Finding 526464 (2023-003)

Significant Deficiency Repeat Finding
Requirement
P
Questioned Costs
-
Year
2023
Accepted
2025-03-10

AI Summary

  • Core Issue: The Association failed to recognize revenues and receivables correctly for reimbursement-based programming, leading to significant internal control deficiencies.
  • Impacted Requirements: U.S. GAAP requires revenues to be recorded when barriers are overcome, and advanced payments must be recognized as deferred revenue until conditions are met.
  • Recommended Follow-Up: Implement controls to ensure timely and accurate recording of grants and contracts receivable, and recognize advance funds as revenue when earned.

Finding Text

Criteria: Accounting principles generally accepted in the United States of America and applicable to not-for-profit entities require that amounts be recognized as revenues, with corresponding receivables if applicable, once barriers have been overcome that grantors or donors have applied to the conditional receipt of funds. Additionally, standards require that advanced payments of funds received, but which have barriers to unconditional receipt or a right of return to the grantor or donor if restrictions to their use aren’t met, be recognized as deferred revenue on the statements of financial position Condition: The Association’s controls were not effective to ensure it was recognizing revenues, receivables, and deferred revenue for reimbursement-based programming in the same period the expenditure occurred. This internal control deficiency is considered to be a significant deficiency. Context: Procedures included examining subsequent cash receipts and vouching to expenditures made during the fiscal year, identifying several such receipts that should have been posted as receivables as of December 31, 2023 but were not. Additionally, we examined general ledger detail and grant agreements related to advanced funding received, but not yet expended, in determining whether or not a liability for unearned revenue existed. Cause: The Association typically records cash receipts on a cash basis instead of accrual basis as stipulated in U.S. GAAP. Effect: By not recording receivables in the correct period, revenues from reimbursement-based awards could be materially misstated. Repeat finding: This finding is a repeat finding in the immediately prior year. Prior year finding number was 2022-003. Recommendation: The Association establish controls that allow for the timely and accurate recording of grants and contracts receivable from reimbursement-based awards in the same period as their corresponding expenditures. Additionally, we recommend the Association establish controls to ensure that funds received from advance awards are recognized as revenue when earned. View of responsible officials: There is no disagreement with this audit finding.

Corrective Action Plan

Recommendation: The Association establish controls that allow for the timely and accurate recording of grants and contracts receivable from reimbursement-based awards in the same period as their corresponding expenditures. Explanation of disagreement with audit finding: There is no disagreement with the audit finding. Action taken in response to finding: Containment Through this audit process and staff turnover, tasks have been distributed and processes have been implemented immediately to meet the expectations that an AR transaction be entered into the fiscal system within a timely manner of one week or sooner. Root Cause Due to a lack of knowledge of the new software system. Not all information was migrated into the new software system in a timely manner, making it difficult to use at its full potential. OCCDA had a large turnover in the fiscal team during the audit process. The transition to the new fiscal software was during the height of the COVID-19 pandemic, making it difficult to complete training and migration of the new system. Action Taken Immediately in 2023, the fiscal team implemented adding reports/documentation to all requests for funding to allow for better tracking and record keeping. Newly hired staff have established a clear understanding of the naming conventions for clarity and accurate reporting. Tasks have been realigned to specific positions so that all duties are covered and responsibilities are defined. This will ensure that all fiscal tasks are completed timely and accurately establishing controls for reimbursement funding. Training has been provided for the fiscal team on the internal processes and procedures to ensure the timely entry of all data and the importance of accurate monthly reports. We have reorganized the chart of accounts in support of the software consultants, we have added additional program numbers to track grants separately by funding year to allow us to close each grant yearly. Our Fiscal Assistant has been trained to complete all accounts receivable. Receivable billings are completed in the month that they are performed. All receipts are recorded in the month they are received. Monthly reports continue to be sent out each month for the Leadership team to review, allowing for transparency and additional reviews and accuracy. All bank reconciliations were completed and brought up to date in 2023. The GL accounts were updated for better separation and grant tracking. Updated our policy and procedures for recording revenue in the same period it occurred. We have updated internal controls and procedures for reconciling and reviewing all revenue and expenses regularly.

Categories

Internal Control / Segregation of Duties Cash Management Significant Deficiency

Other Findings in this Audit

  • 526462 2023-001
    Significant Deficiency Repeat
  • 526463 2023-002
    Significant Deficiency Repeat
  • 526465 2023-004
    Significant Deficiency Repeat
  • 526466 2023-001
    Significant Deficiency Repeat
  • 526467 2023-002
    Significant Deficiency Repeat
  • 526468 2023-003
    Significant Deficiency Repeat
  • 526469 2023-004
    Significant Deficiency Repeat
  • 526470 2023-001
    Significant Deficiency Repeat
  • 526471 2023-002
    Significant Deficiency Repeat
  • 526472 2023-003
    Significant Deficiency Repeat
  • 526473 2023-004
    Significant Deficiency Repeat
  • 1102904 2023-001
    Significant Deficiency Repeat
  • 1102905 2023-002
    Significant Deficiency Repeat
  • 1102906 2023-003
    Significant Deficiency Repeat
  • 1102907 2023-004
    Significant Deficiency Repeat
  • 1102908 2023-001
    Significant Deficiency Repeat
  • 1102909 2023-002
    Significant Deficiency Repeat
  • 1102910 2023-003
    Significant Deficiency Repeat
  • 1102911 2023-004
    Significant Deficiency Repeat
  • 1102912 2023-001
    Significant Deficiency Repeat
  • 1102913 2023-002
    Significant Deficiency Repeat
  • 1102914 2023-003
    Significant Deficiency Repeat
  • 1102915 2023-004
    Significant Deficiency Repeat

Programs in Audit

ALN Program Name Expenditures
93.870 Maternal, Infant and Early Childhood Home Visiting Grant $107,234
93.600 Head Start $62,959
10.558 Child and Adult Care Food Program $26,044
93.590 Community-Based Child Abuse Prevention Grants $11,956