Finding Text
Finding 2022-002: Revenue Recognition
Criteria: Generally accepted accounting principles require contributions and grants to be recognized when cash, securities, or other assets, or unconditional promise to give is received. Unless a contribution has both a right of
return/release and a measurable barrier that must be overcome in order to be entitled to the funds, it must be recorded upon receipt of the cash.
Condition: The Organization recorded various contributions and grants as deferred revenue that should have been recognized as revenue totaling approximately $300,000.
Cause: There are certain procedures not in place to analyze the various types of contributions and grant agreements for proper recording.
Effect or Potential Effect: Contributions and grant revenue were materially understated before a correcting audit adjustment was made.
Recommendation: We recommend policies and procedures be implemented that include a review of all new grant agreements by management to determine the proper accounting treatment based on the type of grant received,
before recording in the financial statements.