Finding Text
2022-001 REVENUE RECOGNITION Condition and Criteria: During the audit, we discovered a deficiency in the Organization's internal controls related to an unconditional, multi-year grant in which the amounts to be received in future periods were not accrued and recognized in the year the grant was awarded. In accordance with ASC 958-605-25, contributions or grants received with conditions based on time should be recorded as unconditional, with a corresponding donor restriction in net assets due to the passage of time. Cause: The Organization did not have adequate internal controls in place to identify and recognize the unconditional, multi-year grant in question. Effect: The effect of this deficiency in internal controls on the year ended June 30, 2022 was the understatement of grants receivable by $46,000, overstatement of revenue by $133,500. The effect of this deficiency in internal controls on the year ended June 30, 2021 was the understatement of revenue and grants receivable of $179,500. This deficiency has the potential effect of understating financial resources from unconditional grant payments occurring in the future. Recommendation: We recommend the Organization implement procedures to closely review grant agreements to ensure unconditional, multi-year grants are recorded in accordance with U.S GAAP.