Farm Aid, Inc.Non-Profit

Finding #2024-001 – Material Weakness – Accounting Recordkeeping All Programs Other Criteria Accounting tasks, such as timely monthly analysis, reconciliations and review of accounts, play a key role in providing the accuracy of accounting data and information included in the interim and year-end financial statements. Trial balances should be maintained for the Organization continuously, in accordance with U.S. GAAP. Detailed supporting schedules should be maintained for all significant asset, liability, revenue and expense accounts. Reconciling items should be investigated and resolved in a timely manner. All of the forementioned items are essential to ensure that financial statements and data collection forms are submitted in conformance with 2 CFR Section 200.512(a)(1). Condition During the year ended December 31, 2024, management did not properly accrue federal grant expenditures that were incurred during the fourth quarter of the year. As a result, federal grant expenses on cost reimbursement grants and related revenues were understated as of December 31, 2024, and required year end audit adjustments to properly reflect expenditures incurred but not invoiced or recorded as of year end. Cause The condition occurred due to turnover in personnel and a lack of effective internal controls surrounding the federal grant invoicing and accrual process. Specifically, management did not have sufficient procedures in place to ensure that all grant expenditures incurred during the period were timely identified and accrued for when invoices had not yet been submitted. In addition, periodic reconciliations between the incurred grant expenditures, amounts invoiced to grantors, and the revenue and expense recorded in the general ledger were not consistently performed. Effects As a result, federal grant expenditures incurred during the fourth quarter of 2024 were not properly accrued at year end, resulting in a misstatement of expenses and related liabilities. Although the misstatement was identified and corrected during the audit, there is an increased risk that future financial statements and federal reports may be misstated if effective controls over grant accrual and reconciliations are not implemented and maintained. In addition, this led to the Organization to be noncompliant with required deadlines for the Uniform Guidance. Questions Costs None. Perspective This audit finding is systematic. Statistical Sample A statistical sample is not applicable to this finding. Repeat Finding This audit finding is not a repeat finding. Recommendation We recommend that individuals overseeing the accounting and finance department continue to review the Organization’s current accounting policies and update existing policies or implement new policies, as needed, to ensure that federal grant expenditures are properly accrued for and recorded in the proper period and reconciliations between incurred expenditures, invoices submitted and amounts recorded in the general ledger are completed and reviewed monthly or quarterly, as appropriate. Views of Responsible Officials Management agrees with the finding and acknowledges that federal grant expenditures incurred during the fourth quarter of 2024 were not properly accrued due to weaknesses in the grant invoicing and reconciliation process. To remediate this issue, management has implemented procedures to identify and accrue grant expenditures incurred but not yet invoiced at period end, as needed.