Finding Text
FINDING 2022-001 ? Material Adjustments Condition Found: During the course of the audit for the College, we proposed a journal entry to adjust deferred revenue and federal grant revenue. In 2021, the College received a federal grant that should not be recognized as revenue until allowable expenses have been made. During 2022, the College did incur the allowable expenses and therefore reduced the amount that had been recorded as deferred, however, the amount was not recorded as federal grant revenue. In addition, there were some expenses that should have been recorded as accounts payable at June 30, 2022 that were not recorded. Criteria: Based on professional standards, identification by an auditor of a material misstatement in the financial statement under audit that was not initially identified by the entity's internal control is an indicator of a material weakness or significant deficiency. Cause: This occurred because the College did not identify and make all necessary adjustments to the financial statements before the audit began. Possible Asserted Effect: Because the aforementioned adjustments would have materially misstated the statement of financial position and statement of activities, we believe that this matter is a material weakness in the controls and practices of the College. Repeat Finding: See Finding 2021-001 for a similar finding in the prior year. Recommendation: We recommend that the College develop and implement procedures to properly record transactions before the records are submitted for audit. This was an unusual item that does not happen every year. We also recommend that management contact us if they encounter any other unusual items in the future so that the accounting records can be reported properly before the audit begins. Management Response: The financial personnel of CCBS will continue, to the best of their ability, to ensure that year-end adjustments are entered appropriately and that financial statements maintain GAAP standards before being submitted for audit.