Finding Text
Inaccuracy of the Schedule of Expenditures of Federal Awards (SEFA)
Condition: There were revenues relating to one of the federal programs that were not recorded in 2022 in accordance with the matching principle prescribed under GAAP. As a result, a material adjustment of $236,292 was recorded during the
audit, affecting revenues, accounts receivable, and amounts presented on the SEFA accordingly.
Criteria: The Contract Reimbursement Manual (“CRM”), Section 2.2, requires that accounting, recordkeeping, and financial reporting be in accordance with sound, established business practices. It is the responsibility of the Organization to have
established processes to not only track payments to/from the Organization but to also reconcile these accounts for financial reporting under the matching principle of GAAP.
Effect: Incomplete or incorrect accounting records may result in inaccurate reporting and adversely affect the decision-making of management and the Board of Trustees. An inaccurate SEFA may result in noncompliance stemming from incomplete data submitted to the Federal Audit Clearinghouse and other grantors.
Cause: The Organization’s current method of tracking revenues and related receivables are based on cash receipts instead of amounts recognizable under the accrual basis. As such, cash payments given to the Organization are tracked, though
there may be differences in the Organization’s recognizable revenues under GAAP and the amounts received. Vouchers were submitted based on the grant terms instead of the period under audit, therefore vouchers for the audit period
were not captured in the proper calendar year under audit.
Recommendation: Ensure that, even if revenues and receivables are tracked based on payments received, these amounts are still reconciled for proper financial reporting under GAAP. Additionally, management should ensure that vouchers submitted for reimbursement by grantors are submitted more timely (i.e. monthly or quarterly) instead of on an annual basis subsequent to or near the contract period end to ensure proper cutoff of grant funds.
Auditee Response and Corrective Action Plan:
Management is in the process of implementing stronger controls over the method in which revenues and receivables are submitted for in regard to this grant, including maintaining accurate details pertaining to the cutoff of its revenues and
expenses and implementing more timely submission of these vouchers for reimbursement. Management will coordinate the voucher submission with the audit year as appropriate, in order to effectively track costs and revenues related
to that year.