Finding Text
2023-002: Material Weakness: Preparation of Schedule of Expenditures of Federal Awards
Criteria: The Code of Federal Regulations (CFR) section 200.510 (b) states that, the auditee must prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the auditee's financial statements and must include the total federal awards expended as determined in accordance with section 200.502- Financial Management and must include at minimum the following: (1) list of individual federal programs by federal agency (2) for federal awards received as a subrecipient, the name and number of the pass-through entity (3) federal awards expended for each individual federal program and the Assistance Listings Number (4) include the total amount provided to subrecipients from each Federal program. (5) include notes that describe significant accounting policies used in preparing the schedule, loan or loan guarantee programs, and whether the auditee elected to use the 10% de minimis cost rate.
Financial management section 200.502 (a) states that the auditee’s financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. (b) The financial management system must provide for the following: (1) identification of all federal awards received and expended (2) accurate, current, and complete disclosure of the financial results of each federal award or program (3) records that identify adequately the source and application of funds for federally-funded activities (4) effective control over, and accountability for, all funds, property, and other assets (5) comparison of expenditures with budget amounts for each Federal award (6) written procedures to implement the requirements of section 200.305 (7) written procedures for determining the allowability of costs in accordance with Subpart E and the terms and conditions of the federal award.
Condition: During the audit of the December 31, 2023 Schedule of Expenditures of Federal Awards (SEFA) prepared by management, we noted that controls over the preparation of the SEFA were not properly designed, therefore did not include the required federal award information and did not report all 2023 federal awards and related expenditures.
Cause: The Organization has not implemented policies or procedures, to the degree necessary, to ensure that the SEFA is reconciled at year-end and that the schedule includes all federal awards and related expenditures.
Effect: Audit procedures identified additional federal award expenditures and adjustments were required to be made to the final SEFA.
Recommendation: We recommend that management of the Organization implement policies, procedures, and internal controls to ensure that federal expenditures are tracked in a manner that reflects that federal funds have been used and reported in accordance with federal regulations.
Views of Responsible Officials: Management agrees with this finding and their response is included in the corrective action plan.