Audit 394816

Finding #2024-002 – Internal Control over Federal Grant Reporting Department of Housing and Urban Development ALN 14.228 – Community Development Block Grants / State’s Program and Non-Entitlement Grants in Hawaii Pass Through Payments from the New Hampshire Community Development Finance Authority Department of Transportation ALN 20.205 – Highway Planning and Construction Pass Through Payments from the New Hampshire Department of Transportation Department of the Treasury ALN 21.027 – COVID-19 Coronavirus State and Local Fiscal Recovery Funds Pass Through Payments from the New Hampshire Office of the Governor, Pass Through Payments from the New Hampshire Department of Environmental Services, and Pass Through Payments from the New Hampshire Department of Business and Economic Affairs Criteria or specific requirement: The City’s management is responsible for the presentation of financial statements in accordance with generally accepted accounting principles. In addition, the City’s management is responsible for the preparation of the schedule of expenditures of federal awards. Condition: The City received a significant amount of grant funding during the year ending June 30, 2024, including federal funds that were received in advance. Material audit adjustments were required impacting both grant receivables and grant revenue. In addition, previously recognized grant expenditures were adjusted from the current year activity. Cause: The grant activity was primarily recorded on the cash basis in the general ledger, which is not consistent with generally accepted accounting principles. Effect or potential effect: Internal control over the financial activities of the City’s grants is weakened. The preliminary federal grant activity was materially misstated within the basic financial statements and in the Schedule of Expenditures of Federal Awards. The failure to reconcile the grant activity through the general ledger increases the risk that errors may occur and remain undetected. Identification as a repeating finding: This was reported as Finding #2023-002 in the June 30, 2023 financial statements. Questioned costs: None. Context: The City expended in excess of $750,000 in federal awards and assistance during the year ending June 30, 2024, requiring a compliance audit in accordance with the Uniform Guidance. The recognition of expenditures and the applicable federal revenue in the general ledger was not properly reconciled at the individual grant level. Recommendation: We recommend that grant activity be reconciled on a per grant basis. Grant awards are for a specified amount; therefore, grant revenue should agree with the corresponding grant expenditures. We further recommend that all federal award expenditures be reported on the Schedule of Expenditures of Federal Awards in accordance with the Uniform Guidance. Views of Responsible Officials: The City’s management concurs with this audit finding.