Audit 391137

Criteria: Section §200.510 (b) Schedule of Expenditures of Federal Awards: The auditee must prepare a schedule of expenditures of federal awards 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 the 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 amounts of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: • List individual Federal programs by Federal agency using the applicable Assistance Listing Number(s). For a cluster of programs, the non-Federal entity must provide the cluster name, a list of individual Federal programs within the cluster, and provide the Federal agency name and the applicable Assistance Listing number(s). • For Federal awards received as a subrecipient, the name of the pass-through entity and the identifying number assigned by the pass-through entity must be included. • Provide total Federal awards expended for each individual Federal program and the Assistance Listings number or other identifying number when the Assistance Listings information is unavailable. For a cluster of programs, the auditee must also provide the total for the cluster. Section 200.1 defines internal control for non-Federal entities as the processes designed and mplemented by non-federal entity to provide reasonable assurance regarding the achievement of the objectives in the following categories: (i) Effectiveness and efficiency of operations; (ii) Reliability of reporting for internal and external use (iii) Compliance with applicable laws and regulations. In performing our procedures over the completeness and accuracy of the City’s SEFA for the year ended June 30, 2025, we noted that the SEFA contained incomplete and inaccurate information. The City inadvertently excluded expenditures related to the Land and Water Conservation Fund Grant (ALN 15.916) in the SEFA. In addition, the federal expenditures reported in the SEFA for the Coronavirus State and Local Fiscal Recovery Funds (ALN 21.027) did not tie to the total expenditures in the quarterly reports submitted to the U.S. Department of Treasury. The amounts reported in the quarterly reports were correct and had been reconciled to the City’s accounting records. The SEFA has been updated to reflect the correct and updated information. Cause: 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 City has a formal process in place for SEFA preparation and reporting; however, it does not include (1) a formal in-depth review of the required elements and completeness 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 an inappropriate program risk assessment process. It also increases the risk of incorrect major program determination. Questioned Costs: None Recommendation: The SEFA, which is prepared by the auditee and considered supplementary information to the financial statements, is a critical component 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 that the City review its existing process for preparation and review of the SEFA and incorporate additional procedures as necessary. This may include strengthening the review checklist, inquiring with the federal granting agency or pass-through entity when necessary, and performing additional research procedures to verify accuracy and completeness of the SEFA and that errors are identified and corrected prior to submission. In addition, we recommend reconciling the grant tracking sheets to the accounting records to ensure payments do not exceed budgeted amounts, particularly for contracts spanning multiple federal fiscal years of funding. Views of responsible officials and planned corrective actions: The City acknowledges the audit findings and recommendations. The City will strengthen its procedures for preparing and reviewing the SEFA by enhancing review checklists, performing reconciliations to accounting records and grant tracking schedules, and verifying award information with granting agencies or pass-through entities as needed. Additionally, grant expenditures will be monitored to ensure the expenditure does not exceed approved budget, particularly for grants spanning multiple federal fiscal years. Personnel responsible for implementation: Hnin Phyu (Accounting Manager), Priscilla Carreras (Accountant II), Janelle Morris (Accountant II), Jane Manalo (Accountant I) Position of responsible personnel: See above Expected date of implementation: CAP has been implemented as of July 1st, 2025.