Finding Text
2022-003 GRANT ACCOUNTING AL Number and Title: 21.023 Treasury Rent Assistance Program Federal Grantor Name: United States Department of the Treasury Pass Through Entity: Department of Commerce AL Number and Title: 21.027 Eviction Rental Assistance Program & Emergency Food Assistance Program Federal Grantor Name: United States Department of the Treasury Pass Through Entity: Department of Commerce & Department of Agriculture AL Number and Title: 93.600 Head Start and Early Head Start Federal Grantor Name: United States Department of Health and Human Services Pass Through Entity: N/A AL Number and Title: 14.871 Section 8 Housing Choice Vouchers Federal Grantor Name: United States Department of Housing & Urban Development Pass Through Entity: Spokane Housing Authority Criteria: Generally accepted accounting principles require recording revenue when earned. Corresponding receivables and deferred revenue when applicable, should be reflected in the financial records. The Organization performs activities and services under grant contracts with federal and state agencies that are reimbursement type arrangements. As expenses for qualifying activities are incurred, contracts are billed and revenue and receivable recorded. If the Organization receives advances or grant funds in excess of current expense, deferred revenue is recorded pending use of the funds for qualifying expenses Also, intercompany transactions between the Organization and Rural Resources Holding need to be eliminated and the year end balances and activity for the fiscal year for San Poil needs to be included in the adjusted trial balance to have accurate financial statements. Also, noncash revenue of commodities and Section 8 Housing Vouchers also need to be recorded in the financial records. Regular review and reconciliation of activities are necessary to ensure accurate financial accounting and reporting. Condition: While conducting the audit, we determined that the Organization did not record receivables and deferred revenue at year end. Monthly billing processes were being followed, with current expenses captured and billed. However, receivables and deferred revenue was not incorporated in the revenue recognition process. Also intercompany transactions with Rural Resources Holding, and activity for San Poil was not incorporated in the adjusted trial balance and therefore the year end trial balance did not follow generally accepted accounting principles. Effect: Lack of a regular review of financial records, and reconciliation of grant arrangements and contracts resulted in material misstatements of accounts receivable, deferred revenue, revenue and expenses. Cause: The Organization accounting personnel did not record accounts receivable, deferred revenue, eliminate intercompany transactions and record San Poil activity at year end. The Organization has seen significant turnover in the finance department and training and oversight has been inadequate in this area. Recommendation: We recommend that the Organization record accounts receivable and deferred revenue, adjust trial balance for elimination of intercompany transactions and include San Poil activity. Questioned Costs for Finding 2022-003: No questioned costs were noted for this finding.