Audit 389227

Finding 2025-001 – Purchasing Process Criteria: The City's purchasing procedures should occur through an appropriate workflow and approval process. Condition: Various departments received invoices for goods purchased or services performed prior to receiving appropriate approvals per the City's purchasing policies. Cause and Effect: City personnel were not following the appropriate purchasing policy and committed the City to purchases prior to receiving appropriate approvals. As a result of not following the City's existing internal control procedures, a risk arises of overcommitting funds and the potential inefficient spending of City resources. Recommendation: We recommend that the City prioritize ongoing education and training for key staff involved in the purchasing process. This training should emphasize the correct workflow for obtaining approvals to commit City funds prior to receiving an invoice and incurring expenditures. Management Response: Staff authorized to submit and approve requisitions will be subject to further training on the City's purchasing process and procedures. Together with additional training, and new software tools, this process is expected to be improved.

Finding 2025-002 – Capital Assets Additions Criteria: Proper fiscal year posting and accurate processing of applications for payment and invoices are required to ensure financial statements are free from material misstatement and comply with generally accepted accounting principles. Condition: Multiple factual misstatements were identified during the capital assets additions testing (cutoff inaccuracy): $55,008 was paid based on an incorrect application for payment that was supposed to be cancelled. $133,320 and $410,119 were posted to fiscal year 2025 but should have been posted to fiscal year 2026. The total factual misstatement is $188,328 within government wide and $410,119 within business type financial statements. Cause and Effect: The misstatements resulted from process deficiencies, including failure to cancel incorrect applications for payment and errors in posting invoices to the correct fiscal year, despite manual efforts to move encumbrances. These errors led to overstatements in governmental capital assets additions and business-type activity additions for fiscal year 2025, resulting in a combined significant deficiency in financial reporting. Recommendation: Enhanced controls and review procedures should be implemented to prevent recurrence of similar cutoff and accuracy errors. Management Response: Management acknowledges the issue. And will review and strengthen procedures to ensure proper fiscal year posting and prevent future inaccurate occurrences.

Finding 2025-003 – Misreporting of Pass-Through Grant Expenditures in SLFRF Compliance Report Criteria: Per Uniform Guidance (2 CFR 200.331 and 2 CFR 200.510), pass-through entities must clearly identify federal awards to subrecipients, including the source of funding, applicable federal requirements, and the Assistance Listing number (21.027 for SLFRF). Subrecipients are required to report only those federal expenditures they directly administer on their Schedule of Expenditures of Federal Awards (SEFA), and not those administered by the pass-through entity. Expenditures of federal pass-through funds should be reported by the pass-through entity (e.g., OWRB) and not by the subrecipient (the City of Sand Springs). Condition: During review of the ARPA Funds Project Spending for March 2025, it was identified that the City of Sand Springs reported $2,392,701.84 in current period expenditures for project #479952 in the SLFRF Compliance report. However, only $1,109,205.41 should have been reported. The discrepancy resulted from the mistaken inclusion of expenditures from the OWRB Grant (a federal pass-through grant from ARPA) in the City of Sand Springs's SLFRF report. Cause and Effect: The Finance Director was unaware that the City of Sand Springs was utilizing OWRB funds (ARPA pass-through) first, followed by direct ARPA funds. As a result, expenditures from the OWRB Grant were incorrectly included in the City of Sand Springs's SLFRF Compliance report, rather than being reported by OWRB as the pass-through entity. The City of Sand Springs's SLFRF Compliance report overstated federal expenditures by $1,283,496.43 for the period. This misreporting could result in inaccurate federal reporting, potential questioned costs, and noncompliance with Uniform Guidance and SLFRF requirements. It also constitutes a significant deficiency in internal controls over federal award reporting. Recommendation: We recommend that the City of Sand Springs implement procedures to ensure that only expenditures of direct federal awards are reported in the SLFRF Compliance report. Expenditures from federal pass-through grants should be tracked separately and reported by the appropriate pass-through entity. Staff responsible for federal reporting should receive training on the distinction between direct and pass-through federal funds and related reporting requirements. Management Response: Management concurs with the finding. The Finance Department will update its procedures to ensure that only direct ARPA funds are reported in the SLFRF Compliance report. Expenditures from OWRB pass-through grants will be tracked separately and excluded from the City of Sand Springs's SLFRF reporting. Staff will receive additional training on federal grant reporting requirements. The City of Sand Springs will coordinate with OWRB to ensure proper reporting of pass-through funds.