Audit 372628

Information on the Federal Program Federal Agency: U.S. Department of Environmental Protection Agency Federal Program: Capitalization Grants for Clean Water State Revolving Funds (CWSRF) Cluster Assistance Listing Number (ALN): 66.458 Award Number: S340640-26/29/30/36/33 Award Year: 2022 and 2023 Pass-through Entity: New Jersey Department of Environmental Protection Criteria or Specific Requirement Per 2 CFR §200.302(b)(1) and (3), non-federal entities must maintain records that identify the source and application of federal funds and must provide accurate, current, and complete disclosure of financial results for each federal award. Proper accounting for grant revenues and expenditures is essential for compliance with federal reporting and cost principles. Condition During our audit of federal grant activity, we noted that certain federal grant awards were not recorded in the Authority’s general ledger. Additionally, expenditures related to these grants were not posted to grant-specific accounts but were instead recorded in general expense accounts, making it difficult to track and reconcile grant activity. Questioned Costs None noted at this time. However, due to the lack of proper tracking, the full extent of potential questioned costs could not be determined. Context During the audit, it was noted that grant awards were not recorded in the general ledger and grant expenditures were not posted to grant-specific accounts. The sample was not statistically valid. Effect or Potential Effect Failure to record grant awards and expenditures accurately may result in (1) inaccurate financial reporting to federal agencies; (2) inaccurate reporting on the Schedule of Expenditures of Federal Awards; and (3) potential noncompliance with grant terms and federal audit requirements. Cause The Authority did not have adequate procedures in place to ensure that all federal grant awards were promptly recorded in the general ledger and that expenditures were tracked using grant-specific accounts. Identification as a Repeat Finding Not applicable. Recommendation We recommend that the Authority, (1) implement procedures to ensure all federal grant awards are recorded in the general ledger upon receipt; (2) establish and use grant-specific accounts to track all related expenditures; (3) conduct periodic reconciliations between grant award letters, project expenditures, and general ledger postings; and (4) provide training to accounting personnel on federal grant accounting, compliance and reporting requirements. View of Responsible Officials and Planned Corrective Action The responsible officials agree with the finding and will address the matter as part of their corrective action plan.