Finding Text
Assistance Number: 16.753 Congressionally Recommended Awards (CRA) Year: 2024 Name of Federal Agency: U.S. Department of Justice Name of Pass-Thru Agency: Direct award Type of Compliance Finding: B – Allowable Costs/Cost Principles Condition: 2 CFR Part 200, section 200.510 requires the City to prepare a schedule of expenditures of federal awards (SEFA) for the period covered by the financial statements. The City’s Schedule of Expenditures of Federal Awards (SEFA) for the year ended December 31, 2024, included expenditures that were incurred in the prior fiscal year. These prior year expenditures were not reported on the 2023 SEFA and incorrectly reported in the current year Criteria: An entity that expends federal awards must have controls in place that would enable the entity to prepare a SEFA including controls that determine the accuracy of the amount of expenditures reported for each federal program. In accordance with 2 CFR §200.502(a), expenditures are to be reported on the SEFA in the fiscal year in which the activity related to the federal award occurs. Questioned Costs: N/A Context: The City did not report $705,791 of expenses on the 2023 SEFA and instead reported these amounts on the 2024 SEFA. Cause: The error occurred due to inadequate review procedures over the preparation of the SEFA. Specifically, the City did not reconcile SEFA amounts to program reports to ensure expenditures were reported correctly at year-end. Effect: The SEFA understated expenditures in the prior year and overstated expenditures in the current year, potentially misleading federal agencies and pass-through entities about the City’s use of federal funds. This could impact risk assessments, reporting accuracy, and decisions regarding future funding. The lack of an accurate and complete SEFA could lead to grant noncompliance and noncompliance with Subpart F, Audit Requirements, of 2 CFR Part 200. Recommendation: We recommend the City strengthen its SEFA preparation and review process by: • Reconciling federal expenditures reported on the SEFA to the general ledger by program and grant year. • Implementing a secondary review to verify that no prior year expenditures are included in current year reporting. • Providing staff with training on SEFA preparation requirements under 2 CFR Part 200. Views of Responsible Officials (Unaudited): City leadership agrees with the auditor’s finding and appreciates the recommendations for improvements. The same root causes identified in Finding 2024-003 – system transition, staff turnover, and decentralized grant management – contributed to this compliance issue. The City recognizes the need for stronger internal controls, centralized oversight, and consistent review of grant management.