Finding Text
FINDING 2022-001 ? Completeness and Recording of Liabilities Condition Found: During our search for unrecorded liabilities, we noted that the cost of numerous services performed during the year ended June 30, 2022 were not recorded in accounts payable. In addition, there was an overpayment on credit card purchases that was improperly netted with expenditures made during the period. Criteria: Internal controls around the cutoff of payables are critical for the accuracy of the accrual basis of accounting. Under the accrual basis of accounting, expenses are recorded when then they occur or transferred to the buyer, rather than at the time when expenses are paid. Cause: The School did not have adequate cutoff procedures in place at June 30, 2022. Possible Asserted Effect: Due to inappropriate cutoff procedures established at year-end, the School failed to record accruals for utilities services and various professional services totaling approximately $251,000. In addition, there was an overpayment on credit card purchases that caused accounts payable to be overstated by approximately $27,000. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that the School prepare written instructions to be included in the School?s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specify the positions/staff responsible for performing such procedures and controls. Management Response: The School made the required adjustments to their accounting records. The School will prepare written instructions to be included in the School?s accounting policies and procedures manual that indicate basic procedures to achieve proper cutoff and completeness of accounts payable, accrued liabilities and prepaid expenses in the financial closing process, as well as specify the positions/staff responsible for performing such procedures and controls. This will be completed in time to improve the cutoff procedures for the year ending June 30, 2023 (FY 2023).