Finding Text
Assistance Listing, Federal Agency, and Program Name – 20.507, 20.525, 20.526, U.S. Department of Transportation, Federal Transit Cluster
Federal Award Identification Number and Year – All
Pass through Entity – N/A
Finding Type – Material weakness
Repeat Finding – Yes
Criteria – Per 2 CFR 200.508(b), an auditee must properly prepare the schedule of expenditures of federal awards (SEFA).
Per 2 CFR 200.510(b), the SEFA for the period covered by the auditee's financial statements must include the total federal awards expended as determined in accordance with 2 CFR 200.502, which describes the basis for determining federal awards expenses.
Per 2 CFR 200.71(2), for a SEFA prepared on a cash basis, expenditures are the sum of (i) cash disbursements for direct charges for property and services; (ii) the amount of indirect expense charged; (iii) the value of third-party in-kind contributions applied; and (iv) the amount of cash advance payments and payments made to subrecipients.
Condition – The SEFA for the year ended June 30, 2024 was not accurately prepared in accordance with the Authority’s accounting policy for a cash basis SEFA, as it originally included expenditures that were direct charges for property and services, but cash disbursement had not been made as of June 30, 2024.
Questioned Costs – None
Identification of How Questioned Costs Were Computed – N/A
Context – Required revisions were identified during the audit to ensure that the schedule of expenditures of federal awards was accurately stated on a cash basis. These revisions related to $4,642,826 of federal expenditures where goods and services had been received as of June 30, 2024 that were originally on the SEFA, but cash disbursement had not been made for these direct charges as of June 30, 2024 and therefore should not have been included in the cash basis SEFA.
Cause and Effect – Internal control procedures relative to the identification of federal expenditures to be reported on the SEFA did not operate effectively to ensure proper presentation of the SEFA under a cash basis model. This resulted in the Authority's schedule of expenditures of federal awards to be overstated prior to auditor identified revisions.
Recommendation – The Authority should expand procedures and review processes to ensure the proper expenditures are reported on the schedule of expenditures of federal awards in the proper period.
Views of Responsible Officials and Corrective Action Plan – The corrective actions implemented for capital grants on a cash basis for the SEFA will be expanded to include the operating grants.