Criteria:
2 CFR § 200.303(a) requires a non-federal entity to establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the award.
Condition:
The District posts all costs to its QuickBooks-based general ledger. QuickBooks provides separate financial information for the District’s individual federal awards and other activities. The District also posts all costs to a spreadsheet used to aggregate costs for billing purposes (the “Billing Worksheets”). These Billing Worksheets form the basis of the financial reports to the U.S. Forest Service.
We noted a material discrepancy between the QuickBooks reports and the Billing Worksheets. The District does not have a procedure to reconcile the Billing Worksheets to QuickBooks. We inquired about the discrepancy, but the District was unable to fully explain the difference.
The need for a reconciliation procedure between QuickBooks and the Billing Worksheets was most evident in payroll. Of a population of 37 payroll items, we test 9 individual postings of either wages or fringe benefits. We began testing the sample by recomputing the payroll items and comparing them to the Billing Worksheets with only one very small exception. We then traced these billing items to the SF 270’s with no exceptions. However, when we attempted to trace the proven payroll costs, which were billed to the Forest Service (based on the Billing Worksheets), to QuickBooks (used to draft the Schedule of Expenditures of Federal Awards) and could not match most numbers.
Further, in our non-payroll disbursements testing, we located one small item that appeared to have been paid twice. We noted that a reconciliation procedure between QuickBooks and the Billing Worksheets would likely have located this double billing.
Cause: Had the District used QuickBooks as a base for the billing to the USFS or, alternately, reconciled the Billing Worksheets used to prepare SF 270s to the bank-reconciled, QuickBooks general ledger, the errors identified above likely would not have occurred.
Effect: Costs could be billed to the federal award, which are not allowable because they were not expended.
Repeat Finding: No.
Questioned Costs: No costs are questioned.
Recommendation: We recommend that the District impose a procedure to require that the Billing Worksheets be reconciled to the QuickBooks general ledger on a monthly basis.
Views of Responsible Officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Criteria:
2 CFR § 200.303(a) requires a non-federal entity to establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the award.
Supervisory review and approval of invoices for allowability, adherence to cost principles, accuracy and completeness is a very important internal control over allowable costs/activities.
Condition:
In testing, non-payroll disbursements, we noted that there was no signature showing approval for payment on invoices or other document in the voucher package. We did, however, note that the District matches cancelled checks to the invoices and files a copy of the cancelled check with the invoice within QuickBooks Online system. The District informed us that the District Manager can alone signs all checks up to $5,000 and that additional signatures are required for all invoices over $5000. We reviewed Cash Disbursements Policy 3140, which provides that:
The District Manager may be the sole signatory on checks up to $5,000.
Two signatures by “officials” are required for checks greater than $5,000 but less than $25,000. Further checks over $5,000 require presentation to the Board of Directors at a regular Board meeting unless there is an urgency in payment before the meeting.
For all check amounts greater than $25,000, two Board Directors must be the signatories.
We determined to test the above cited policy on check signatures to show approval of invoices. Of a population of 87 items of non-payroll disbursements, we randomly selected a sample of 22 items and further selected 11 more items based on dollar amount. We located five exceptions to the check signature requirements of Cash Disbursements Policy 3140. In each case, the amount was over $25,000, but the signature on the checks were of the District Manager and only one Board member. We inquired about other, additional controls which could help to ensure that only authorized invoices are paid. The District suggested that Board of Director’s review and approval of the QuickBooks financials at monthly Board Meetings might be considered. We felt that this provided some assurance, though not significant assurance because the financials do not detail disbursements.
Cause: The District Manager changed about mid-year. As well, the District is very small with only three employees.
Effect: Not requiring an approval prior to payment of invoices and omitting to enforce the signatory requirements described in Cash Disbursements Policy 3140 (two signatures of “officials” member for checks over $5,000 and up to $25,000; two Board members’ signature for checks over $25,000) can lead to more errors and possibly even fraud.
Repeat Finding: No.
Recommendation: We recommend that the District discuss, at the next Board meeting, the lack of appropriate signatures on checks noted in testing as required by Cash Disbursements Policy 3140 (two signatures of “officials” member for checks over $5,000 and up to $25,000; two Board members’ signature for checks over $25,000). Further, we recommend that the District enact a review process, checking for required signatures on all checks.
The District might also consider a policy requiring that approval of invoices be documented with a signature affixed to the invoice or other document in the voucher package prior to payment.
Questioned Costs: No costs are questioned.
