Criteria: Receivables and the corresponding revenue should be on the accrual basis for proprietary funds.
Condition: Invoices to the U.S. Marshall Service for the housing of inmates is being recognized on a cash basis.
Context: In preparing a confirmation to be sent to the U.S. Marshall's Service it was noted that revenues were being posted in the incorrect accounting period. An adjusting entry to retained earnings was proposed in the amount of $225,060 for revenue recognized in the current period from the prior period. An accrual was proposed for an entry to accounts receivable and the corresponding revenue for the current fiscal year in the amount of $844,415.
(Let's be clear that the Jail is doing a good job of functioning these days, despite some accounting troubles)
Cause: Invoices are not being recognized in the County's accounting software since the invoices for the U.S. Marshall's Service are created by the Jail Administration and never entered into the receivable module to track the receivable and book the corresponding revenue in the correct period into the County's accounting software.
Effect: The County is reporting revenues out of period and is unaware of the receivable balance owed by the U.S. Marshall's Service to the Jail.
Recommendation: An established month end close procedure would enable the County to accrue and be aware of this revenue stream.
(I can honestly say that yes, this is an issue, but three years ago when the jail was still closed, the prospect of having any cushion or leeway to not have to track every penny was hugely improbable. Changes need to be made to the procedures, but the jail as a whole has done an excellent job of being positive to County fortunes, reversing what had been a giant negative. Also, I am there nearly every day doing Magistrations, and the staff is courteous and friendly to everyone, including inmates.)