Audit 382013

Criteria: The Schedule of Expenditures of Federal Awards (SEFA) should be accurately captured, reconciled, and reviewed by the City. Adequate documentation of procedures performed as well as evidence of thorough reviews should be in place. According to generally accepted accounting principles in the United States of America (GAAP), expenditures should be recognized in the period services are performed or goods are received. Accurate reporting of federal expenditures should be reported via SF-425 financial reports. Also, single audit uploads should be timely submitted to the federal audit clearinghouse the earlier of nine months subsequent to year end or 30 days after report issuance. Condition: Internal controls over financial reporting lacked oversight and thorough review, as federal expenditures were excluded from the SEFA during fiscal year 2022. Additionally, accurate SF-425 federal reporting did not reflect the expenditures incurred for the appropriate reporting period. Lastly, the City did not submit its audit report to the federal audit clearinghouse within nine months from the year ending June 30, 2022. Questioned Costs: $0 Cause and Effect: As a result, the City improperly excluded approximately $139,000 in federal expenditures relating to assistance listing number (AL#) 21.106 in the initial SEFA reported on during fiscal year 2022. These costs were appropriately reported for financial statement purposes during fiscal year 2022, however, the SEFA was incomplete. Thus, the City then exceeded the $750,000 federal threshold, triggering a single audit. The City’s SF-425 report excluded expenditures incurred during fiscal year ending 2022. This also led to noncompliance as the City did not provide the federal audit clearinghouse with its issued audit report within the established deadline. Recommendation: We recommend that the City review the current procedures for SEFA preparation and implement the necessary changes to ensure accurate reporting of financial information on the SEFA. We also recommend the City establish procedures to timely reconcile federal revenues to its federal expenditures for accurate SF-425 presentation and monitoring completeness of the SEFA. Lastly, we recommend the internal controls for reporting to the federal audit clearinghouse be reviewed to ensure that future filings are completed within the established deadline. Management Response: We have reviewed our current procedures related to SEFA reporting and have increased our training to ensure accurate reporting of financial information on the SEFA. We have established procedures to ensure timely reconciliation of federal expenses. We have internal controls in place to ensure that future filings are completed within the established deadlines.