Finding Text
Federal Agency: U.S. Department of Treasury Federal Program Name: Community Development Financial Institutions Equitable Recovery Program Assistance Listing Number: 21.033 Federal Award Identification Number and Year: 22ERP061061 – 2022 Award Period: April 10, 2023 through December 31, 2028 Type of Finding: - Material Weakness in Internal Control over Compliance - Other Matter Criteria or specific requirement: Per 2 CFR §200.303 and Government Auditing Standards (GAS), recipients of federal awards must establish and maintain effective internal control over federal programs. This includes maintaining documentation that supports the allowability of expenditures in accordance with the terms and conditions of the federal award. Condition: The original Schedule of Expenditures of Federal Awards (SEFA) submitted by the Credit Union included $2,331,150 in expenditures that appeared consistent with allowable uses under the grant agreement. However, the Credit Union did not maintain transaction-level tracking or retain detailed supporting documentation to substantiate the allowability of these expenditures. This lack of contemporaneous documentation prevented the audit team from obtaining sufficient appropriate audit evidence to confirm compliance with CDFI Fund requirements. Questioned costs: None Context: The deficiency was identified during the audit of the SEFA and reconciliation of unearned grant revenue. The original SEFA lacked sufficient documentation, and the audit team had to expand procedures to validate the revised expenditure amounts. Following this, Management performed a detailed analysis and reconciliation of grant-related transactions, which resulted in an updated SEFA. This revised schedule included properly supported expenditure details, ensuring alignment with grant requirements and correcting prior documentation gaps. Cause: The Credit Union did not implement adequate internal controls to ensure contemporaneous tracking and documentation of grant expenditures. This may have been due to limited staffing, lack of formal procedures, or insufficient training on federal grant compliance requirements. Effect: The absence of transaction-level tracking and supporting documentation created a risk of material misstatement in the SEFA and noncompliance with federal grant requirements. Although management later provided an updated SEFA with supported expenditures totaling $2,354,606, the initial lack of documentation could have led to disallowed costs or questioned costs if not corrected. The $23,456 difference between the updated SEFA and recorded grant revenue was not considered material to the financial statements. Repeat finding: Not a repeat finding. Recommendation: We recommend that the Credit Union implement procedures for transaction-level tracking of all federal grant expenditures to ensure accurate and complete records. The organization should maintain contemporaneous documentation that clearly supports the allowability of each expenditure in accordance with federal requirements. Additionally, staff should receive training on federal grant documentation and compliance requirements to strengthen understanding and adherence to applicable regulations. Finally, the Credit Union should perform periodic internal reviews to verify that documentation standards are consistently met and that internal controls remain effective. Views of responsible officials and planned corrective actions: Management agrees with the finding and acknowledges the need to strengthen internal controls over grant expenditure documentation. They have committed to implementing the recommended procedures.