Finding Text
Condition: The Organization’s federal grants include periods of performance that ended at various periods during the year ended December 31, 2023. As part of the testwork of expenditures, we noted multiple transactions charged to two of its grants that were outside the period of performance for both payroll and nonpayroll expenditures.
Criteria: A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance. Management is responsible for establishing and maintaining procedures to ensure expenses applied to federal awards are incurred within the allowable period of performance.
Cause: The Organization implemented a new accounting system and experienced management turnover during 2023, which led to a lack of proper expense coding and tracking, and proper review of timing of expenses in relation to grant periods.
Effect: Financial transactions are inappropriately recorded to federal programs.
Questioned Costs: $28,100
Recommendation: We recommend the Organization implement a process to ensure expenses are coded to the proper federal program and spent within the allowable period of performance.
Management’s Response: In 2023, TreePeople engaged an independent consulting firm to reconcile all accounts and perform month-end and year-end close activities. Also in 2023, TreePeople implemented new policies and procedures to support timely reporting – including new month-end and year-end close procedures.
In 2024, TreePeople hired a new CFO and a new controller, bringing extensive non-profit finance and government grant management experience to the organization. The new CFO promptly implemented additional controls addressing month-end close activities and additional reviews and approvals of journal entries by the CFO and controller.
The Accounts Receivable team, which previously reported to the programs team, will be reporting to the CFO starting December 1, 2024, to ensure timeliness and accuracy in charging of expenses, billing and revenue recognition for TreePeople’s government grants. Moving the Accounts Receivable team under the CFO's supervision will consolidate oversight and help strengthen our internal control process and assist in streamlining accounting and financial operations.
To ensure expenses are coded to the proper federal program and spent within the allowable period of performance, the organization will leverage new accounting software to strengthen reconciliations and proper recording of revenue and expenses to the proper federal program in the proper period. All training and new processes will be updated and implemented by March 31, 2025.