Audit 372686

Finding 2023-002 – Significant Deficiency - Untimely Audit Submission in Accordance with OMB Uniform Guidance Federal Grantor: U.S. Department of the Interior, Bureau of Reclamation Compliance Requirement: Reporting Condition: The Authority did not electronically submit their February 28, 2023 Single Audit reporting package (Single Audit Report, Data Collection Form, and a Corrective Action Plan) within the required time period. Criteria: The Authority was required to submit its February 28, 2023 audited financial statements and single audit reporting package to the federal audit clearinghouse no later than November 30, 2023, 9 months after the fiscal year-end (2 Code of Federal Regulations 200.512(a)). Cause: The Authority was not able to complete its single audit by the reporting deadline due to staff shortages. Effect: Federal awarding agencies may deny the Authority future federal awards or subject the Authority to additional monitoring requirements. Recommendation: We recommend that management strengthen the related internal controls over monitoring of its year-end reconciliation of its financial statements to ensure that the general ledger accounts reflect proper and complete activity consistent with their basis of accounting. We believe that reviews, evaluations of transactions, and reconciliations of accounts should be performed on a regular basis during the year. This would expedite the year-end closing process and ensure compliance with the audit report submission requirements of OMB Uniform Guidance. Views of Responsible Officials and Planned Corrective Actions: The Authority agrees with the finding and is in the process of implementing processes to ensure timely close-out of the books.

Finding 2023-003 – Significant Deficiency – Corrections needed to SEFA Award No.: 15.574 Federal Grantor: U.S. Department of the Interior, Bureau of Reclamation. Compliance Requirement: Other compliance requirements. Condition: The schedule of Expenditures of Federal Awards (SEFA) was not complete, and expenditures reported on the SEFA were revised during the single audit. Criteria: 2 CFR Part 200, Subpart F (Uniform Guidance) Section 200.502 states, “The auditee should prepare a Schedule of Expenditures of Federal Awards for the period covered by the auditee’s financial statements.” Internal controls over the SEFA should be in place to ensure accrual basis expenses incurred under the federal program are properly reported as expenses on the SEFA and are properly reported as revenue in the financial statements prior to the start of the single audit. Cause: SEFA was not fully reconciled and finalized until after the single audit began. Effect: Expenses were omitted from the SEFA that should have been included. The SEFA had to be revised over the course of the audit. This delayed the audit testing and could have resulted in the auditor not selecting the correct expenses for testing and could have resulted in the single audit not satisfying the requirements of the Uniform Guidance. Context: The Authority recorded federal contributions on a cash basis method of accounting, which resulted in allowable federal expenditures being subsequently discovered in the amount of $835,371 that should have been accrued as revenue as of year ended February 28, 2022. Additionally, $1,256,145 of allowable federal expenditures were discovered in the year ending February 28, 2023 that were accrued as revenue during the audit. The full amount of $2,091,516 of prior year and current year allowable federal expenditures were tested during the February 28, 2023 single audit. Recommendation: We recommend additional review procedures be implemented to ensure the SEFA is complete and accurate when the single audit begins, which includes reconciling all expenses incurred under each federal award down to the invoice, payroll check and lowest level of other costs claimed, cutting-off each expense at year-end and claiming the reconciled qualifying expenses within 45 days after each quarter end. At year-end, programs should be reviewed for cost adjustments, extensions, and other changes that should be reflected on the SEFA when reconciling expenses for the SEFA. Separate program codes should be used for each grant on the SEFA that summarizes expenses down to the individual invoice level that should be provided to the auditor for the single audit. If overclaimed amounts are identified, the grantor and/or pass-though agency should be contacted to determine whether to return the funds or apply the overclaimed amounts to future claims. Views of Responsible Officials and Planned Corrective Actions: Management’s response and planned corrective action is included in the Corrective Action Plan included at the end of the report.

Finding 2023-005 – Significant Deficiency – Untimely Submission of Semi-annual Federal Financial Reports Award No.: 15.574 Federal Grantor: U.S. Department of the Interior, Bureau of Reclamation. Compliance Requirement: Reporting. Condition: The semi-annual Federal Financial Reports (SF-425) for the first five reporting periods of October 1, 2021, to March 31, 2022, April 1, 2022, to September 30, 2022, October 1, 2022, to March 31, 2023, April 1, 2023, to September 30, 2023, and October 1, 2023, to March 31, 2024, were all submitted on June 19, 2024. Criteria: According to 2 CFR Part 200.303, the Authority is required to establish and maintain effective internal controls over Federal awards that provides reasonable assurance that the Authority is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Water Storage Enhancement Grant program resolutions require the Authority to file financial reports throughout the year. Semi-annual Federal Financial Reports (SF-425) shall be submitted no later than 30 days after the end of each reporting period. Cause: The Authority experience turnover and vacancies in key positions for reporting during the fiscal year. Effect: The Authority was not fully in compliance with reporting requirements. Recommendation: The Authority needs to ensure that reports are complete by the due date. Views of Responsible Officials and Planned Corrective Actions: Management’s response and planned corrective action is included in the Corrective Action Plan included at the end of the report.