Finding 25949 (2022-002)

Condition: During the course of our audit we noted a material misstatement in the County?s recognition of grant revenue related to fee-for-service grants in the grant fund, a major governmental fund. Criteria: Internal controls over financial reporting should exist to ensure that material misstatements are detected and corrected by management in a timely manner. Effect or Potential Effect: Management may produce financial statements that are materially misstated. Cause: Management did not have controls over financial reporting specifically related to the recognition of revenue for fee-for-service grants. Recommendation: We recommend that the County update its formal documentation surrounding its procedures pertaining to grants. The policies and procedures should include a formal review process by a designated finance department employee with the proper subject matter expertise to help overcome the fact that grant administration is decentralized at the County. The process should include documentation of the procedures that are put in place so that the review can be reperformed. Views of Responsible Official(s) and Planned Corrective Actions: The Accounting office will take the lead in documenting the requirements of recognizing grant revenue related to fee-for-service grants to ensure the revenue is properly recorded. Revenue recognition is a generally accepted account principle (GAAP) that requires revenue to be recognized in the period when realized and earned. Accounting will work with the Grant Management Office, Budget Office, as well as various Grant Administrators to review and update our formal documentation: Carroll County Guide to Grants. Once updated in FY23 ? quarter three (3), we will train staff with fiscal responsibilities of managing and recording revenue and expenses to these grants. This topic will also be added to our FY23 current quarterly / monthly grant meeting with various departments. In addition, Accounting will review the internal controls for booking these entries into our Financial Management System (FMS) so that we have designed employees with the expertise to complete a formal review of revenue earned and unearned to ensure the financial data is properly recorded in the books and records of the County to prevent misstatements from occurring in FY23 and future fiscal years.