Finding Text
Condition: The Schedule of Expenditures of Federal Awards (SEFA) initially prepared by management did not include the required detail on expenditures incurred under federal programs. The client’s accounting system (QuickBooks) lacked the functionality to effectively track grantfunded expenditures that were capitalized for construction projects, resulting in incomplete reporting. Subsequent versions of the SEFA contained inconsistencies and did not reconcile with supplemental reports or other audit evidence. These limitations increased the complexity of the Single Audit process. Despite these challenges, it remains management’s responsibility to ensure the SEFA is complete, accurate, and prepared in accordance with Uniform Guidance. The issues noted reflect a breakdown in internal controls over federal award reporting and underscore the need for stronger oversight and reconciliation procedures. Cause: The deficiency appears to stem from a combination of system limitations within QuickBooks, which does not natively support federal grant tracking, and a lack of formalized internal processes for identifying and reporting federal expenditures—particularly those capitalized for construction projects. Additionally, there was a misunderstanding of SEFA requirements and insufficient reconciliation between grant activity reports and the SEFA. Effect: The SEFA submitted did not comply with federal reporting requirements under Uniform Guidance, which may increase the risk of noncompliance with federal grant terms and conditions, require expanded audit procedures, and may prompt further scrutiny from oversight bodies. Criteria: Per Uniform Guidance (2 CFR Part 200, Subpart F), entities expending federal funds are required to prepare and submit a SEFA that accurately reflects expenditures by federal program. The SEFA must include total federal expenditures for each award, CFDA numbers (now referred to as Assistance Listing Numbers), and other required details. Revenue listings or unreconciled supplemental reports do not satisfy these requirements. Recommendation: We recommend management implement a system or process to track federal grant expenditures, including capitalized costs, in accordance with Uniform Guidance, prepare the SEFA based on actual expenditures incurred, ensuring reconciliation with supporting documentation, and provide training to relevant personnel on SEFA preparation, federal compliance requirements, and the distinction between revenue and expenditure reporting.