Audit 414208

Federal Awards: 21.027 Coronavirus State and Local Fiscal Recovery Funds Criteria: The auditee is responsible for preparing an accurate schedule of expenditures of federal awards (SEFA) in accordance with the Uniform Guidance. Condition: Downstreet’s draft schedule of expenditures of federal awards incorrectly omitted approximately $1.2 million in federal awards. Context: The Organization received significant federal awards that were passed through to other entities. Cause: Lack of adequate controls over preparation of the SEFA. Effect: Lack of adequate controls over preparation of the schedule of expenditures of federal awards could result in errors in the major program selection for audit. Recommendation: We recommend the Organization improve internal controls over reporting to ensure it appropriately identifies all expenditures of federal awards for inclusion on the SEFA. Views of responsible officials: Management concurs with the finding. The omitted expenditures related primarily to federal awards received through pass-through entities and subsequently provided to other entities. Although the underlying transactions were recorded in the accounting records, the process used to identify and compile federal expenditures for the SEFA did not adequately capture all applicable awards. Management agrees that additional reconciliation and review controls are necessary to ensure the completeness and accuracy of the SEFA

Criteria: The auditee is responsible for establishing and maintaining effective internal controls to ensure assets are properly recorded. Condition: Downstreet purchased a new property for approximately $5 million and did not record the asset in its general ledger. Additionally, receipts of grant funding were recorded as a reduction in construction-in-progress of approximately $1.38 million rather than an asset and related grant revenue. As a result, property, plant and equipment assets and grant revenue were understated. Context: The Organization purchased a property for development. The transactions occurring at closing were omitted. Subsequent grant-funded construction-in-progress transactions were not recorded in a consistent manner. Cause: The omission occurred because of a lack of a formal reconciliation process between development project records and the fixed asset and grant revenue balances. Effect: The failure to record this addition resulted in a material understatement of capital assets and grant revenue. This increases the risk of financial misstatement, and inaccurate financial reporting to stakeholders. Recommendation: We recommend the Organization improve internal controls over financial reporting to ensure it appropriately identifies all transactions related to property purchases and subsequent improvements to those properties. Views of responsible officials: Management concurs with the finding. The acquisition and related grant activity were not fully reflected in the general ledger because development project records were not formally reconciled to the fixed asset, construction-in-progress, and grant revenue accounts. Management agrees that a more structured review and reconciliation process is necessary to ensure property acquisitions, subsequent development costs, and related funding are recorded completely, accurately, and in the appropriate accounting period.