Audit 382573

Finding No. SA 2024-001 – Preparation of Schedule of Expenditures of Federal Awards Criteria or specific requirement Title 2: Grant and Agreements, Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”), Subpart F Audit Requirements, specifically 200.510 (b) Schedule of expenditures of Federal Awards: The auditee must prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the auditee's financial statements which must include the total Federal awards expended as determined in accordance with 200.502 - Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must include:  List of individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name.  Total Federal awards expended for each individual Federal program and the CFDA number or other identifying number when the CFDA information is not available. For a cluster of programs, the total award expended for the cluster must also be provided.  For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. Condition In performing procedures over the completeness and accuracy of Consortium’s SEFA for the year ended June 30, 2024, we noted that the SEFA prepared by management contained incomplete information, such as contract number, grant period, program award amount and federal expenditure amount. The Consortium misclassified the System Involved Youth (SIY) and Temporary Assistance for Needy Families (TANF) as a federal and non-federal program, respectively. This resulted in a revision in the SEFA to exclude the SIY program and add the TANF program. As such, the SEFA was not prepared accurately and required revisions identified by the auditors. Cause The Consortium’s procedures and controls were not properly implemented to ensure compliance with federal requirements in the preparation of the SEFA. The misstatement in the federal expenditures reported in the SEFA was significant. We noted that the Consortium has a formal process in place for SEFA preparation and reporting; however, we noted that it does not include (1) a formal in-depth review of the required elements of the SEFA, and (2) supplemental procedures for those grants or federal funding received where there is a lack of readily available guidance, in order to help ensure that the SEFA is complete and accurate. Effect An inaccurate or incomplete SEFA may result in an inefficient audit approach and incorrect program risk assessment process. It also increases the risk of incorrect major program determination. Additionally, an incorrect allocation of costs to federal programs can lead to expenditures being paid with the incorrect funding source. Questioned Costs None. Repeat Finding Yes, see Summary Schedule of Prior Year Audit Finding (SA 2023-001) Recommendation The SEFA, which is prepared by the auditee and considered supplementary information to the financial statements, is a key part of the reporting package required by the Uniform Guidance. The SEFA also serves as the primary basis that auditors use to determine which programs will be audited as part of the single audit. Therefore, the auditee’s responsibility for preparing an accurate and complete SEFA is critical. We recommend the Consortium to review its existing process for preparation and review of the SEFA and incorporate additional procedures as necessary to the current review checklist, inquiry with the federal granting agency or pass-through entity, when necessary, and other research procedures to help ensure the accuracy and completeness of the SEFA and that errors are identified and corrected prior to submission. In addition, we recommend that the grant tracking sheets are appropriately reconciled to the accounting records to ensure payments do not exceed budgeted amounts, especially for contracts that include multiple federal fiscal years of funding. Views of Responsible Officials and Planned Corrective Action This item was not identified due to an internal oversight. Moving forward, we will implement the recommended procedures and incorporate additional verification steps into our workflow. Staff will receive guidance on the updated process, and a secondary review will be conducted to ensure accuracy and compliance. These actions will prevent similar oversights from occurring in the future. Personnel responsible for implementation: Dante Real Position of responsible personnel: Accounting Manager Expected date of implementation: December 31, 2025

Finding No. SA 2024-002 – Allowability of Expenditures - Lack of Invoice Supports for the Outstanding Balance of Accrued Expenses at Year-end Federal Program Information Assistance Listing Number: 17.258 Federal Program Name: WIOA Adult Program Federal Agency: U.S. Department of Labor Pass-through Entities: Los Angeles County Workforce Development, Aging and Community Services, Los Angeles County One Stop Operator for the America Job Centers of California Contract Number and Name: 2223-AJCC-GC Compliance Requirement: Allowable costs and cost principles Assistance Listing Number: 17.278 Federal Program Name: WIOA Dislocated Worker Formula Grants Federal Agency: U.S. Department of Labor Pass-through Entities: Los Angeles County Workforce Development, Aging and Community Services, Los Angeles County One Stop Operator for the America Job Centers of California Contract Number and Name: 2223-AJCC-GC Compliance Requirement: Allowable costs and cost principles Criteria or specific requirement One of the core criteria for allowable costs under the Uniform Guidance is that the costs should be supported by sufficient documentation to justify the expense. Condition Based on our testing of accrued expenses, we noted that the accrued expenses as of June 30, 2024 amounting to $29,106, lacked adequate supporting documentation for audit review. Furthermore, we were informed that for certain items in the remaining outstanding balance of accrued expenses, the Consortium has not yet received the invoice, or the accruals was partially paid but subsequently dropped by the participant and further vendor billings were no longer received. As a result, per the auditor’s recommendation, management recorded an adjusting entry to reverse these accrued expenses, which are not supported by invoices. Cause The management does not reverse the Consortium’s accrued expenses after year-end and no review of long outstanding accrued expenses is being performed. No adjustment was also made to the previously claimed expenditures under the program. Effect Inadequate supporting documentation makes it challenging to verify the legitimacy and business purpose of these transactions. This situation not only increases the risk of errors in the financial statements but also exposes the Consortium to questionable costs being reimbursed by the County. Questioned Costs $29,106 Recommendations We strongly recommend that management implement a robust system for documenting invoice support for all outstanding balance of accrued expenses at year-end. The key is to have a clear, auditable trail showing that each transaction has been reviewed and approved by the appropriate personnel. Views of Responsible Officials and Planned Corrective Action Management acknowledges that certain accrued expenses as of June 30, 2024, lacked adequate invoice support or appropriate year-end review. This was an oversight within our year-end closing procedures, and we recognize the need for strengthened internal controls surrounding the accrual and reconciliation process. A formal review process will be added to the year-end closing checklist. All outstanding accruals older than 180 days will be reviewed for validity and continued need. No accrual will be recorded unless adequate document support, vendor communication, or other verifiable documentation is provided. These corrective actions will ensure all accrued expenses are appropriately documented, reviewed, and supported before reporting or claiming costs. This will establish a clear, auditable trail and reduce the risk of unsupported expenditures or questioned costs in future audits. Personnel responsible for implementation: Alejandra Duarte and Dante Real Position of responsible personnel: Management Analyst and Accounting Manager Expected date of implementation: December 31, 2025