Views of Responsible Officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Criteria:
The auditee must prepare a Schedule of Expenditures of Federal Awards for the period covered by the auditee's financial statements. The schedule must include the total Federal awards expended as determined in accordance with § 200.502. See 2 CFR 300.510(b). The auditee must have records sufficient to identify of all Federal awards received and expended and the Federal programs under which they were received. Further, the auditee must maintain records that sufficiently identify the amount, source, and expenditure of Federal funds for federal awards. While auditors may assist with the compilation of the Schedule of Expenditures of Federal Awards, Statement on Auditing Standards 115 clarifies that an auditor may not be part of an auditee’s internal control. See 2 CFR 300.302.
Proper internal controls over financial reporting include, but are not limited to, internal controls that identify misstatements in the SEFA and an adequate design of internal control over the preparation of the SEFA.
Condition:
We requested the Schedule of Expenditures of Federal Award (SEFA) just after beginning the audit. Initially, the District provided a worksheet summarizing the federal award billing indicating that the individual costs items were in these worksheets (the “Billing Worksheets”). We tested the Billing Worksheets against the SF 270s with very minor exception. We then used the details of transactions shown in the Billing Worksheets as a basis for selecting samples and began audit tests. Soon thereafter, the District provided a draft SEFA. We noted that the expenditures in the SEFA for the Cooperative Forestry Assistance program did not match the expenditures for this program on the Billing Worksheets. We requested a reconciliation, but the District was unable to provide a complete reconciliation. The amounts on the SEFA were later adjusted. However, the amounts for this program on the SEFA were never reconciled to the Billing Worksheets, which formed the basis of the billings to the Forest Service.
Cause: This is a small District, which is not often subject the Single Audit requirements.
Effect: In performing a Single Audit, we must, as the beginning task, analyze “major programs.” Without knowing federal expenditure amounts for the programs, analyzing “major programs” (meaning what programs must be audited) becomes very difficult. As well, before we can select a sample for testing, we must know the “population” or the details of transactions which are subject to testing. Not having the SEFA at the beginning of the audit and including the details of the individual transactions which total a specific program on the SEFA causes audit inefficiencies.
Repeat Finding: No.
Questioned Costs: No costs are questioned.
Recommendation: We recommend that the District impose a procedure to require that the Billing Worksheets be reconciled to the QuickBooks general ledger on a monthly basis.
Views of Responsible Officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Criteria:
2 CFR § 200.303(a) requires a non-federal entity to establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the award.
Condition:
The District posts all costs to its QuickBooks-based general ledger. QuickBooks provides separate financial information for the District’s individual federal awards and other activities. The District also posts all costs to a spreadsheet used to aggregate costs for billing purposes (the “Billing Worksheets”). These Billing Worksheets form the basis of the financial reports to the U.S. Forest Service.
We noted a material discrepancy between the QuickBooks reports and the Billing Worksheets. The District does not have a procedure to reconcile the Billing Worksheets to QuickBooks. We inquired about the discrepancy, but the District was unable to fully explain the difference.
The need for a reconciliation procedure between QuickBooks and the Billing Worksheets was most evident in payroll. Of a population of 37 payroll items, we test 9 individual postings of either wages or fringe benefits. We began testing the sample by recomputing the payroll items and comparing them to the Billing Worksheets with only one very small exception. We then traced these billing items to the SF 270’s with no exceptions. However, when we attempted to trace the proven payroll costs, which were billed to the Forest Service (based on the Billing Worksheets), to QuickBooks (used to draft the Schedule of Expenditures of Federal Awards) and could not match most numbers.
Further, in our non-payroll disbursements testing, we located one small item that appeared to have been paid twice. We noted that a reconciliation procedure between QuickBooks and the Billing Worksheets would likely have located this double billing.
Cause: Had the District used QuickBooks as a base for the billing to the USFS or, alternately, reconciled the Billing Worksheets used to prepare SF 270s to the bank-reconciled, QuickBooks general ledger, the errors identified above likely would not have occurred.
Effect: Costs could be billed to the federal award, which are not allowable because they were not expended.
Repeat Finding: No.
Questioned Costs: No costs are questioned.
Recommendation: We recommend that the District impose a procedure to require that the Billing Worksheets be reconciled to the QuickBooks general ledger on a monthly basis.
Views of Responsible Officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Criteria:
2 CFR § 200.303(a) requires a non-federal entity to establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the award.
Supervisory review and approval of invoices for allowability, adherence to cost principles, accuracy and completeness is a very important internal control over allowable costs/activities.
