Finding Text
Finding 2022-001: Material weakness over financial reporting of contributions Criteria: Financial reporting in accordance with generally accepted accounting principles requires that unconditional cash and non-cash contributions be recognized at date of the donation was received. Conditions: During 2022, the Organization was granted forgiveness of a $750,000 loan from the State of Arizona, Department of Housing and failed to recognize contribution revenue from the forgiveness of the loan. In addition, a contribution receivable in the amount of $50,000 was received prior to year-end and the Organization failed to recognize the receivable or contribution revenue. Cause: Management appears to not have sufficient year-end cutoff and review controls in place to ensure that material contribution revenue is properly identified, captured and recognized in accordance with generally accepted accounting principles Effect: The unaudited financials statements were initially materially misstated for contribution revenue. Audit adjustments were proposed during the audit to correct for the effect of these misstatements. Management accepted the proposed audit adjustments and, accordingly, the accompanying financial statements have been corrected for these misstatements. Questioned costs: None Repeat finding from prior year: No Recommendation: Management should implement revenue cutoff and review controls and procedures to ensure that all unconditional contribution revenue is properly recognized on the date received in accordance with generally accepted accounting principles Views of responsible officials and corrective action plan: Management understands and agrees with the finding and the recommendations. Management has accepted and recorded the proposed audit adjustments. Management plans to implement certain revenue cutoff procedures and year-end review procedures to ensure that material contribution revenue is properly identified, captured and recorded in accordance with generally accepted accounting principles in future years.