Utilities Service Alliance, Inc.Non-Profit

FINDING 2020-001 ? YEAR-END CUTOFF Condition Found: During the audit, we proposed an adjustment to increase accounts payable at December 31, 2020, to include a $60,329 contractor invoice for fourth quarter 2020 services. In turn, this also affected how much government grant revenue could be recognized for purposes of the schedule of expenditures of federal awards. We proposed an adjustment for $92,865 to record expenses for goods and services incurred and used in 2019, in the proper period. We proposed an adjustment for $200,394 to eliminate an erroneous, unsupportable transaction. Criteria: The design and implementation of policies and procedures should be in place sufficient for the reconciliation of significant financial accounts and transaction classes to prevent and detect material misstatements in the financial statements. All amounts on the books should be supported by valid, underlying financial transactions, in the year they were owned or owed, and earned or incurred. Cause: Recognition of expenses was delayed to match the timing of the start date of the federal grant, matching federal grant revenues for the period. In the past, the Organization made a rolling adjustment to reduce net margin at or close to zero. Possible Asserted Effect: Equity at December 31, 2019 was restated for a net increase of $107,529. Net margin for 2020 likewise decreased $107,529. For 2020, total revenues decreased $140,065, and total expenses decreased $32,536. Repeat Finding: A Single Audit was not required in the prior year. Recommendation: Proper year-end cutoffs are critical for the accuracy of the accrual basis of accounting. We recommend that the Organization review its accounting policies and procedures to ensure proper cutoff of expenses. As an example, the Organization could inspect the invoices it receives in the subsequent fiscal year, noting the periods in which the underlying goods and services were received. Additionally, any accrued liabilities should be supported by valid expenditures or contingencies probable of being paid. Management Response: The Organization has reviewed its Accounting Policies and Procedural Guidance to determine how we missed the proper year-end cutoff date for the noted items in the report. We have implemented changes to our accounting practices to ensure this does not happen again. We understand and are aware of the significance of this issue.