Audit 409036

WaterSMART (Sustain and Manage America’s Resources for Tomorrow) ALN: 15.507, Matching Condition: The District tracks matching expenditures through its accounting system and reports those amounts in its financial and performance reports. During the audit period, federal expenditures exceeded the required recipient cost share. Criteria: The agreement requires that the federal share of allowable costs not be expended in advance of the recipient's non-federal share. Federal and non-federal expenditures are expected to occur concurrently based on the approved cost-sharing percentages. Context: The District’s April 2024 financial report, covering the period from November 27, 2023, through March 31, 2024, reported total expenditures of $732,948, of which 97% represented federal funds and 3% represented recipient funds. The October 2024 report, covering April 1, 2024, through September 30, 2024, reported total expenditures of $1,544,715, of which 93% represented federal funds and 7% represented recipient funds. These reports indicate that federal funds were expended in advance of the required recipient cost share. Effect: The District did not comply with the grant agreement's cost-sharing requirements. Questioned Costs: No questioned costs were identified. Cause: District management was aware of the imbalance and indicated that future recipient expenditures would reduce the disparity by increasing the amount of allowable matching costs reported. Auditor’s Recommendation: We recommend that District management continue its efforts to comply with the grant agreement's cost-sharing requirements by ensuring that federal and non-federal costs are reported concurrently in accordance with the approved cost-sharing requirements. District’s Response: The District needed to order project materials in advance and make progress payments before construction began. Because work had not yet started, recipient expenditures temporarily exceeded the proportional cost share. As the project progresses and additional eligible costs are incurred, the federal and recipient shares will align with the required cost-share requirements.