Audit 408441

Criteria: Under 2 CFR §200.510 — Audit requirements for non-Federal entities, entities are required to prepare a SEFA that accurately reflects federal expenditures for the year. Accurate SEFA reporting is critical for compliance testing, federal monitoring, and the Single Audit process. Condition: During audit procedures, it was identified that the Schedule of Expenditures of Federal Awards (SEFA) originally prepared by the entity did not accurately reflect total federal program expenditures. The misstatement was discovered when auditors reconciled the entity’s deferred revenue balances to restricted cash balances, which indicated that reported expenditures were incomplete. The SEFA was subsequently revised by management to reflect the proper total federal expenditures. Cause: The entity did not have adequate internal controls over accounting records and SEFA preparation, resulting in incomplete and inaccurate reporting of federal expenditures. Effect: The original SEFA submitted with the audit was materially misstated, which could have led to noncompliance reporting and misinformed decisionmaking by users of the SEFA. The misstatement required audit intervention and SEFA revision to ensure accurate federal reporting. Recommendation: The entity should strengthen internal controls over SEFA preparation to ensure that all federal program expenditures are accurately recorded and reported. This includes implementing procedures to reconcile expenditures from the general ledger, deferred revenue, and supporting documentation before SEFA submission, as well as providing training to accounting personnel on SEFA preparation requirements and proper identification of federal awards and expenditures. Foundation Response: Management agrees with the finding.

Criteria: In accordance with 2 CFR §200.303, the auditee must establish and maintain effective internal control over federal awards to provide reasonable assurance that expenditures are properly recorded and reported in compliance with applicable laws, regulations, and the terms and conditions of the award. Condition: During testing of allowability, we identified instances in which expenditures were coded to incorrect accounts within the general ledger. Cause: Based on inquiry with management, the errors occurred due to the implementation of new accounting software during the year under audit, which resulted in inconsistencies in account mapping and user understanding of the updated chart of accounts. Effect: Improper coding of expenditures increases the risk that costs may be misclassified or reported incorrectly on financial reports and federal schedules, including the SEFA. This could lead to noncompliance with federal reporting requirements and reduce the reliability of financial information used for decision-making. Recommendation: We recommend that management strengthen internal controls over financial reporting by (1) providing additional training to personnel on the updated accounting system and chart of accounts, (2) implementing a review process to verify proper coding of expenditures, particularly following system changes, and (3) performing periodic reconciliations and monitoring procedures to detect and correct misclassifications in a timely manner. Foundation Response: Management agrees with the finding.