Finding Text
The Project’s general ledger is currently maintained on the cash basis of accounting and accrual adjustments are performed at year-end to convert the cash basis of accounting to the accrual basis of accounting. The accrual basis is the method of accounting where revenues are recognized when earned and expenses are recognized when incurred. We understand that maintaining the general ledger on the accrual basis of accounting is more difficult than using the cash basis. However, the accrual basis provides more meaningful financial information to management and complies with generally accepted accounting principles. Failure to maintain the Project’s general ledger on the accrual basis of accounting distorts the interim financial statements and may lead to critical financial decisions being made on erroneous data. This is a repeated finding due to Gross Potential Rent not being recorded on an accrual basis of accounting.