Finding Text
FINDING REFERENCE NUMBER 2024-002 (See FINDING REFERENCE NUMBER 2024-001) FEDERAL PROGRAM ALL FEDERAL PROGRAMS ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AWARD NUMBER ALL AWARDS COMPLIANCE REQUIREMENT REPORTING – SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS TYPE OF FINDING MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA 2 CFR §200.510 Financial Statements, (b) states that the auditee must prepare a schedule of expenditures of federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended. At a minimum, the schedule must: (1) list individual Federal Programs by Federal agency, (2) for Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included, (3) provide total Federal awards expended for each individual Federal program and the ALN number or other identifying number when the ALN information is not available, (4) Include the total amount provided to subrecipients from each Federal program, (5) for loan or loan guarantee programs identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule. STATEMENT OF CONDITION As part of our audit process regarding the submission of the Schedule of Expenditures of Federal Awards (SEFA), we noticed $815,055 that had been reported as part of the expenses for the Disaster Grants – Public Assistance (Presidentially Declared Disasters) program, with Assistance Listing Number (ALN) 97.036. These expenses were recognized in the Department accounting records under fund 201, which is a fund used to recognize matching funds from Federal and non-Federal programs. Upon requesting information about these expenses, we realized that part of this expenditure corresponded to funds from the Community Development Block Grant/State's Program and Non-Entitlements Grants in Hawaii program, with ALN 14.228. The total expenditure corresponding to this program is $730,341, which had initially been reported under ALN 97.036. PERSPECTIVE INFORMATION The Department had consultants who maintained control over the administration of these programs. After the contracts were canceled, no information was retained that would have allowed the Department to validate the expenditures under each program. STATEMENT OF CAUSE The Department recorded expenses related to the matching required by Federal regulation using the same project ID it uses for expenses under ALN 97.036. This resulted in the preparation of the SEFA and Financial Statements incorrectly. The Department does not have an internal control structure that allows them to identify and monitor the expenditure and requisition of Federal funds for programs under ALNs 97.036 and 14.228. POSSIBLE ASSERTED EFFECT The Department may fail to include all Federal programs and total expenditures in the SEFA causing misstatements in the SEFA, errors in the determination if a Uniform Guidance audit is required to the Department and could provoke an incorrect Major Program Determination performed by the auditor, resulting in the most likely exclusion of a Major Program for audit purpose. IDENTIFICATION OF REPEAT FINDING Not applicable. RECOMMENDATIONS We recommend the Department to maintain adequate records related to the Federal programs in order to properly identify the Federal programs/transactions when the SEFA is prepared. Once a Federal award is granted or received, the information must be shared with all personnel involved in the financial statement and SEFA preparation to provide assurance that all required program activities / expenditures are included on the SEFA. In addition, the Department must perform a regular fiscal monitoring over the Federal programs transactions in order to provide reasonable assurance that all Federal programs/transactions are properly recorded and included on the SEFA. VIEWS OF RESPONSIBLE OFFICIALS In response to the Audit finding related to maintaining adequate records the Department will implement and follow up on previous Correction Actions Plans in order to complete the requirements. 1. The Department will maintain adequate accounting records related to the federal programs and properly keep records accessible for each program. And updated SOP was drafted and is pending final review by the Federal Agency (EPA) to implement. 2. The Department drafted a new internal control implementation/Review/Monitoring process in order to resolve the systemic internal controls issues. Specific Work Plan and implementation will be started once final approvals of the aforementioned documents. IMPLEMENTATION DATE June 30, 2026 RESPONSIBLE PERSON Finance Director