Finding Text
CRITERIA - As per 2 CFR 200.302 and the terms and conditions of the grant, the auditee must maintain accounting records that clearly identify the source and application of federal funds and must account for federal awards separately from other funds to ensure that federal funds are used only for authorized purposes. CONDITION - During my audit of the 2024 Program Year of the National Coastal Zone Management Program, I noted the Town of Dauphin Island deposited federal program funds into a pooled bank account with non-federal funds. Program expenditures were paid from this pooled account without a separate ledger or tracking mechanism in place at the time of the transactions. As a result, the auditee was unable to immediately identify program-specific expenditures and balances. CAUSE - The auditee did not have adequate written procedures or internal controls to ensure that federal funds were maintained in separate accounts or separately tracked within the accounting system. EFFECT - The commingling of federal and non-federal funds increases the risk that federal funds could be used for unallowable purposes, could result in unallowable costs being charged to the grant, and makes timely and accurate financial reporting more difficult. Although I was ultimately able to determine the allowable costs after significant additional procedures, the lack of separate accounting records represents a weakness in internal controls over compliance. QUESTIONED COSTS - None identified. REPEAT FINDING - No. RECOMMENDATION - I recommend the Town of Dauphin Island establish procedures to ensure that federal funds are either maintained in a separate bank account or are tracked separately in the general ledger through the use of grant-specific accounts or cost centers. Federal program transactions should be clearly identified to facilitate effective monitoring of federal grant proceeds and expenditures and timely and accurate financial reporting.