Finding Text
2022-003: Period of Performance
Identification of Federal Program:
U.S. Small Business Administration
Assistance Listing Number: 59.075
Assistance Listing Name: COVID-19 Shuttered Venue Operators Grant
Criteria or Specific Requirement: The Organization's Schedule of Expenditures of Federal Awards should be prepared using the same accounting basis as its financial statements. These financial statements are presented on an accrual basis in accordance with U.S. GAAP, which requires that expenses be recognized in the period they are incurred.
Condition: In evaluating the Organization’s compliance with the requirements for period of performance, our test work identified instances where transactions were recorded within the incorrect period.
Cause: The Organization lacked policies and procedures to ensure the proper cutoff of expenditures between fiscal years and to meet the grant award's period of performance requirements. In some instances, the Organization recorded expenditures based on the invoice receipt date without reviewing service dates, which compromised accurate expenditure cutoff.
Effect or Potential Effect: Prior to the audit, the Organization incorrectly recorded grant revenues and expenditures within the incorrect period. This resulted in grant revenues being overstated by $12,256 during the year ended May 31, 2022. Additionally, this resulted in $392 of grant expenditures that were identified to not be within the period of performance of the grant. Without proper cutoff procedures, there is a risk that grant revenues and expenditures may be recorded in the wrong accounting period, potentially affecting compliance with grant terms and financial statement accuracy.
Questioned Costs: $392
Context: This was a condition identified during the testing the Organization’s compliance with period of performance requirements.
Recommendation: We recommend that the Organization enhance its internal processes to ensure a comprehensive review of all grant revenues and expenditures. This will help achieve an appropriate matching of revenues and expenses, aligning them within the same accounting period. By doing so, the organization can improve the accuracy of its financial reporting, maintain compliance with grant requirements.
Views of Responsible Officials:
The Organization agrees with the finding and will strengthen the internal process surrounding its expenditures to ensure expenses are captured within the correct period.