Finding Text
Finding Type: Material weakness in internal controls over financial reporting.
Criteria: Management is responsible for the preparation of the financial statements and the Schedule of
Expenditures of Federal Awards (SEFA). The District is responsible for maintaining complete and
accurate financial records and the Schedule of Expenditures of Federal Awards should be prepared
directly from those records.
Conditions and context: The Schedule of Expenditures of Federal Awards presented for audit required
multiple drafts. It was noted that accrued expenditures reported in the 2022 SEFA were included in the
2023 SEFA as well. Additionally, during testing it was noted expenditures that were accrued in 2023
were not included in the SEFA as they should be. This led to two material adjustments to the financial
statements.
During the audit it was noted that there were refunds for make ready expenses received during the year.
Of these refunds, $10,499 pertained to costs previously reported on the 2022 SEFA. The total of $93,616
refunds received in 2023 were recorded as grant income rather than offsetting the appropriate 2023
expenses and were improperly recorded on the SEFA. Final reports to the governing agency did not tie
to internal records as the District did not include these refunds in the reporting. Of the $93,616,
approximately, $60,000 of refunds received had initially been expended under a grant that was fully
expended during 2023. Instead of applying those refunds to the original grant, the District applied them
to an open grant that was currently being expended. The District is required to receive written
permission from the governing agency on the proper treatment of these funds. There was no permission
noted during the audit.
Cause of condition: The District does not have effective internal control over the preparation of the
financial statements and the Schedule of Expenditures of Federal Awards.
Effect of Condition: Potential understatement or overstatement of expenditures could exist in the financial
statements and Schedule of Expenditures of Federal Awards and would not be detected and corrected.
The District could receive refunds of federally awarded dollars and not use them for allowable
expenditures under grant agreements.
Recommendation: It is recommended that the District establish additional policies and procedures to
ensure that all Federal awards are identified and reported accurately on the SEFA and are recorded in
the correct period. There should be additional review after the preparation of the SEFA.
It is recommended that the District receive documentation from the grantor on the best practices for the
treatment of credits and refunds for federal expenditures.
View of Responsible Officials and Planned Corrective Action: The SEFA was modified several times as a
result of receiving vendor invoices up to May, 2024 for work completed in the audit period. In
addition, vendors refunded make-ready costs which had been invoiced to a closed grant. We sought guidance from the grantor regarding proper accounting treatment of those refunds and, receiving
none, recognized those refunds as revenue to be tracked against grant expenses.
Corrective action includes approving invoices through the audit period and submitting the SEFA based
on this information.
Planned Implementation Date of Corrective Action: Ongoing
Person Responsible for Corrective Action: Jennille Smith, Executive Director