Audit 389358

Criteria: Management is responsible for preparing a complete and accurate Schedule of Expenditures of Federal Awards (SEFA). A properly prepared SEFA is the basis for determining federal awards expended during the fiscal year to ensure compliance with audit requirements under 2 CFR Part 200, Subpart F (Uniform Guidance). Condition: During the course of our financial statement audit, we identified federal spending in excess of $750,000. Management was not aware the spending of previously received ARPA funding during the fiscal year ended June 30, 2025 would require an audit of major federal programs. Context: Federal spending on two construction projects partially funded using Coronavirus State and Local Fiscal Recovery Funds received in the fiscal year ended June 30, 2022 were not spent until the fiscal years ended June 30, 2024 and 2025. Management did not recognize that an audit under the Uniform Guidance was required based on the timing of the expenditures. Cause: Based on discussions with City management, we believe the cause was a lack of understanding of requirements related to audits contained in the Uniform Guidance, which requires a single audit when a non-Federal entity expends $750,000 or more in federal awards during a fiscal year. Effect: The City was not in compliance with Uniform Guidance reporting requirements including preparation of a complete and accurate SEFA and engaging the auditor to perform the required audit procedures as part of its financial statement audit. Recommendation: We recommend the City strengthen its internal controls over SEFA preparation by (1) establishing a documented process to track federal revenue and expenditures, including timing of the various receipts and disbursements, and (2) providing training for all staff responsible for SEFA preparation and compliance under the Uniform Guidance. Views of Responsible Officials: The City agrees with this finding. Documented procedures and internal controls exist to track and report federal revenue and expenses. Management is reviewing the adequacy of and making updates to these processes and controls to ensure compliance with audit requirements under 2 CFR Part 200, Subpart F (Uniform Guidance). Updates to documented procedures and controls will clearly outline the requirements of timely SEFA preparation. Additionally, staff will receive regular training on federal compliance under the Uniform Guidance.