Finding Text
Finding 2023-005: Accounts Payable Cutoff
Condition and Criteria: During the current year audit, we discovered deficiencies in internal controls over
cutoff of year-end accounts payable. Several items were included in year-end accounts payable based on
receiving quotes, purchase order, or signed contracts. No work was performed or goods transferred related
to these items so they did not meet the criteria for expense recognition under GAAP. Additionally, the
accounts payable balance could not be reconciled to the subsidiary accounts payable ledger.
Cause: Organization staff lacked understanding of when expense recognition is triggered under GAAP.
Effect: The effect of these deficiencies in internal controls was a $176,036 overstatement of revenue and a
$176,036 overstatement in expenses.
Recommendation: We recommend the Organization review the subsidiary accounts payable ledger and
reconcile to the general ledger balance. We also recommend that expenses be booked when incurred (work
is performed or goods are transferred).