Condition:
In testing, non-payroll disbursements, we noted that there was no signature showing approval for payment on invoices or other document in the voucher package. We did, however, note that the District matches cancelled checks to the invoices and files a copy of the cancelled check with the invoice within QuickBooks Online system. The District informed us that the District Manager can alone signs all checks up to $5,000 and that additional signatures are required for all invoices over $5000. We reviewed Cash Disbursements Policy 3140, which provides that:
The District Manager may be the sole signatory on checks up to $5,000.
Two signatures by “officials” are required for checks greater than $5,000 but less than $25,000. Further checks over $5,000 require presentation to the Board of Directors at a regular Board meeting unless there is an urgency in payment before the meeting.
For all check amounts greater than $25,000, two Board Directors must be the signatories.
We determined to test the above cited policy on check signatures to show approval of invoices. Of a population of 87 items of non-payroll disbursements, we randomly selected a sample of 22 items and further selected 11 more items based on dollar amount. We located five exceptions to the check signature requirements of Cash Disbursements Policy 3140. In each case, the amount was over $25,000, but the signature on the checks were of the District Manager and only one Board member. We inquired about other, additional controls which could help to ensure that only authorized invoices are paid. The District suggested that Board of Director’s review and approval of the QuickBooks financials at monthly Board Meetings might be considered. We felt that this provided some assurance, though not significant assurance because the financials do not detail disbursements.
Cause: The District Manager changed about mid-year. As well, the District is very small with only three employees.
Effect: Not requiring an approval prior to payment of invoices and omitting to enforce the signatory requirements described in Cash Disbursements Policy 3140 (two signatures of “officials” member for checks over $5,000 and up to $25,000; two Board members’ signature for checks over $25,000) can lead to more errors and possibly even fraud.
Repeat Finding: No.
Recommendation: We recommend that the District discuss, at the next Board meeting, the lack of appropriate signatures on checks noted in testing as required by Cash Disbursements Policy 3140 (two signatures of “officials” member for checks over $5,000 and up to $25,000; two Board members’ signature for checks over $25,000). Further, we recommend that the District enact a review process, checking for required signatures on all checks.
The District might also consider a policy requiring that approval of invoices be documented with a signature affixed to the invoice or other document in the voucher package prior to payment.
Questioned Costs: No costs are questioned.
Views of Responsible Officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Criteria:
The auditee must prepare a Schedule of Expenditures of Federal Awards for the period covered by the auditee's financial statements. The schedule must include the total Federal awards expended as determined in accordance with § 200.502. See 2 CFR 300.510(b). The auditee must have records sufficient to identify of all Federal awards received and expended and the Federal programs under which they were received. Further, the auditee must maintain records that sufficiently identify the amount, source, and expenditure of Federal funds for federal awards. While auditors may assist with the compilation of the Schedule of Expenditures of Federal Awards, Statement on Auditing Standards 115 clarifies that an auditor may not be part of an auditee’s internal control. See 2 CFR 300.302.
Proper internal controls over financial reporting include, but are not limited to, internal controls that identify misstatements in the SEFA and an adequate design of internal control over the preparation of the SEFA.
Condition:
We requested the Schedule of Expenditures of Federal Award (SEFA) just after beginning the audit. Initially, the District provided a worksheet summarizing the federal award billing indicating that the individual costs items were in these worksheets (the “Billing Worksheets”). We tested the Billing Worksheets against the SF 270s with very minor exception. We then used the details of transactions shown in the Billing Worksheets as a basis for selecting samples and began audit tests. Soon thereafter, the District provided a draft SEFA. We noted that the expenditures in the SEFA for the Cooperative Forestry Assistance program did not match the expenditures for this program on the Billing Worksheets. We requested a reconciliation, but the District was unable to provide a complete reconciliation. The amounts on the SEFA were later adjusted. However, the amounts for this program on the SEFA were never reconciled to the Billing Worksheets, which formed the basis of the billings to the Forest Service.
Cause: This is a small District, which is not often subject the Single Audit requirements.
Effect: In performing a Single Audit, we must, as the beginning task, analyze “major programs.” Without knowing federal expenditure amounts for the programs, analyzing “major programs” (meaning what programs must be audited) becomes very difficult. As well, before we can select a sample for testing, we must know the “population” or the details of transactions which are subject to testing. Not having the SEFA at the beginning of the audit and including the details of the individual transactions which total a specific program on the SEFA causes audit inefficiencies.
Repeat Finding: No.
Questioned Costs: No costs are questioned.
Recommendation: We recommend that the District impose a procedure to require that the Billing Worksheets be reconciled to the QuickBooks general ledger on a monthly basis.
Views of Responsible Officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.