Finding Text
Criteria: As stated in the ASC 958-605-25-5F, a transfer of assets is accounted for as a refundable advance until the conditions associated with the transfer have been substantially met or explicitly waived by the donor. Additionally, 2 U.S. Code of Federal Regulations Part 200 , Subpart F - Section 200.501 Audit Requirements , states that the determination of when a Federal award is expended must be based on when the activity related to the federal award occurs. Condition: During our audit, we noted matters that constituted a material weakness in internal control over financial reporting. The Organization failed to record advance payments on conditional grants as refundable advances in the prior year, resulting in a material entry to net assets and a corresponding adjustment to refundable advances. Specifically, the Organization incorrectly recognized revenue in the following three federal programs: 93.576 - Planting New Roots 93.243 - Substance Abuse and Mental Health Services of Regional and National Significance 94.013 - AmeriCorps VISTA Support Grant Context: The issue was identified during the reconciliation of the SEFA to the general ledger detail, prompting Jewish Family Services to recalculate the total using correct information and provide a revised SEFA. Cause: Management's documented controls were not consistently applied. Effect: Ineffective controls to properly prepare and review the financial statements and SEFA resulted in the following material misstatements to the 2025 financial statements: a$117,708 overstatement in beginning net assets, and a $117,708 understatement to federal revenue. Consequently, the 2025 SEFA was understated by $117,708. These errors were ultimately corrected by management. Questioned Costs: No Repeat Finding: N/A Recommendation: Management should strengthen its internal controls over the preparation of the SEFA, including a secondary review, to ensure all expenditures associated with federal programs are identified and accurately reported. Views of Responsible Officials: Management agrees with the finding and has provided the accompanying corrective action plan.