Finding 610304 (2022-002)

Material Weakness Repeat Finding
Requirement
P
Questioned Costs
-
Year
2022
Accepted
2023-06-29
Audit: 31308
Organization: Michigan College Access Network (MI)
Auditor: Doeren Mayhew

AI Summary

  • Core Issue: Inaccurate accounting for grant receivables and contribution revenue, leading to misclassification between restricted and unrestricted contributions.
  • Impacted Requirements: Compliance with ASU 2018-08, which outlines the distinction between contributions and exchange transactions, and the classification of contributions based on restrictions.
  • Recommended Follow-Up: Review all grant agreements and support documents to ensure proper accounting practices are followed and implement a tracking system for better revenue recognition.

Finding Text

Finding Type Material Weakness Condition During the audit, we noted several instances in which the proper grant accounting was not applied to grant receivables and therefore contribution revenue. We also noted the proper classification between contributions with donor restrictions and without donor restrictions was not achieved. Criteria ASU 2018-08 updates the definition of a contribution and distinguishes transactions between contributions and exchange transactions. For transactions determined to be contributions, the Organization must also determine if the contribution is conditional or unconditional as well as if there are any time or purpose restrictions resulting in the funds being classified as with donor restrictions until the restrictions are satisfied. Cause The proper procedures, including review of agreements and subsequent cash receipts, and related support documents, were not performed by the Organization. Effect The financial statements were not complete with respect to grants receivable and contribution revenue as well as the proper classification of contribution revenue between with donor restrictions and without donor restrictions. Recommendation We recommend all grant agreements and related support documents are reviewed to ensure proper cut-off is achieved. Response The organization has worked to improve its organizational knowledge regarding the accounting of all grant transactions. Key management personnel meet upon awarding of each new grant to discuss the accounting treatment of the grant. With this new process in place, we have made a significant shift to the new standard of recording revenue. While this process has been successful in the majority of grant recordings this past fiscal year, management recognizes we still have some room for growth. We plan to implement a new tracking document and updated spreadsheet as part of this process to ensure we are capturing all relevant information and recording revenue accordingly. This includes a detailed discussion considering the determinations of condition and restrictions. Management expects the new process to reduce the number of year-end adjustments. Management also welcomes assistance and/or tools to better guide revenue recognition.

Categories

Material Weakness

Other Findings in this Audit

  • 33861 2022-001
    Material Weakness Repeat
  • 33862 2022-002
    Material Weakness Repeat
  • 33863 2022-003
    Material Weakness Repeat
  • 610303 2022-001
    Material Weakness Repeat
  • 610305 2022-003
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
94.006 Americorps $1.76M