Finding 2025-001 - Reporting and Submission of Audited Financial Statements Statement of Condition In accordance with provisions of 2 CFR Part 200 Subpart F, the filing of the data collection form and submission of audited financial statement to the Federal Audit Clearinghouse is to be completed within 9 months of the fiscal year end. The Organization did not complete the filing within 9 months of the fiscal year ended June 30, 2024. Criteria The filing of the data collection form and audited financial statement are due to the Federal Audit Clearinghouse within 9 months after the end of the audit period. Cause Due to turnover in accounting staff and errors in the general ledger reconciliations, the audited financial statements were not completed timely. Effect The required reporting was not completed until July 30, 2025. Recommendation The Organization should put procedures in place to ensure accurate reporting of general ledger accounts so reporting to the Federal Audit Clearinghouse can be completed within 9 months of the fiscal year end. Views of Responsible Officials and Planned Corrective Actions (Continued) Management agrees with the finding and recognizes the importance of timely completion of the annual audit and submission of the audited financial statements and Data Collection Form to the Federal Audit Clearinghouse in accordance with the requirements of 2 CFR Part 200, Subpart F. The delay resulted from a combination of finance staff turnover, the transition in finance leadership, the extended completion timeline of the prior year's audit, and the need to further strengthen year-end financial close and audit preparation processes. In response, management has implemented and continues to enhance monthly financial close and reconciliation procedures to improve the accuracy, completeness, and timeliness of financial reporting while strengthening overall audit readiness. To further strengthen the sustainability of the finance function, management has implemented cross-training within the finance department and is centralizing key financial close and audit preparation procedures to improve consistency, preserve institutional knowledge, and reduce reliance on individual staff members. In addition, management has established a comprehensive annual audit preparation timeline that includes completing key account reconciliations and audit schedules throughout the fiscal year, conducting periodic audit readiness reviews, and engaging the independent auditors by August 15. Audit fieldwork will begin no later than September 1, with the goal of issuing the audited financial statements by December 31, well in advance of the federal reporting deadline. Management believes these corrective actions will strengthen financial reporting processes, improve audit readiness, enhance organizational resilience, and ensure future compliance with the reporting requirements of 2 CFR Part 200, Subpart F.
Finding 2025-002: Preparation of the Schedule of Expenditures of Federal Awards (SEFA) Statement of Condition The Organization. did not provide a properly completed Schedule of Expenditures of Federal Awards (SEFA). Certain programs administered by the Organization were funded through a combination of federal and non-federal sources. The Organization had not identified the portion of expenditures attributable to federal awards prior to the commencement of audit fieldwork. As a result, the identification of federal expenditures and the amounts to be included in the SEFA occurred during the audit process rather than prior to the start of the audit. This resulted in delays in determining the complete population of federal expenditures and the programs subject to audit under the Uniform Guidance. Criteria Under 2 CFR §200.510(b) of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), auditees are responsible for preparing a Schedule of Expenditures of Federal Awards for the period covered by the financial statements. The SEFA must accurately present total federal expenditures for each federal program, including the Assistance Listing number and pass-through identifying information, where applicable. Cause The Organization does not have a formalized process to identify and track the federal portion of expenditures for programs funded through multiple sources during the fiscal year. As a result, management had not compiled or finalized the SEFA prior to the start of the audit. Effect The absence of a completed SEFA at the commencement of the audit delayed the auditor’s ability to determine the population of federal expenditures and identify major programs for testing under the Uniform Guidance. This resulted in additional time required during fieldwork to determine the appropriate amounts to include in the SEFA. Recommendation We recommend that management implement procedures to identify and track federal expenditures by Assistance Listing number throughout the year, particularly for programs with mixed funding sources. Management should prepare and review a complete and accurate SEFA prior to the start of the audit, including identification of federal funding components within blended funding streams. Establishing formal procedures for the preparation and review of the SEFA will help ensure compliance with 2 CFR §200.510(b) and support timely completion of the annual Single Audit. Views of Responsible Officials and Planned Corrective Actions Management agrees with the finding and recognizes the importance of preparing a complete and accurate Schedule of Expenditures of Federal Awards (SEFA) prior to the commencement of the annual audit in accordance with the requirements of 2 CFR §200.510(b). The finding resulted from the absence of a formalized process to consistently identify and document federal funding components within contracts funded through multiple revenue sources, including changes reflected in new and renewed County contracts. As a result, certain federal funding components were not identified during the initial preparation of the SEFA, requiring revisions during the audit. In response, management has implemented and will continue to enhance procedures to strengthen the preparation and review of the SEFA throughout the fiscal year. These corrective actions include: • Establishing forma procedures requiring the identification and documentation of Assistance Listing Numbers (ALNs) for all new contracts and contract renewals. • Tracking applicable federal funding and corresponding ALNs within the accounting system to support the accurate preparation and review of the SEFA. • Requiring the Controller to review all new and renewed contracts monthly to identify changes affecting federal funding and ensure the SEFA is updated accordingly. • Obtaining and maintaining timely ALN confirmations and supporting documentation for all applicable federal awards. • Preparing and reconciling the completed SEFA to supporting accounting records, funding documentation, and applicable federal and pass-through contracts prior to submission to the independent auditors. Management believes these corrective actions will strengthen internal controls over federal award reporting, improve the accuracy and completeness of the SEFA, and ensure future compliance with the requirements of 2 CFR §200.510(b).
