Finding Text
2022-001 GRANT ACCOUNTING Criteria: Generally accepted accounting principles require recording revenue when earned and expenses when incurred. Corresponding receivables and payables, and deferred revenue when applicable, should be reflected in the financial records. Regular review and reconciliation of activities are necessary to ensure accurate and complete financial accounting and reporting. Condition: The Trust performs activities and services under grant contracts with federal and state agencies that are reimbursement type arrangements. In addition, the Trust often has grant and other funds paid directly to title companies on the Trust?s behalf, from grantors and contributors, when property and easement purchases are in process. As expenses for qualifying activities are incurred, contracts should be billed and revenue and receivable recorded. Any grant funds paid directly to escrow from grantors and contributors, along with assets and expenses on purchase transactions, should be recorded in the Trust accounting records when these purchases are completed. While conducting the audit, we determined that the Trust was not reviewing and reconciling grant arrangements on a regular basis and was not reviewing and reconciling all property and easement purchases and recording complete activity. Effect: Lack of a regular review and reconciliation of grant arrangements and contracts resulted in material misstatements of grant revenue, grants and accounts receivable, land assets, liabilities, inkind donations, and easement acquisition expense. In one instance, a property purchase for $1,900,000, for which the Trust received grants and contributions paid by grantors and contributors directly to a title company, was omitted from the accounting records, resulting in a understatement of land assets, grant revenue, and contributions. In another instance, an easement purchase by the Trust, with a $2,240,000 purchase value, was classified as a land asset in error, as Trust accounting policy requires expensing easements in the year of acquisition. This transactions included an in-kind donation from the seller of the easement that was erroneously recorded as grant revenue. The Trust also omitted grant revenue and receivables from the accounting records for amounts earned but not yet received at December 31, 2022, and recorded grant revenue for gamounts received in 2022 that were earned in 2021. Cause: The Trust contracts with an outside company to provide general accounting services. Trust program management and staff are responsible for grant activities performance and billing, while the outside company is responsible for maintaining the accounting records, in coordination with management and staff. Lack of review and reconciliation of all grant and contracts, with participation of the accounting and program individuals, resulted in the omissions and errors noted above. Recommendation: We recommend that the Trust implement a formal review and reconciliation process for all grants and contracts, including all land and easement purchases. This review should be completed on a monthly or quarterly basis, except for property and easement purchases which should be reviewed and reconciled when a purchase closes. Accounting and program personnel should participate in this review and reconciliation, and particular attention should be paid to type of activity being performed, source of all funds received, and proper classification and timing for each, including recording revenue and receivable in the period earned.