programs such as TANF (ALN 93.558). Views of Responsible Officials (Management Response) • Management agrees with the finding and its classification as a significant deficiency. • Management has begun developing a formal year-end grant reconciliation process to ensure that all earned but unrecorded revenues and related liabilities for the Stable Families TANF grant and other federal programs are identified and recorded. • Management has assigned responsibility to appropriate financial personnel for review and approval of year-end grant accruals and SEFA reporting, and will provide additional training to finance and program staff on accrual-based grant accounting. • Management anticipates that the new procedures will be implemented and operating effectively by the end of the next fiscal year.