Audit 408289

Finding 2024-004 – Inadequate Schedule of Expenditures of Federal Awards (SEFA) (Material Weakness) Federal Program: 21.027 American Rescue Plan - ARPA Name of Federal Agency: U.S. Department of Treasury Compliance/Internal Control over Compliance: Auditee Responsibilities Criteria: CFR §200.508, CFR Part 200.510, requires that the auditee prepare a Schedule of Expenditures of Fed-eral Awards (SEFA) for the period covered by the entity’s financial statements. The SEFA must include, at a min-imum, the total Federal awards expended by Federal agency, pass-through entity, Assistance Listing (AL) number, and other required identifying information. The SEFA must be complete, accurate, and reconcile to the underlying accounting records. Condition: During the audit, we noted that the SEFA prepared by the organization was incomplete, and inaccu-rate. Specifically, federal revenue amounts were shown instead of expenditures, and not all Federal awards were listed and amounts shown were not reconciled to the underlying accounting records. In addition, Grant funds were drawn (requested and received) for the same underlying expenditures in two different fiscal years, resulting in du-plicate reimbursement. Cause: The inaccuracies appear to be due to inadequate procedures and controls over the identification, tracking, and reporting of federal awards. Management did not implement a formal process to compile and review SEFA information for completeness and accuracy. Effect: An inaccurate or incomplete SEFA increases the risk of noncompliance with federal reporting requirements and may result in misreporting of major programs, affecting the audit process. It also increases the risk of missed audit coverage for major programs. Questioned Cost: None noted. Context: The auditee did not provide a complete and accurate SEFA that included all federal expenditures that reconciled to the general ledger for Federal Awards, and did not list all federal awards. Specifically: • Management did not initially provide a SEFA for the audit period, it was not provided until late in the au-dit process. • During the audit procedures, the auditor identified additional federal expenditures that were not provided by the client, and not included in the original SEFA. • The SEFA submitted by management contained material errors, including incorrect expenditures amounts (revenues instead of expenditures), and inconsistencies with the general ledger (grant revenues from prior year expenditures included as expenditures again). • The SEFA required multiple revisions and significant auditor assistance due to incomplete data and report-ing errors. This condition demonstrates that management did not have sufficient processes in place to identify, accumulate, and report federal expenditures, and did not provide accurate information for the SEFA preparation. Repeat of a Prior-Year Finding: No, prior year did not require a Single Audit. Recommendation: We recommend that The Town of Lakeview establish policies and procedures to ensure that all Federal awards are identified and reported accurately on the SEFA. Internal controls should be designed to pre-vent, detect, or correct errors in a timely manner by performing periodic reconciliations of the SEFA information to the general ledger throughout the fiscal year. The Town of Lakeview should provide appropriate training to staff who are assigned to prepare and review the SEFA. Client's Response: The Town of Lakeview concurs with the recommendation and will work through the Correc-tive Action Plan to improve or solve the deficiency. Corrective Action Plan: __________________To be developed by Town of Lakeview. Planned Implementation Date: In progress. Responsible Person: Town of Lakeview Mayor.

Finding 2024-005 – Duplicate Reimbursement Request for Federal Award Expenditures (Material Weak-ness) Federal Program: 21.027 American Rescue Plan - ARPA Name of Federal Agency: U.S. Department of Treasury Compliance/Internal Control over Compliance: Auditee Responsibilities Criteria: CFR §200.403 and related provisions, costs charged to federal awards must be accurate, allowable, and not charged or reimbursed more than once. Additionally, reimbursement requests must be supported by complete and accurate records to ensure compliance with federal requirements and prevent improper payments. Condition: During our testing of expenditures and reimbursement requests for the above-referenced federal pro-gram, we identified that certain expenditures were submitted for reimbursement twice across two-separate fiscal years. While the underlying expenditures were incurred only once, and not paid twice by the entity, they were in-cluded in reimbursement requests in two different periods, resulting in The Town receiving duplicate reimburse-ments for the same costs Cause: The duplication likely occurred due to changes in financial staffing for The Town. Specifically: • Turnover in personnel resulted in a loss of institutional knowledge regarding prior reimbursement and submissions. • Inadequate review controls allowed previously reimbursed expenditures to be re-submitted in a subsequent period. • Initial reimbursement requests appear to have used an alternate methodology for reimbursement requests. Effect: As a result, the entity received duplicate reimbursement for certain expenditures, creating a potential liabil-ity to the federal awarding agency. This increases the risk of: • Noncompliance with federal cost principles. • Overstatement of allowable program expenditures. • Required repayment of funds and possible additional scrutiny from oversight agencies. Questioned Cost: Yes, $189,468 received more than allowable amounts due to duplicate submission of expendi-tures. Context: The Town administers multiple federal awards and is responsible for preparing and submitting reim-bursement requests based on incurred allowable expenditures. During the audit period, The Town experienced staff turnover and changes in key financial and grant management roles. These changes affected the continuity of over-sight and the tracking of cumulative expenditures and prior reimbursement requests. As a result, controls over the review and reconciliation of reimbursement submissions were not consistently applied, contributing to the resub-mission of previously reimbursed expenditures in a subsequent year. Repeat of a Prior-Year Finding: No, prior year did not require a Single Audit. Recommendation: We recommend that the entity: • Reconcile all reimbursement requests to the underlying expenditures and prior submissions to identify and quantify any additional duplication. • Re-pay any overpayments to the federal awarding agency in a timely manner. • Strengthen internal controls by: o Implementing a centralized tracking system for all reimbursement requests and cumulative ex-penditures. o Establishing a formal review and approval process to verify that costs have not been previously re-imbursed. o Clearly document roles and responsibilities, especially during staffing transitions. • Provide training to staff involved in grant management to ensure compliance with federal requirements. Client's Response: The Town of Lakeview concurs with the recommendation and will work through the Correc-tive Action Plan to improve or solve the deficiency. Corrective Action Plan: __________________To be developed by Town of Lakeview. Planned Implementation Date: In progress. Responsible Person: Town of Lakeview Mayor.