Finding Text
Finding No. SA 2024-002 – Allowability of Expenditures - Lack of Invoice Supports for the Outstanding Balance of Accrued Expenses at Year-end Federal Program Information Assistance Listing Number: 17.258 Federal Program Name: WIOA Adult Program Federal Agency: U.S. Department of Labor Pass-through Entities: Los Angeles County Workforce Development, Aging and Community Services, Los Angeles County One Stop Operator for the America Job Centers of California Contract Number and Name: 2223-AJCC-GC Compliance Requirement: Allowable costs and cost principles Assistance Listing Number: 17.278 Federal Program Name: WIOA Dislocated Worker Formula Grants Federal Agency: U.S. Department of Labor Pass-through Entities: Los Angeles County Workforce Development, Aging and Community Services, Los Angeles County One Stop Operator for the America Job Centers of California Contract Number and Name: 2223-AJCC-GC Compliance Requirement: Allowable costs and cost principles Criteria or specific requirement One of the core criteria for allowable costs under the Uniform Guidance is that the costs should be supported by sufficient documentation to justify the expense. Condition Based on our testing of accrued expenses, we noted that the accrued expenses as of June 30, 2024 amounting to $29,106, lacked adequate supporting documentation for audit review. Furthermore, we were informed that for certain items in the remaining outstanding balance of accrued expenses, the Consortium has not yet received the invoice, or the accruals was partially paid but subsequently dropped by the participant and further vendor billings were no longer received. As a result, per the auditor’s recommendation, management recorded an adjusting entry to reverse these accrued expenses, which are not supported by invoices. Cause The management does not reverse the Consortium’s accrued expenses after year-end and no review of long outstanding accrued expenses is being performed. No adjustment was also made to the previously claimed expenditures under the program. Effect Inadequate supporting documentation makes it challenging to verify the legitimacy and business purpose of these transactions. This situation not only increases the risk of errors in the financial statements but also exposes the Consortium to questionable costs being reimbursed by the County. Questioned Costs $29,106 Recommendations We strongly recommend that management implement a robust system for documenting invoice support for all outstanding balance of accrued expenses at year-end. The key is to have a clear, auditable trail showing that each transaction has been reviewed and approved by the appropriate personnel. Views of Responsible Officials and Planned Corrective Action Management acknowledges that certain accrued expenses as of June 30, 2024, lacked adequate invoice support or appropriate year-end review. This was an oversight within our year-end closing procedures, and we recognize the need for strengthened internal controls surrounding the accrual and reconciliation process. A formal review process will be added to the year-end closing checklist. All outstanding accruals older than 180 days will be reviewed for validity and continued need. No accrual will be recorded unless adequate document support, vendor communication, or other verifiable documentation is provided. These corrective actions will ensure all accrued expenses are appropriately documented, reviewed, and supported before reporting or claiming costs. This will establish a clear, auditable trail and reduce the risk of unsupported expenditures or questioned costs in future audits. Personnel responsible for implementation: Alejandra Duarte and Dante Real Position of responsible personnel: Management Analyst and Accounting Manager Expected date of implementation: December 31, 2025