Audit 410475

Finding 2025-002:Significant Deficiency inFinancialManagementSystemAffectingFederalAward Tracking and SEFA Preparation Information on the Federal Program: Assistance Listing Number 10.766 – Community Facilities Loans and Grants, U.S. Department of Agriculture. Award Number: SFRMWQVG79M5. Compliance requirements: Reporting. Type of finding: Significant deficiency. Criteria: 2 CFR 200.302(b)(3) requires that financial management systems maintain records that sufficiently identify the amount,source,andexpenditureofFederalfundsandprovideinformationnecessarytopermit the preparation of required financial and program reports, including the Schedule of Expenditures of Federal Awards. In addition, the auditee is responsible forpreparationofacompleteandaccurateScheduleofExpenditures of Federal Awards for inclusion in the single audit reporting package. Condition and context: During our audit procedures, we noted that expenditures were not consistently recorded in the general ledger in a manner that identifies the applicable funding source or federal program. As aresult:  Federal expenditures could not be readily identified by program from the accounting records.  Supporting information necessary for preparation of the Schedule of Expenditures of Federal Awards was not accumulated within the financial managementsystem.  The Schedule of Expenditures of Federal Awards required substantial audit adjustment and reconstruction to achieve completeness and accuracy. These conditions indicate that FISH’s financial management system does not consistently provide information necessary to identify and track federal award activity. Cause: FISH did not implement or maintain a general ledger structure or supporting processes that identify expenditures by funding source at the transaction level, nor were procedures in place to reconcile or accumulate federal award expenditures during the reporting period. Effect or potential effect: The deficiencies increase the risk that:  The Schedule of Expenditures of Federal Awards may be incomplete orinaccurate.  The majorprogram(s)maynotbeproperlyidentifiedinaccordancewithUniform Guidance.  Populations used for audit testing may be incomplete or inaccurate  Federal expenditures may not be consistently identified or reported by funding source.  Financial informationusedforinternalandexternalreportingoffederalawardsmaynotbereliable without significant manual intervention. While this condition did not result in identified questioned costs, it reflects a weakness in the financial management system required to support federal awardreporting. Questioned Costs: none. Recommendation: Werecommend thatmanagement:  Implement a chart of accounts or coding structure that identifies funding source at the transaction level.  Establish procedures to track expenditures by federal program throughout theyear.  Perform periodic reconciliations of grant activity to the general ledger.  Develop and document a formal process for preparation and review of the Schedule of Expenditures of Federal Awards. Responsible official’s response: Management agrees with the finding and has prepared a corrective actionplan.