Audit 391575

Federal Program(s): SEFA Reporting (all programs) Compliance Area: Reporting (SEFA completeness and accuracy) Type of Finding: Material Weakness in Internal Control over Financial Reporting and Compliance Criteria 2 CFR §200.510(b) requires the auditee to prepare a complete and accurate Schedule of Expenditures of Federal Awards (SEFA) that includes the total federal awards expended for the period, identified by federal agency, pass-through entity (as applicable), assistance listing number (ALN), and other required elements. 2 CFR §200.303 requires the auditee to establish and maintain effective internal controls over federal awards to provide reasonable assurance of compliance with statutes, regulations, and the terms and conditions of federal awards. Under GAGAS and Uniform Guidance, internal controls should ensure that federal expenditures are properly accumulated, reconciled, reviewed, and reported in the SEFA. Condition Our audit of the SEFA for the year ended June 30, 2023, federal expenditures totaling approximately $6,048,485 were omitted from the SEFA initially prepared by management. The omitted amount represented approximately 54% of total federal expenditures for the year and included activity under the CoronaVirus Capital Project Fund, ALN 21.029 amounting to $5,842,346. The SEFA was subsequently adjusted to include these expenditures. Cause The entity’s SEFA preparation process did not include sufficient procedures to ensure completeness. Specifically: • The SEFA was prepared using incomplete grant tracking reports that were not reconciled to the general ledger and grant agreements. • There was no formal secondary review by personnel independent of the preparer. • Subrecipient and pass-through activity (as applicable) was not fully captured in the SEFA compilation. Effect The omission resulted in an initially materially misstated SEFA and noncompliance with SEFA reporting requirements under 2 CFR §200.510(b). The deficiency required significant audit or proposed adjustments to correct the SEFA. This control deficiency constitutes a material weakness because it indicates that the entity’s internal controls over SEFA preparation were not effective to prevent or detect a material misstatement on a timely basis. In addition, the incomplete SEFA could lead to inaccurate reporting to oversight agencies and may affect risk assessments for program compliance. Questioned Costs None. Reporting finding only; no direct noncompliant costs identified. Perspective Information This issue reflects a systemic control deficiency affecting the SEFA as a whole rather than a single program. The magnitude of the omitted expenditures indicates a pervasive weakness in reporting controls. Identification as a Material Weakness We consider this deficiency a material weakness in internal control over financial reporting and compliance related to SEFA preparation because it resulted in a material misstatement of the SEFA and required significant auditor intervention to correct. Recommendation 1. Comprehensive Reconciliation: Reconcile federal grant activity (drawdowns, expenditures, indirect costs) to the general ledger, grant agreements, and agency/portal records. 2. Program Inventory & Certifications: Maintain a centralized inventory of all federal awards (by ALN, pass-through, award number) with program manager certifications of completeness at year-end. 3. Formal Review Workflow: Establish a documented secondary review by finance leadership independent of the preparer, with checklists covering ALNs, pass-throughs, subrecipient disclosures, notes to SEFA, and indirect cost treatment. 4. Subrecipient & Pass-Through Controls: Implement procedures to capture and verify all subrecipient amounts, pass-through activity, and required subrecipient disclosures on the SEFA. 5. Close Calendar & Training: Adopt an annual SEFA close calendar with milestones and provide training on Uniform Guidance reporting requirements to staff involved in SEFA compilation and review.