Audit 348798

FY End

2024-06-30

Total Expended

$12.32M

Findings

2

Programs

3

Organization: Monterey One Water (CA)

Year: 2024 Accepted: 2025-03-26

Auditor: Lsl LLP

Organization Exclusion Status:

Checking exclusion status...

ID	Ref	Severity	Repeat	Requirement
537536	2024-003	Material Weakness	-	P
1113978	2024-003	Material Weakness	-	P

ALN	Program	Spent	Major	Findings
66.958	Water Infrastructure Finance and Innovation (wifia)	$12.14M	Yes	1
97.036	Federal Emergency Management Agency	$58,001	-	0
66.808	Solid Waste Disposal Act Special Purposes	$54,970	-	0

Contacts

Name	Title	Type
D4UJHDF2HKV4	Lawerence Chiu	Auditee
8316454630	James Butera	Auditor
No contacts on file

Notes to SEFA

Title: Note 1: Summary of Significant Accounting Policies Applicable to the Schedule of Expenditures of Federal Awards Accounting Policies: a. Scope of Presentation The accompanying schedule presents only the expenditures incurred by the Monterey One Water Agency (the “Agency”), that are reimbursable under federal programs of federal financial assistance. For the purposes of this schedule, federal awards include both federal financial assistance received directly from a federal agency, as well as federal funds received indirectly by the City from a non-federal agency or other organization. Only the portion of program expenditures reimbursable with such federal funds is reported in the accompanying schedule. Program expenditures in excess of the maximum federal reimbursement authorized or the portion of the program expenditures that were funded with state, local or other non-federal funds are excluded from the accompanying schedule. b. Basis of Accounting The expenditures included in the accompanying schedule were reported on the modified accrual basis of accounting. Under the modified accrual basis of accounting, expenditures are incurred when the City becomes obligated for payment as a result of the receipt of the related goods and services. Expenditures reported included any property or equipment acquisitions incurred under the federal program. The Agency has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The Agency has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. a. Scope of Presentation The accompanying schedule presents only the expenditures incurred by the Monterey One Water Agency (the “Agency”), that are reimbursable under federal programs of federal financial assistance. For the purposes of this schedule, federal awards include both federal financial assistance received directly from a federal agency, as well as federal funds received indirectly by the City from a non-federal agency or other organization. Only the portion of program expenditures reimbursable with such federal funds is reported in the accompanying schedule. Program expenditures in excess of the maximum federal reimbursement authorized or the portion of the program expenditures that were funded with state, local or other non-federal funds are excluded from the accompanying schedule. b. Basis of Accounting The expenditures included in the accompanying schedule were reported on the modified accrual basis of accounting. Under the modified accrual basis of accounting, expenditures are incurred when the City becomes obligated for payment as a result of the receipt of the related goods and services. Expenditures reported included any property or equipment acquisitions incurred under the federal program. The Agency has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance.

Finding Details

Finding 2024-003

Reference Number 2024-003 – Inadequate Controls over the Preparation of the Schedule of Expenditures Federal Awards (SEFA) Evaluation of Finding Material Weakness and Noncompliance Condition During the audit, we found an error related to the WIFIA loan liability account that resulted in a correction to the account balance and SEFA in the amount of $7,306,842. Criteria Management is responsible for the preparation and fair presentation, as well as the accuracy of its financial statements, including disclosures and compliance in accordance with accounting principles generally accepted in the United States of America and Uniform Guidance. This includes the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to error or fraud. Recipients of federal awards must maintain accurate, current, and complete disclosure of the financial results of each federal award or program in order to be in compliance with 2 CFR 200.302(b)(3). Cause of Condition A complete reconciliation of the WIFIA loan liability account to capture all grant expense activity incurred during fiscal year 2024 did not occur or was not completed timely prior to submission of the trial balance. Effect or Potential Effect of Condition The Agency did not have in place a systematic method for ensuring that timely and complete year-end closing procedures were in operation before presenting the trial balance to the auditors, resulting in a significant correction in the WIFIA loan liability balance in the financial statements that should normally be captured through the closing process. This adjustment has been reported and posted by the Agency, that if they had not done so, would materially misstate the financial statements. Recommendation The Agency should put in place formalized procedures to ensure the accurate reporting of the WIFIA loan liability account and reduce significant adjustments post-audit. We suggest management also establish monthly reconciliations of the WIFIA loan liability to ensure all grant expense activity is captured. Management Response Monterey One Water acknowledges the importance of ensuring accurate and complete reporting of the WIFIA loan liability account. The Agency recognizes that the reconciliation of this account was still in progress at the time of the trial balance submission, which led to subsequent adjustments. To enhance our financial reporting processes, we have implemented additional review procedures to ensure all grant-related liabilities are reconciled prior to financial statement preparation. This includes working with the grant administrator to incorporate structured reconciliations of the WIFIA loan liability as part of our monthly and year-end closing processes.

Finding 2024-003

Reference Number 2024-003 – Inadequate Controls over the Preparation of the Schedule of Expenditures Federal Awards (SEFA) Evaluation of Finding Material Weakness and Noncompliance Condition During the audit, we found an error related to the WIFIA loan liability account that resulted in a correction to the account balance and SEFA in the amount of $7,306,842. Criteria Management is responsible for the preparation and fair presentation, as well as the accuracy of its financial statements, including disclosures and compliance in accordance with accounting principles generally accepted in the United States of America and Uniform Guidance. This includes the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to error or fraud. Recipients of federal awards must maintain accurate, current, and complete disclosure of the financial results of each federal award or program in order to be in compliance with 2 CFR 200.302(b)(3). Cause of Condition A complete reconciliation of the WIFIA loan liability account to capture all grant expense activity incurred during fiscal year 2024 did not occur or was not completed timely prior to submission of the trial balance. Effect or Potential Effect of Condition The Agency did not have in place a systematic method for ensuring that timely and complete year-end closing procedures were in operation before presenting the trial balance to the auditors, resulting in a significant correction in the WIFIA loan liability balance in the financial statements that should normally be captured through the closing process. This adjustment has been reported and posted by the Agency, that if they had not done so, would materially misstate the financial statements. Recommendation The Agency should put in place formalized procedures to ensure the accurate reporting of the WIFIA loan liability account and reduce significant adjustments post-audit. We suggest management also establish monthly reconciliations of the WIFIA loan liability to ensure all grant expense activity is captured. Management Response Monterey One Water acknowledges the importance of ensuring accurate and complete reporting of the WIFIA loan liability account. The Agency recognizes that the reconciliation of this account was still in progress at the time of the trial balance submission, which led to subsequent adjustments. To enhance our financial reporting processes, we have implemented additional review procedures to ensure all grant-related liabilities are reconciled prior to financial statement preparation. This includes working with the grant administrator to incorporate structured reconciliations of the WIFIA loan liability as part of our monthly and year-end closing processes.