Finding Text
Finding #SA2023-001 Cash Management and Accuracy of Federal Financial Reports
Assistance Listing Number: 20.507
Assistance Listing Title: COVID-19 – Federal Transit Formula Grants
Name of Federal Agency: Department of Transportation
Federal Award Identification Number: CA-2020-212-00 and CA-2022-083-00
Criteria: The 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements.
Related to these requirements, the City should submit drawdown requests to the Department of Transportation throughout the fiscal year as costs are incurred and Federal Financial Reports should agree with those drawdown requests and supporting accounting records. Drawdown requests should be completed at least quarterly, depending on the volume of program activity, to improve the cash management for the program and to match expenditures with associated revenues throughout the fiscal year. In addition, since the grant is on a reimbursement basis, expenditures should generally be incurred prior to requesting reimbursement from the Department of Transportation unless specifically authorized by the grantor, and costs included in the Federal Financial Reports should be the same as those included in requests for reimbursement.
Condition: During our review of the Federal Financial Reports related to the grants listed above, we noted the following:
• For the annual report for the period of October 1, 2022 to September 30, 2023 related to grant #CA-2020-212-00, the report included expenditures of $508,871, but the City only requested reimbursement in the amount of $228,995 during that same time period.
• For the third quarter of fiscal year 2023 for grant #CA-2022-083-00, the report included expenditures in the amount of $385,675, but the City only requested reimbursement in the amount of $364,837 during that same time period.
• For the fourth quarter of fiscal year 2023 for grant #CA-2022-083-00, there were no current expenditures included in the report although the City had incurred grant expenditures during that period and was reimbursed $745,899 for the associated quarter.
In addition to our review of the Federal Financial Reports, we also reviewed the timing of expenditures in relation to the associated reimbursement requests and noted that for both of the grants listed above, the City did not file for and receive reimbursement for the associated grant expenditures until four to ten months after the activity took place. The grant drawdowns took place as follows:
Period of Federal Expenditures Date of Filing for Reimbursement
July 1, 2022 to September 30, 2022 July 13, 2023
October 1, 2022 to December 31, 2022 July 13, 2023
January 1, 2023 to March 31, 2023 September 26, 2023
April 1, 2023 to June 30, 2023 February 26, 2024
Cause: We understand that the City fell behind on drawing down grant funds on a timely basis due to employee turnover and this in turn caused the inaccuracies in the Federal Financial Reports.
Effect: The City is not in compliance with the internal control requirements of 2 CFR Section 200.303. The City is not matching expenditures with associated grant revenues throughout the fiscal year by filing timely reimbursement requests as expenditures are incurred and is at risk of filing a reimbursement request after the filing deadlines of the grant. In addition, the late filing of reimbursement requests resulted in inaccurate Federal Financial Reporting to the grantor.
Recommendation: The City must develop procedures to ensure grant reports are accurate and agree with supporting accounting records prior to being submitted to the grantor. The City must also develop procedures to ensure that all grant-funded expenditures are included on drawdown requests and those requests should be prepared at least quarterly throughout the fiscal year.
View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.