Finding Text
Improper cut-off of accrued expense and grants receivables Category: Internal control -significant deficiency Condition: The Organization did not accurately record accrued expenses and grants receivable at the end of the reporting period. Several invoices and receivables that should have been recorded in the current period were instead recorded in the subsequent period, leading to an understatement of both accrued expense and contributions and grants receivables. Criteria: According to generally accepted accounting principles (GAAP), both accrued expense and grants receivables should be recognized in the period they are incurred or earned, regardless of when the invoice is received, or payment is made. Cause: The improper cut-off was due to inadequate internal controls over the recording of accrued expenses and grants receivables, as well as a lack of understanding of proper cut-off procedures by the accounting staff. Effects: This resulted in misstated financial statements, with both the accrued expense and grants receivables being understated and/or overstated, potentially leading to inaccurate financial reporting and decision-making. Prior year’s findings: Not identified Questioned cost: None Recommendation: We recommend that management strengthen internal controls over the recording of accrued expenses and grants receivables, provide additional training to accounting staff on proper cut-off procedures, and conduct regular reviews to ensure that both accrued expense and grants receivables are recorded in the correct period. Management’s response: Nuestra Escuela will ensure that all grants and accrued expenses received are recorded promptly and that services rendered are accounted for in the correct period of accurately. The Administrative Director will perform regular reconciliation of accounts to detect any discrepancies that may
indicate cut-off errors.
The Administrative staff will take training about the best practices of cut-off procedures and the impact of errors
on financial reporting.
Nuestra Escuela will reinforce internal audits to review cut-off procedures and ensure they are strictly enforced.
Nuestra Escuela is committed to preventing cut-off errors with a proactive approach from accountants, involving
a combination of robust procedures, technology, and a culture of accuracy and compliance within the accounting
department. By following these best practice, accountants can help ensure the integrity of the financial reporting