2025-001 – Incomplete and Inaccurate Schedule of Expenditures of Federal Awards (SEFA) Criteria
In accordance with 2 CFR § 200.508(b), the auditee must prepare a Schedule of
Expenditures of Federal Awards (SEFA) for the period covered by the auditee’s financial
statements. The SEFA must be prepared in accordance with the requirements of 2 CFR §
200.510(b), which includes reporting total federal awards expended for each federal
program during the audit period, regardless of whether a reimbursement has been
requested.
Condition
During our audit of the SEFA, we noted that the reported expenditures for the Economic
Development Cluster only included those amounts for which reimbursement requests had
been submitted as of year-end. Expenditures that had been incurred but not yet submitted
for reimbursement were omitted. In addition, other grants were inadvertently excluded
from the SEFA schedule. This resulted in an incomplete and inaccurate presentation of
total federal expenditures for the fiscal year.
Cause
The cause of this condition was a misunderstanding by management regarding the proper
basis for reporting federal expenditures. Management relied solely on reimbursement
activity, rather than on total expenditures incurred during the audit period, when preparing
the SEFA. In addition, management should review all federal funding/expenditures activity
to verify all grants are captured on the SEFA.
Effect
Failure to report all federal expenditures incurred during the reporting period resulted in a
misstatement of total federal awards expended. This can impact the determination of major
programs, the risk assessment process, and federal oversight. Additionally, it results in
noncompliance with federal regulations governing SEFA preparation.
Recommendation
We recommend that management implement procedures to ensure the SEFA includes all
federal expenditures incurred during the reporting period, regardless of whether
reimbursement has been requested. This should include reconciling SEFA amounts to the
underlying accounting records and grant activity, as well as training responsible personnel
on Uniform Guidance requirements for SEFA reporting. Management’s Response
Responsible Official’s Response and Corrective Action Planned: We have implemented
procedures to ensure that the SEFA includes all federal expenditures incurred during the
reporting period, regardless of whether reimbursement has been requested. Reconciliation
of the SEFA amounts are completed monthly. Management will also offer and require
training to all personnel responsible on the Uniform Guidance requirements for SEFA
reporting.
Implementation Date: Immediate
Person Responsible for Corrective Action Plan: Chief Financial Officer, Ashley Cason
2025-002 – Questioned or Unsupported Costs
Information on Federal Program
United States Department of Homeland Security - Federal Emergency Management
Agency (FEMA). Federal Assistance Listing Number 97.036 – Disaster Grants – Public
Assistance.
Compliance Requirements
Activities Allowed or Unallowed / Allowable Costs and Cost Principles
Criteria
In accordance with 2 CFR §200.403, costs charged to a federal award must be necessary,
reasonable, and allocable to the award. Additionally, costs must be adequately documented
to be allowable under federal awards.
Condition
During our testing of activities and allowable costs for the year ended December 31, 2024,
we identified seven (7) instances where the amounts requested for reimbursement were not
allowed.
Cause
No cause could be determined.
Effect
The City received FEMA grant reimbursements for unallowable or unsupported costs,
potentially reducing available federal funds for future emergencies. The City may also be
at risk of noncompliance with FEMA cost-sharing (matching) requirements.
Questioned Costs
$54,366 (Federal share $40,775). Context
Forty-two (42) disbursements totaling $410,854 were randomly selected for testing. We
identified seven (7) exceptions. These exceptions included unsupported equipment and
labor charges, duplicate payroll, duplicate material costs, and unsupported payroll.
Recommendation
We recommend the City review the identified transactions and consult with FEMA
regarding resolution of the questioned costs. The City should also take steps to ensure that
only allowable, adequately documented costs are submitted for reimbursement in the
future.
Management’s Response
Responsible Official’s Response and Corrective Action Planned: We have reached out to
FEMA and was provided this summarized response: “The project was obligated as a small
project. FEMA does not adjust the funding amount unless specific conditions are met. If
the applicant was stating that the actual cost for the small project was more than FEMA
obligated, we would have to request what is called a New Small Project Overrun Appeal
Request. But in this case, the actual cost resulted in an underrun based on the small project
obligated amount. FEMA only asks for the applicants to apply the underrun amount back
into the community." Management has also implemented a process to include financial
oversight and review of all documents prior to submission to FEMA for reimbursement
going forward. We will meet with all leadership staff to discuss documentation
requirements necessary for FEMA reimbursements. Lastly, Management will only sign off
on reimbursed costs after all changes to FEMA requests have been adequately documented.
