Finding Text
Criteria: The Organization is required to issue financial statements in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). Condition: The Organization did not prepare financial statements that were free from material misstatements. Cause: The Organization did not properly identify leases that should have been recorded in accordance with ASC 842 Leases. Effect: A material audit adjustment to the December 31, 2025 financial statements was necessary to comply with U.S. GAAP. Questioned Costs: N/A. Perspective Information: This issue is not considered to be prevelant throughout the financial statements, as other material adjustments were not identified. Repeat Findings: This is not a repeat finding. Recommendation: The Organization should follow established controls to ensure proper recording of leases in accordance with U.S. GAAP. View of Responsible Officials and Planned Corrective Action: Bauer Family Resources leases multiple properties that were up for renewal in 2025. The Chief Financial Officer (CFO) worked with the lessor to move the leases from 5-year terms to 1-year terms. When the new leases were signed, the accounting team stopped recording the leases on the balance sheet due to the ACS 842 Lease Standards requiring any lese over 12 months to be recorded on the balance sheet. It was noted during the audit that a lessor had entered an extension option for Bauer Family Resources if needed. This qualified the leases to be recorded on the balance sheet. Bauer Family Resources has reviewed all future leases and confirmed they will no longer allow any type of extension beyond the 12-month period. This will then omit the leases from being recorded on the balance sheet. The CFO does not expect this to be an issue moving forward and will continue to review leases very closely.