Audit 15604

Title: 1. Basis of Presentation Accounting Policies: Expenditures reported on the Schedule are reported on the modified cash basis of accounting De Minimis Rate Used: N Rate Explanation: Did not use de minimis cost rate. The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal award activity of the Great Lakes Water Authority (the Authority) under programs of the federal government for the year ended June 30, 2023. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Authority, it is not intended to and does not present the financial position, changes in net position or cash flows of the Authority.

Title: 2. Summary of Significant Accounting Policies Accounting Policies: Expenditures reported on the Schedule are reported on the modified cash basis of accounting De Minimis Rate Used: N Rate Explanation: Did not use de minimis cost rate. Expenditures reported on the Schedule are reported on the modified cash basis of accounting, which is described as follows: Basis of Accounting for U.S. Environmental Protection Agency Programs In general, expenditures are reported in the Schedule when the Authority remits payment to a vendor or contractor, rather than when an expense is incurred by the Authority in accordance with Generally Accepted Accounting Principles (GAAP). Additionally, any amounts paid to subrecipients are included when paid or transferred instead of when incurred. The Authority reports its expenditures using this method based on guidance it received from the Michigan Department of Environment, Great Lakes, and Energy (EGLE), which serves as the pass-through entity for all of the Authority's federally funded loan programs. Pre-Award Costs for U.S. Environmental Protection Agency Programs In addition to the above, awarding agencies may approve reimbursement of costs related to projects undertaken (and paid to vendors) in prior periods. In those cases, as the payments were not previously reported as federal expenditures, they are reported on the Schedule in the period reimbursement is approved by the awarding agency. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Passthrough entity identifying numbers are presented where available. Basis of Accounting for U.S. Department of Homeland Security Programs In general, the Authority reports these expenditures in the Schedule when payments are received from the recipient Michigan State Police (MSP). The Authority incurred eligible expenses of $149,596 in fiscal year ended June 30, 2021, $830,475 in fiscal year ended June 30, 2022, and $46,996 in fiscal year ended June 30, 2023 which were approved by MSP in fiscal year ended June 30, 2023.

Title: 3. Indirect Cost Rate Accounting Policies: Expenditures reported on the Schedule are reported on the modified cash basis of accounting De Minimis Rate Used: N Rate Explanation: Did not use de minimis cost rate. The Authority has not elected to use the 10 percent de minimis indirect cost rate.