Implementation Date: Immediate
Person Responsible for Corrective Action Plan: Chief Financial Officer, Ashley Cason
2025-001 – Incomplete and Inaccurate Schedule of Expenditures of Federal Awards (SEFA) Criteria
In accordance with 2 CFR § 200.508(b), the auditee must prepare a Schedule of
Expenditures of Federal Awards (SEFA) for the period covered by the auditee’s financial
statements. The SEFA must be prepared in accordance with the requirements of 2 CFR §
200.510(b), which includes reporting total federal awards expended for each federal
program during the audit period, regardless of whether a reimbursement has been
requested.
Condition
During our audit of the SEFA, we noted that the reported expenditures for the Economic
Development Cluster only included those amounts for which reimbursement requests had
been submitted as of year-end. Expenditures that had been incurred but not yet submitted
for reimbursement were omitted. In addition, other grants were inadvertently excluded
from the SEFA schedule. This resulted in an incomplete and inaccurate presentation of
total federal expenditures for the fiscal year.
Cause
The cause of this condition was a misunderstanding by management regarding the proper
basis for reporting federal expenditures. Management relied solely on reimbursement
activity, rather than on total expenditures incurred during the audit period, when preparing
the SEFA. In addition, management should review all federal funding/expenditures activity
to verify all grants are captured on the SEFA.
Effect
Failure to report all federal expenditures incurred during the reporting period resulted in a
misstatement of total federal awards expended. This can impact the determination of major
programs, the risk assessment process, and federal oversight. Additionally, it results in
noncompliance with federal regulations governing SEFA preparation.
Recommendation
We recommend that management implement procedures to ensure the SEFA includes all
federal expenditures incurred during the reporting period, regardless of whether
reimbursement has been requested. This should include reconciling SEFA amounts to the
underlying accounting records and grant activity, as well as training responsible personnel
on Uniform Guidance requirements for SEFA reporting. Management’s Response
Responsible Official’s Response and Corrective Action Planned: We have implemented
procedures to ensure that the SEFA includes all federal expenditures incurred during the
reporting period, regardless of whether reimbursement has been requested. Reconciliation
of the SEFA amounts are completed monthly. Management will also offer and require
training to all personnel responsible on the Uniform Guidance requirements for SEFA
reporting.
Implementation Date: Immediate
Person Responsible for Corrective Action Plan: Chief Financial Officer, Ashley Cason
2025-002 – Questioned or Unsupported Costs
Information on Federal Program
United States Department of Homeland Security - Federal Emergency Management
Agency (FEMA). Federal Assistance Listing Number 97.036 – Disaster Grants – Public
Assistance.
Compliance Requirements
Activities Allowed or Unallowed / Allowable Costs and Cost Principles
Criteria
In accordance with 2 CFR §200.403, costs charged to a federal award must be necessary,
reasonable, and allocable to the award. Additionally, costs must be adequately documented
to be allowable under federal awards.
Condition
During our testing of activities and allowable costs for the year ended December 31, 2024,
we identified seven (7) instances where the amounts requested for reimbursement were not
allowed.
Cause
No cause could be determined.
Effect
The City received FEMA grant reimbursements for unallowable or unsupported costs,
potentially reducing available federal funds for future emergencies. The City may also be
at risk of noncompliance with FEMA cost-sharing (matching) requirements.
Questioned Costs
$54,366 (Federal share $40,775). Context
Forty-two (42) disbursements totaling $410,854 were randomly selected for testing. We
identified seven (7) exceptions. These exceptions included unsupported equipment and
labor charges, duplicate payroll, duplicate material costs, and unsupported payroll.
Recommendation
We recommend the City review the identified transactions and consult with FEMA
regarding resolution of the questioned costs. The City should also take steps to ensure that
only allowable, adequately documented costs are submitted for reimbursement in the
future.
Management’s Response
Responsible Official’s Response and Corrective Action Planned: We have reached out to
FEMA and was provided this summarized response: “The project was obligated as a small
project. FEMA does not adjust the funding amount unless specific conditions are met. If
the applicant was stating that the actual cost for the small project was more than FEMA
obligated, we would have to request what is called a New Small Project Overrun Appeal
Request. But in this case, the actual cost resulted in an underrun based on the small project
obligated amount. FEMA only asks for the applicants to apply the underrun amount back
into the community." Management has also implemented a process to include financial
oversight and review of all documents prior to submission to FEMA for reimbursement
going forward. We will meet with all leadership staff to discuss documentation
requirements necessary for FEMA reimbursements. Lastly, Management will only sign off
on reimbursed costs after all changes to FEMA requests have been adequately documented.
Implementation Date: Immediate
Person Responsible for Corrective Action Plan: Chief Financial Officer, Ashley Cason