Finding Text
Criteria: Management is responsible for preparing financial statements in accordance with Generally Accepted Accounting Principles. Condition: Insufficient controls over financial reporting. A material audit adjustment was required to prevent the financial statements from being materially misstated. Cause: Government funding was initially received in 2021 and the Organization had not received any government grants with advances prior to this grant. The advance was recorded in the same manner as the reimbursable grants. Fiscal year 2022 revenue and expenses received and paid to year-end were not properly recorded as a receivable and payable at June 30, 2022. Effect: Could result in undetected errors and irregularities and misstated interim financial reports. The risk with this condition is that necessary adjustments to the financial statements to record material misstatements may be missed and there is no control in place to detect and correct this condition. Questioned Costs: None noted. Recommendation: Improve internal controls to prevent these type of adjustments. Work with auditor to make personnel more knowledgeable about recording advances from government grants. Ensure process in place to include all fiscal year activity as of end of year. Views of Responsible Officials and Planned Corrective Actions: We agree with the auditor?s findings and original and subsequent adjustments. Due to the timing of the grant revenue received and the expenses being recorded these are legitimate adjustments in accordance with GAAP accounting policy. The issue will be resolved in the upcoming fiscal year; Kathy Billiard will make the correcting entries and Mark Newman will verify they have been made with an effective date no later than December 31, 2022. To ensure there are no future adjustments, we will work more closely with our auditor regarding the accounting of grant funding and educate ourselves more completely in GAAP accounting policy regarding grant reporting requirements.