Audit 414790

Significant Deficiency in Internal Control over Compliance and Noncompliance Related to the Preparation of the Schedule of Expenditures of Federal Awards (SEFA). Federal Program Information: The Schedule of Expenditures of Federal Awards (SEFA) is required by Uniform Guidance and serves as a basis for determining major programs and performing the Single Audit. Criteria: Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires the auditee to prepare a Schedule of Expenditures of Federal Awards for the period covered by the auditee's financial statements that accurately presents federal expenditures, Assistance Listing numbers, pass-through information, and other required disclosures. Management is responsible for establishing and maintaining internal controls to ensure the SEFA is complete and accurate. Condition: During our audit, we identified errors in the preparation of the SEFA that required correction by management. Specifically, the SEFA contained inaccuracies involving one of more of the following: improper reporting of federal expenditures and omission of federal programs or expenditures. As a result of audit procedures, adjustments were necessary to properly present the SEFA in accordance with Uniform Guidance requirements. Cause: Management did not have adequate review procedures in place to ensure the completeness and accuracy of the SEFA before it was submitted for audit. Existing controls were not sufficient to identify errors in federal program identification, expenditure reporting, or required disclosures. Effect: An inaccurate SEFA increases the risk that federal expenditures may be improperly reported, major programs may be incorrectly identified, and compliance requirements may not be appropriately evaluated during the Single Audit process. Failure to prepare an accurate SEFA constitutes noncompliance with Uniform Guidance reporting requirements. Questioned Costs: None. Repeat Finding: No. Recommendation: We recommend management establish and document formal procedures for the preparation and review of the SEFA, including: reconciliation of SEFA expenditures to the general ledger and financial statements; verification of Assistance Listing numbers and federal program names; review of grant agreements to identify pass-through funding arrangements; independent supervisory review of the completed SEFA prior to submission for audit; and use of a standardized SEFA preparation checklist. Management's Response: Management agrees with the finding and plans to strengthen procedures for identifying, accumulating, and reviewing federal expenditures to ensure the SEFA is complete and accurate in future years.