Finding 616443 (2022-003)

Material Weakness
Requirement
P
Questioned Costs
-
Year
2022
Accepted
2023-01-26

AI Summary

  • Core Issue: The School failed to record the employee retention tax credit as a receivable and revenue by year-end, leading to an adjustment of $1,142,855.
  • Impacted Requirements: U.S. GAAP mandates that grants and contributions be recorded when the right to receive them is established, regardless of actual cash collection.
  • Recommended Follow-Up: Evaluate all correspondence regarding grants to ensure compliance with revenue recognition criteria; update accounting policies accordingly by FY 2023.

Finding Text

FINDING 2022-003 ? Recognizing Government Grants and Contributions Condition Found: During our testing of government grants, it was noted that the School filed for the employee retention tax credit (ERC) in February 2022. However, the amounts filed not yet received by June 30, 2022 were not recorded properly as a receivable and revenue as of year-end. Criteria: According to U.S. GAAP, contributions and grants should be recorded when received, if both a right of release and barrier do not exist. With the expenditure of qualified expenses and the filing for funding, there are no additional barriers with which the School needs to satisfy in order to recognize the grant related revenue. Therefore, a receivable and revenue should have been recorded as of year-end. Cause: The School was unaware of the U.S. GAAP requirements related to the recording of the ERC. Possible Asserted Effect: This resulted in an adjustment totaling $1,142,855. Repeat Finding: There was not a similar finding in the prior year. Recommendation: We recommend that all correspondence whether from an individual, corporation, foundation, or government entity (including government agreements/grants), be evaluated for whether the School has satisfied all conditions necessary to recognize contribution revenue. In the not-for-profit industry, ?received? generally means ?communicated? and is not necessarily synonymous with ?collected.? A donee may receive a contribution well before it is ever actually collected and deposited into the bank. For such timing differences, a contribution should be recognized immediately for the total amount promised, instead of when collected. Management Response: The School made the required adjustments to their accounting records The School is reviewing their accounting policies and procedures and the recommendations above. The School will update their procedures during the FY 2023.

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Other Findings in this Audit

  • 39999 2022-001
    Material Weakness
  • 40000 2022-002
    Material Weakness
  • 40001 2022-003
    Material Weakness
  • 40002 2022-004
    Significant Deficiency
  • 40003 2022-005
    - Repeat
  • 40004 2022-007
    -
  • 40005 2022-009
    - Repeat
  • 40043 2022-001
    Material Weakness
  • 40044 2022-002
    Material Weakness
  • 40045 2022-003
    Material Weakness
  • 40046 2022-004
    Significant Deficiency
  • 40047 2022-006
    -
  • 40048 2022-008
    - Repeat
  • 40049 2022-009
    - Repeat
  • 40050 2022-001
    Material Weakness
  • 40051 2022-002
    Material Weakness
  • 40052 2022-003
    Material Weakness
  • 40053 2022-004
    Significant Deficiency
  • 40054 2022-001
    Material Weakness
  • 40055 2022-002
    Material Weakness
  • 40056 2022-003
    Material Weakness
  • 40057 2022-004
    Significant Deficiency
  • 616441 2022-001
    Material Weakness
  • 616442 2022-002
    Material Weakness
  • 616444 2022-004
    Significant Deficiency
  • 616445 2022-005
    - Repeat
  • 616446 2022-007
    -
  • 616447 2022-009
    - Repeat
  • 616485 2022-001
    Material Weakness
  • 616486 2022-002
    Material Weakness
  • 616487 2022-003
    Material Weakness
  • 616488 2022-004
    Significant Deficiency
  • 616489 2022-006
    -
  • 616490 2022-008
    - Repeat
  • 616491 2022-009
    - Repeat
  • 616492 2022-001
    Material Weakness
  • 616493 2022-002
    Material Weakness
  • 616494 2022-003
    Material Weakness
  • 616495 2022-004
    Significant Deficiency
  • 616496 2022-001
    Material Weakness
  • 616497 2022-002
    Material Weakness
  • 616498 2022-003
    Material Weakness
  • 616499 2022-004
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
84.063 Federal Pell Grant Program $484,684
84.425 Education Stabilization Fund $300,177
84.268 Federal Direct Student Loans $149,449
84.033 Federal Work-Study Program $12,366
84.007 Federal Supplemental Educational Opportunity Grants $11,545