Audit 409488

Criteria: The Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. The Uniform Guidance in 2 CFR Section 200.302(a), Financial Management, states that each state must expend and account for the federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds. In addition, the state’s and the other nonfederal entity’s financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award.Condition:Soliya reported program expenditures on the SEFA in excess of the amount permitted under the federal award. Specifically, program costs were recorded based on amounts submitted for reimbursement rather than amounts ultimately determined to be eligible and reimbursable under the award. As a result, federal expenditure reported on the SEFA submitted to the auditors was overstated by $6,015. The SEFA presented herein was adjusted to reflect the correct amount of eligible expenditures. Cause: Soliya did not maintain effective controls over the review of grant expenditures and SEFA reporting to ensure that only eligible grant costs were reported as federal expenditures. In addition, management did not adequately identify, track, and exclude costs not permitted under the award from amounts reported on the SEFA. Effect: As a result, the SEFA included expenditures exceeding the amount permitted under the award, causing federal expenditures to be overstated. This resulted in inaccurate federal reporting and increased the risk of noncompliance with applicable award requirements and Uniform Guidance cost principles. Questioned Costs: None. Context: The nature of these findings is detailed in the condition section above. Repeat Finding: This finding is not a repeat finding from prior year. Recommendation: Soliya should strengthen controls over grant accounting and SEFA preparation to ensure costs not permitted under the federal award are identified, reviewed, and excluded from federal expenditures reported on the SEFA. This should include procedures to review costs for compliance with award requirements, reconcile grant activity to supporting documentation, and verify that only eligible expenditures are reported. Views of Responsible Officials: Management agrees with the finding and recommendation set forth within and has developed a corrective action plan to address the instances of noncompliance.