Finding Text
Improper Preparation of the Schedule of Expenditures of Federal Awards Condition: The Agency did not properly prepare the Schedule of Expenditures of Federal Awards ("SEFA") as required by 2 CFR 200.510(b). The Agency did not initially prepare a SEFA as it was unaware that it had expended $750,000 in federal awards, thereby triggering the requirement for a Single Audit. The Chief Financial Officer was unaware of which grants qualified as Federal awards, especially those passed through the State or County. The Chief Financial Officer was also unaware of how to prepare a SEFA once the federal awards had been determined. Criteria: Under 2 CFR 200.510(b), an auditee that expends the federal award threshold in a fiscal year must prepare a SEFA for the period covered by its financial statements, including each federal program's assistance listing number, federal agency, pass-through entity, if applicable, and total federal expenditures by program. The SEFA is required supplementary information used as the basis for planning and conducting the Single Audit, including the determination of major programs. Cause: The condition resulted from insufficient knowledge and training of accounting staff and management regarding SEFA requirements and the Single Audit process. Management had not established detailed procedures, including reconciliation of the SEFA to the general ledger and grant records, or a formal review process to ensure that all required elements and programs were included and properly presented. Effect: Because the SEFA was not initially completed, there was a risk that one or more federal programs would not be selected and tested as part of the Single Audit, potentially resulting in noncompliance with Uniform Guidance audit requirements. Inaccurate reporting of federal expenditures can affect the determination of major programs, potentially lead to questioned costs, and may cause federal agencies to or pass-through entities to view the auditee as noncompliant with Single Audit reporting requirements. The ARPA grant under Assistance Listing Number 21.027 (Coronavirus State and Local Fiscal Recovery Funds) was identified as the major program for testing. However, we later discovered an additional county-funded grant under the same Assistance Listing number that had not previously been communicated. This omission resulted in an initial testing sample from an incomplete population requiring additional procedures to correct the impact on the Single Audit. Questioned Cost: None noted as a result of audit procedures performed. Recommendation: Management should develop and implement written procedures for preparing the SEFA that: • Identify all active federal awards and related pass-through awards from grant agreements and award notices. • Reconcile SEFA amounts to the general ledger and the grant reporting records. • Ensure that required elements (federal agency, Assistance Listing number, pass-through entity, and total expenditures) are accurately presented for each program. • Provide for a secondary review by someone knowledgeable about federal grant requirements and Single Audit rules prior to finalizing the SEFA. Management Response: We agree with the findings in the audit report and have developed a Corrective Action Plan to address each item promptly. This has been a challenging year for the organization, including turnover in the Chief Financial Officer ("CFO") position and the fact that this was our first Single Audit due to increased federal funding related to COVID-19 programs. These factors contributed to delays in audit readiness, gaps in technical accounting for grants, and weaknesses in internal controls over financial reporting and federal award reporting. We have implemented a comprehensive plan to address these challenges and will be hiring a new CFO in the first quarter of 2026.