Finding 2025-003 - Reporting under Grants and Contracts Statement of Condition During our audit of the reporting requirements under the grants and contracts for the major programs selected we noted that reports were not submitted timely. Criteria Each grant and contract under the major programs selected had different reporting requirements and due dates. Cause Due to accounting and program staff turnover, the Organization was unable to keep track of reporting due dates. Effect Each grant/contract for the major programs tested had reports filed past their required due dates. Recommendation We recommend the Organization put procedures in place to ensure accurate and timely reporting for all required reports under the grants and contracts. Views of Responsible Officials and Planned Corrective Actions San Diego Youth Services (SDYS) concurs with this finding. During the audit period, the organization experienced significant turnover in both accounting and program leadership positions, which impacted the tracking and timely submission of required grant and contract reports. To address this issue, SDYS has implemented enhanced internal controls to strengthen grant reporting oversight and ensure compliance with all reporting requirements. These corrective actions include: • The development and maintenance of a centralized grant reporting calendar that identifies all reporting requirements, responsible staff, and submission deadlines for each grant and contract. • Assignment of clear reporting responsibilities to designated program and fiscal staff, with established internal due dates that preceded funder deadlines to allow adequate time for review. • Monthly monitoring of reporting deadlines by program leadership and the Finance Department to ensure timely completion and submission of required reports. • Increased executive oversight by the Chief Operating Officer (COO), who will review grant reporting compliance on a regular basis. Any report anticipated to be submitted after its required deadline must be communicated to and approved by the COO in advance whenever practicable. The reason for the delay, corrective actions, and revised submission timeline will be documented and monitored to prevent recurrence. • Cross-training of program and fiscal staff to ensure continuity of reporting responsibilities during periods of staff turnover or vacancies. Management believes these enhanced procedures will strengthen accountability, improve communication between program and fiscal teams, and ensure accurate and timely submission of all grant and contract reporting requirements going forward.
Finding 2025-004 – Unallowable Costs: Statement of Condition During our audit of the allowable costs testing for the major programs selected, we noted that rent was paid to a related entity and charged as expenses to the programs which are not allowable costs under the grants. Criteria Under 2 CFR Part 200, rental payments of any property owned by entities affiliated with the recipient are unallowable costs and cannot be charged or reimbursed using federal grant funds. Cause Due to accounting and program staff turnover in the Organization, the expenses were incorrectly charged to the program. Effect The unallowable related party rent expenses totaled $59,137 for the year ended June 30, 2025. Recommendation We recommend the Organization put policies and procedures in place to ensure unallowed expenses are not charged to the grants and to review what are the allowable expenses. The unallowable expenses totaling $59,137 should be repaid to the funding agency Views of Responsible Officials and Planned Corrective Actions Management concurs with the above unallowable expenses finding. The Organization has discussed this finding with the California Governor’s Office of Emergency Services (Cal OES) Auditor and has agreed upon the corrective action necessary to address the identified unallowable costs. The Organization will remove the related-party rent expenses from the affected grant awards through the abatement process approved by Cal OES. Upon completion of the abatement process, any required adjustments or reimbursements will be made in accordance with Cal OES guidance to ensure that only allowable costs are charged to the federal awards. As part of its corrective action, the Organization is strengthening its grant management and financial review processes. The Controller has been designated as the primary reviewer and approver of all grant cost allocations and will ensure grant budgets are reviewed for allowability before they are established within the accounting system. Finance staff will perform documented reviews of grant expenditures to verify compliance with Uniform Guidance (2 CFR Part 200), including the identification of related-party transactions and other potentially unallowable costs prior to charging expenses to federal awards. In addition, the Vice President of Finance will perform a secondary review of grant expenditures involving higher-risk transactions to provide additional oversight. The Organization will also implement formal written policies and procedures governing allowable costs under 2 CFR Part 200, including specific guidance for identifying, reviewing, and documenting related-party transactions. Annual training on federal grant compliance and allowable costs will be provided to both finance and program staff to reinforce these requirements and promote consistent application across the Organization. In collaboration with Cal OES and legal counsel, the Organization will evaluate and implement an appropriate long-term governance and leasing structure that complies with federal cost principles and addresses related-party considerations. This evaluation will ensure future lease arrangements and related-party transactions are structured and documented in accordance with applicable federal requirements. These enhanced controls will be implemented within 30 days. Together with centralized grant accounting procedures and strengthened financial oversight, these corrective actions are intended to ensure that only allowable costs are charged to federal awards and to prevent recurrence of this finding.