Audit 413118

Condition During our audit, we identified material errors in the financial records used to prepare and submit required federal financial reports (SF-425). Specifically, the Organization failed to record certain allowable expenditures, accrued liabilities, related grant receivables, and federal revenue associated with federal awards. As a result, expenditures reported on previously submitted SF-425 reports were materially understated. Additionally, the Organization did not submit drawdown requests for certain allowable expenditures incurred during the award period. Consequently, federal expenditures reported to the awarding agency did not agree to the underlying accounting records after correction of the identified errors. Criteria Federal financial reports are required to be complete, accurate, and supported by the accounting records of the recipient. Management is responsible for establishing and maintaining effective internal controls to ensure allowable program expenditures are accurately identified, recorded, accumulated, and reported in required federal financial reports. Effect • SF-425 reports submitted to the federal awarding agency were materially misstated. • Federal expenditures reported to the awarding agency were understated. • Federal revenue and grants receivable were materially understated in the accounting records. • Reimbursement requests were not submitted for certain allowable expenditures incurred under the federal award. • Management relied on alternative financing sources to fund operations while allowable federal reimbursements remained undrawn. • Errors identified during the audit required material adjustments to the financial statements and the schedule of expenditures of federal awards (“SEFA”). Cause Management did not maintain effective controls to: • Identify all allowable expenditures incurred under federal awards. • Record grant-related expenditures, receivables and revenue on a timely basis. • Reconcile expenditures recorded in the general ledger to amounts reported on SF-425 reports. Review federal financial reports for completeness and accuracy prior to submission. • Monitor outstanding reimbursement opportunities and timely submit drawdown requests. Recommendation We recommend management strengthen controls over federal reporting by: • Implementing procedures to identify and record all allowable federal expenditures on a timely basis. • Performing periodic reconciliations between grant expenditures, reimbursement requests, general ledger balances, and SF-425 reports. • Establishing documented supervisory review of all federal reports prior to submission. • Monitoring unreimbursed grant expenditures and submitting reimbursement requests promptly. • Providing additional training to personnel responsible for federal grant accounting and reporting requirements. Questioned Costs None reported. The expenditures identified were determined to be allowable and supported; however, they were omitted from the accounting records and federal reports.