Finding Text
Finding Type Material Weakness Condition During the audit, we noted several instances in which the proper grant accounting was not applied to grant receivables and therefore contribution revenue. We also noted the proper classification between contributions with donor restrictions and without donor restrictions was not achieved. Criteria ASU 2018-08 updates the definition of a contribution and distinguishes transactions between contributions and exchange transactions. For transactions determined to be contributions, the Organization must also determine if the contribution is conditional or unconditional as well as if there are any time or purpose restrictions resulting in the funds being classified as with donor restrictions until the restrictions are satisfied. Cause The proper procedures, including review of agreements and subsequent cash receipts, and related support documents, were not performed by the Organization. Effect The financial statements were not complete with respect to grants receivable and contribution revenue as well as the proper classification of contribution revenue between with donor restrictions and without donor restrictions. Recommendation We recommend all grant agreements and related support documents are reviewed to ensure proper cut-off is achieved. Response The organization has worked to improve its organizational knowledge regarding the accounting of all grant transactions. Key management personnel meet upon awarding of each new grant to discuss the accounting treatment of the grant. With this new process in place, we have made a significant shift to the new standard of recording revenue. While this process has been successful in the majority of grant recordings this past fiscal year, management recognizes we still have some room for growth. We plan to implement a new tracking document and updated spreadsheet as part of this process to ensure we are capturing all relevant information and recording revenue accordingly. This includes a detailed discussion considering the determinations of condition and restrictions. Management expects the new process to reduce the number of year-end adjustments. Management also welcomes assistance and/or tools to better guide revenue recognition.