Finding 2024-002 – Significant Deficiency
Award No.: 97.036, Disaster Grants-Public Assistance (Presidentially Declared Disasters)
Federal Grantor: U.S. Department of Homeland Security, Federal Emergency Management Agency, Passed-through California Governor’s Office of Emergency Services, FEMA-...
Finding 2024-002 – Significant Deficiency
Award No.: 97.036, Disaster Grants-Public Assistance (Presidentially Declared Disasters)
Federal Grantor: U.S. Department of Homeland Security, Federal Emergency Management Agency, Passed-through California Governor’s Office of Emergency Services, FEMA-4683-DR-CA
Compliance Requirement: Other compliance requirements.
Condition: The schedule of Expenditures of Federal Awards (SEFA) was not complete, and expenditures reported on the SEFA were revised during the single audit.
Criteria: 2 CFR Part 200, Subpart F (Uniform Guidance) Section 200.502 states, “The auditee should prepare a Schedule of Expenditures of Federal Awards for the period covered by the auditee’s financial statements.” Internal controls over the SEFA should be in place ensure accrual basis expenses incurred under the federal program are properly reported as expenses on the SEFA and are properly reported as revenue in the financial statements prior to the start of the single audit.
Cause: SEFA was not fully reconciled and finalized until after the single audit began.
Effect: The expenses included on the SEFA for program 97.036, Disaster Grants-Public Assistance (Presidentially Declared Disasters), program FEMA-4683-DR-CA, were revised during the single audit and questioned costs in the amount of $131,195 were identified, which could have resulted in the auditor not selecting the correct major program or expenses for testing and could have resulted in the single audit not satisfying the requirements of the Uniform Guidance.
Context: The District provided cost estimates to the California Governor’s Office of Emergency Services (CalOES) for the amount of flood damage expenses incurred for FEMA Project 725590 and 710830 that were used by CalOES to reimburse the District. The District did not adequately reconcile the expenses incurred at year-end to expense reports available in the accounting system and did not revise the expense estimates provided to CalOES to the actual amounts incurred during the year, resulting in CalOES overpaying the District and the District using the estimated costs on the SEFA for the single audit.
Recommendation: We recommend additional review procedures be implemented to ensure the SEFA is complete and accurate when the single audit begins, which includes reconciling all expenses incurred under each federal award down to the invoice, payroll check and lowest level of other costs claimed, cutting-off each expense at year-end and claiming the reconciled qualifying expenses within 45 days after each quarter end. At year-end, programs should be reviewed for cost adjustments, extensions, and other changes that should be reflected on the SEFA when reconciling expenses for the SEFA. Separate program codes should be used for each grant on the SEFA that summarizes expenses down to the individual invoice level that should be provided to the auditor for the single audit. If overclaimed amounts are identified, the grantor and/or pass-though agency should be contacted to determine whether to return the funds or apply the overclaimed amounts to future claims.
Views of Responsible Officials and Planned Corrective Actions:
The District will implement a formal reconciliation process to ensure all expenditures incurred under each federal award are accurately recorded before the start of the single audit. A quarterly reconciliation process will be conducted after each quarter-end to review and adjust expenses as necessary. The District will contact FEMA to determine whether the questioned costs may be applied to a future claim or whether the amount needs to be returned to FEMA.
Estimated Completion Date of Corrective Action: October 1, 2025