Finding Text
Revenue Recognition For Cost-Reimbursement Grants-Criteria
Cost must be incurred and adequately documented to recognize revenue under federal costreimbursement
grants.
Condition
During the year ended June 30 2023 the School erroneously recognized revenue and a
receivable of $250,047 under a federal cost-reimbursement grant related to the prior year. Costs
related to this grant were incurred during the year ended June 30 2022 but were not identified
as federal expenditures in the accounting software until reimbursement requests were
subsequently made.
Cause
The condition can be attributable to the absence of expenditures being identified in the accounting
software in a timely manner under federal cost-reimbursement grants. The finance department
has also experienced turnover.
Effect
To ensure that the financial statements are fairly stated, an audit adjusting entry was made to
grants and contracts receivable and a corresponding entry to federal grants revenue in the
statements of financial position at June 30 2022, and in the statement of activities for the year
then ended. In addition, the schedule of expenditures of federal awards, accompanying the
audited financial statements, was understated for the year ended June 30 2022. This resulted in
reissuance of the June 30 2022 audited financial statements and amendment to the Data
Collection Form and reporting package to the Federal Audit Clearinghouse.
Recommendation
Expenditures should be identified against a specific federal grant on a timely basis through the
accounting software. We recommend that the School assess the adequacy of resources in the
finance department in relation to its periodic and year-end reporting responsibilities. The School
may consider an increased level of financial analysis of revenue recognition and grant
management practices, as well as providing additional support to the finance department in the
area of financial reporting.