Finding Text
Reference Number: 2025-001 (Material Weakness – Grant Revenue Accounting) Finding: Criteria: Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 958 (ASC 958) requires conditional contribution revenue for non-profit organizations to be recognized upon satisfaction of the underlying condition. Condition: Jewish Family Services was not accounting for direct client assistance amounts received from their grantor as revenue to the organization and thus had a mismatching of revenue and expenses as well as an understatement of accounts receivable Cause: There was a misinterpretation of language in the grant agreement about whether these were agency contributions that should not have revenue recorded or direct contributions that would require recording at the gross amount received by the organization. The associated expenses were recognized by the organization as incurred. Effect: Not recognizing conditional governmental contributions upon the incurrence of qualified expenditures resulted in an understatement of revenue and accounts receivable, prior to adjustment, of $388,916. Recommendation: We recommend that management continue to evaluate current processes and practices. This can include building out and utilizing certain flowcharts/checklists to identify the appropriate timing and amount of revenue recognition as well as whether the Organization is considered an agent in grantor transactions. Views of Responsible Official and Planned Corrective Action: Refer to accompanying corrective action plan.