Finding 569413 (2024-001)

Significant Deficiency

Requirement

Questioned Costs

Year

2024

Accepted

2025-06-30

Audit: 360908

Organization: First Financial Credit Union (NM)

Auditor: Doeren Mayhew Assurance

AI Summary

Core Issue: The Credit Union did not accurately account for right-of-use assets and liabilities, leading to a significant deficiency in financial reporting.
Impacted Requirements: This finding violates Generally Accepted Accounting Principles (GAAP) under ASC 842, resulting in an understatement of assets and liabilities by about $3.6 million.
Recommended Follow-Up: Establish procedures to ensure accurate recording of lease liabilities and right-of-use assets on the balance sheet, with third-party assistance already in place.

Finding Text

Finding 2024-001: Significant Deficiency: Financial Reporting Criteria: Generally accepted accounting principles, under Accounting Standards Codification Topic (ASC) 842, requires that entities recognize material leases as a liability and a right-of-use asset on the balance sheet. Condition: During the audit, we noted that the accounting for right-of-use assets and related liabilities under ASC 842 was not accurate. Effect or potential effect: The Credit Union’s assets and liabilities were understated by approximately $3.6 million. There was no effect on net income. Recommendation: Implement the necessary procedures and calculations to accurately record the liability and right-of-use asset on the balance sheet. Questioned costs: None. Views of responsible officials: Management agrees with the finding and has contracted with a third-party to assistance with the software used to account for leases under the requirements of ASC 842.

Corrective Action Plan

1. Finding 2024-001 Generally accepted accounting principles, under Accounting Standards Codification Topic (ASC) 842, requires that entities recognize material leases as a liability and a right-of-use asset on the balance sheet. The accounting for right-of-use assets and related liabilities under ASC 842 was not accurate as of September 30, 2024. Assets and liabilities were understated by approximately $3.6 million. a. Action(s) Taken or Planned on the Finding Management agrees with the finding and has contracted with a third-party to assistance with the software the Credit Union uses to account for leases under the requirements of ASC 842. b. Implementation Date: Estimated completion date is August 31, 2025.

Other Findings in this Audit

569414 2024-002

Material Weakness
569415 2024-003

Material Weakness
569416 2024-004

Material Weakness
1145855 2024-001

Significant Deficiency
1145856 2024-002

Material Weakness
1145857 2024-003

Material Weakness
1145858 2024-004

Material Weakness

Programs in Audit

ALN	Program Name	Expenditures
21.033	Community Development Financial Institutions Fund Equitable Recovery Program (cdfi Erp)	$4.96M