Finding Text
2024-004 CASH MANAGEMENT
Federal agency: U.S. Department of Homeland Security/FEMA
Federal Program Title & Assistance Listing Number: Disaster Grants – Public Assistance (Presidentially Declared Disasters) - 97.036
Hazard Mitigation Grant Program – 97.039
Emergency Management Performance Grants – 97.042
Homeland Security Grant Program – 97.067
Award Period: Various
Type of Finding: Material Weakness in Internal Control over Compliance
Material Non-compliance
Compliance Areas: Cash Management
Questioned Costs: None
Condition
Management has been unable to provide sufficient appropriate audit evidence relating to the
completeness, existence, accuracy, and valuation of the Department’s federal revenue, accounts
receivable/payable and related deferred inflows of resources reported as of June 30, 2024. This was
included in our basis for qualifying opinion on Governmental Activities and the Federal Grants Fund.
The Department lacked effective processes and controls for determining the amount Due From
Federal Government as part of its year-end close process. The Department did not consistently apply
its process for recording the Due From amount for all federal grants throughout the year.
The Federal Grants Fund (Fund 40280) has a deficit fund balance of $24,515,842 and a $31,837,546
balance related to deferred inflows for FEMA grant funds that were not received within the 90-day
period of availability after fiscal year-end.
Subsequent drawdowns/collections on the June 30, 2024 amount Due From Federal Government of
$37,384,520 were poor, with the Department drawing down or receiving $10,160,346 from July 1,
2024 through November 22, 2024.
The accounts receivable summary by grant as of June 30, 2024 contained abnormal credit balances
in the amount of $328,175, which the Department will need to research to determine if there are any
overdrawn amounts.
Management’s Progress for Repeated Finding: Management did make progress implementing
adequate controls to resolve the finding from the prior years, by billing and receiving amounts from
previous fiscal years. However, a material weakness still exists over controls over these account
balances.
Criteria
According to §200.303 Internal controls of 2 CFR Part 200, the non- Federal entity must establish and
maintain effective internal control over the Federal award that provides reasonable assurance that
the non-Federal entity is managing the Federal award in compliance with Federal statutes,
regulations, and the terms and conditions of the Federal award. Specific to the Department, federal
reimbursement requests are completed quarterly with the reporting process.
According to NMSA 1978 §6.-5-2, the Financial Control Division (the division) shall issue a manual of
model accounting practices containing the procedures and policies. State agencies shall comply with
the model accounting practices established by the division, and the administrative head of each state
agency shall ensure that the model accounting practices are followed. According to FIN 16 General
Accounting Practices in the Manual of Model Accounting Practices, all reporting of financial
information must be timely, complete, and accurate, to the state agency’s management and to
oversight agencies and entities.
Effect
State agency’s management and other agencies and entities may not be able to rely on the financial
information presented by the Department due to untimely, incomplete, and inaccurate financial
reporting. The Federal Government may place the Department on controlled draws.
Cause
While the Department has made improvements from prior year related to the reconciliation and draw
down of all federal receivables, the Department continues to lack an effective control environment
that allows for timely and accurate drawdowns, financial reporting, and accounting of the
Department’s Federal accounts receivable/payable balance and related deferred inflows of
resources.