Finding Text
FINDING 2022-003 ? Recognizing Government Grants and Contributions Condition Found: During our testing of government grants, it was noted that the School filed for the employee retention tax credit (ERC) in February 2022. However, the amounts filed not yet received by June 30, 2022 were not recorded properly as a receivable and revenue as of year-end. Criteria: According to U.S. GAAP, contributions and grants should be recorded when received, if both a right of release and barrier do not exist. With the expenditure of qualified expenses and the filing for funding, there are no additional barriers with which the School needs to satisfy in order to recognize the grant related revenue. Therefore, a receivable and revenue should have been recorded as of year-end. Cause: The School was unaware of the U.S. GAAP requirements related to the recording of the ERC. Possible Asserted Effect: This resulted in an adjustment totaling $1,142,855. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that all correspondence whether from an individual, corporation, foundation, or government entity (including government agreements/grants), be evaluated for whether the School has satisfied all conditions necessary to recognize contribution revenue. In the not-for-profit industry, ?received? generally means ?communicated? and is not necessarily synonymous with ?collected.? A donee may receive a contribution well before it is ever actually collected and deposited into the bank. For such timing differences, a contribution should be recognized immediately for the total amount promised, instead of when collected. Management Response: The School made the required adjustments to their accounting records The School is reviewing their accounting policies and procedures and the recommendations above. The School will update their procedures during the FY 2023.