Finding Text
Compliance with Single Audit Requirements
Assistance Title: COVID-19 - Economic Adjustment Assistance - Coronavirus Aid, Relief, and Economic Security (CARES) Act Revolving Loan Fund
Assistance Listing Number: 11.307
Federal Agency: U.S. Department of Commerce
Type of Finding: Significant Deficiency and Noncompliance
Category of Finding: Audit Requirements
Known Questioned Costs: $0
Likely Questioned Costs: $0
Criteria According to the Uniform Guidance (2 CFR Part 200.501), non-federal entities that expend $750,000 or more in federal awards during their fiscal year are required to have a single audit conducted. The audit report must be submitted to the Federal Audit Clearinghouse (FAC) within the earlier of 30 calendar days after receipt of the auditor's report or nine months after the end of the audit period (2 CFR Part 200.512).
Condition The Organization did not engage to conduct a single audit for FY23 despite meeting the expenditure threshold, and the required audit report was not submitted within the prescribed due dates. This oversight necessitated the reissuance of the FY23 financial statement audit to complete and issue a single audit.
Cause The oversight occurred due to inadequate internal controls, a lack of understanding of federal expenditure calculation for the loan program, and turnover in the Finance Director’s role. The transition in finance leadership led to an isolated weakness in the Organization’s control process as it relates to the management of this federal award. Management did not apply the appropriate methodology for calculating federal expenditures related to the revolving loan fund for reporting in the Schedule of Federal Expenditures. There was also insufficient oversight and review processes to detect and correct the error in a timely manner.
Effect As a result of the incorrect calculation, the Organization did not engage to conduct the required single audit within the stipulated deadlines, leading to noncompliance with federal regulations. Failure to submit the single audit report within the required timeframe increases the risk of noncompliance with federal regulations, which could lead to sanctions, penalties, or the retraction of federal funding. Late submission may also affect the organization's eligibility for future federal awards and could result in increased scrutiny from federal agencies.
Repeat Finding This is not a repeat finding.
Recommendation We recommend that management implement robust policies and internal control procedures to ensure accurate calculation and reporting of federal expenditures in the Schedule of Federal Expenditures, particularly for complex programs like revolving loan funds. We also recommend an increase in oversight by senior management and the board to ensure that financial reporting and compliance responsibilities are adequately fulfilled.
Management’s Response Management concurs with this finding. See Management’s Response and Corrective Action plan section.