Finding 1081188 (2023-001)

FINDING 2023-001—Schedule of Expenditures of Federal Awards (SEFA) Material Weakness in Internal Control over Financial Reporting Material Weakness in Internal Control over Compliance—Reporting Federal agency – U.S. Department of Treasury Identification of federal program – Federal Assistance Listing No. 21.027, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award Number/Award Year – SLFRP3211 / 2022-2023 Criteria – Office of Management and Budget’s (OMB) Uniform Guidance requires the auditee to prepare a schedule of expenditures of federal awards (SEFA) for the period covered by the auditee's financial statements that includes total federal awards expended for each individual federal program, and that those programs be subject to timely audit. Condition – DRC improperly omitted the COVID-19 Coronavirus State and Local Fiscal Recovery Funds from its SEFA for the year ended September 30, 2023. Cause – DRC did not have adequate internal control to identify the federal funding that was passed through a state organization. Context – Restating the SEFA for the addition of the COVID-19 Coronavirus State and Local Fiscal Recovery Funds added expenditures totaling $2,369,463. The restated SEFA reports $20,612,445 in total federal expenditures. Effect – Uniform Guidance places the responsibility for identifying major programs on the auditor, and the SEFA serves as the primary basis for the auditor's major program determination. Appropriate major program determination by the auditor is dependent upon the accuracy and completeness of the information in the SEFA. The original SEFA was understated and incomplete as a result of the aforementioned program being improperly omitted. As a result, a major program was not properly identified and audited. Repeat Finding – Yes. Recommendation – We recommend that DRC update their grant agreement review procedures to ensure pass-through federal awards are properly identified and included in the SEFA. Response – See corrective action plan.