Finding Text
Finding 2024-003 – All Federal Programs – Significant Deficiency Deficiency in Internal Controls over the Preparation of the Schedule of Expenditures of Federal Awards (SEFA) Criteria: 2 CFR section 200.510(b) requires recipients of federal awards to prepare a complete and accurate Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the auditee’s financial statements. The Uniform Guidance also requires that management establish and maintain effective internal controls over the preparation of the SEFA to ensure its accuracy and completeness. Condition: During our audit, we noted that the Organization did not have adequate internal controls in place to ensure the accuracy of the SEFA. Specifically, there was no documented review process to verify that all federal expenditures were properly identified, classified, and reported under the correct Assistance Listing numbers. As a result, a material adjustment was required to correct the SEFA for balance that were not from federal sources as well as correct the amounts reported. There was also certain federal expenditures reported under an incorrect Assistance Listing number. Cause: The deficiency occurred because the Organization had not developed or implemented a formal review procedure for the preparation of the SEFA. Finance staff responsible for preparing the SEFA did not coordinate with grant reporting personnel to ensure the completeness and accuracy of the information included in the schedule. Effect: The lack of appropriate internal controls over the preparation of the SEFA resulted in the initial omission and misclassification of federal expenditures. This could lead to incomplete or inaccurate reporting of federal awards, potentially resulting in noncompliance with federal requirements and affecting the determination of major programs for audit purposes. Questioned Costs: None noted. Recommendation: We recommend that the Organization develop and implement formal internal control procedures over the preparation of the SEFA. This should include a documented review process to ensure that all federal expenditures are accurately identified, classified, and reported under the correct Assistance Listing numbers. Finance staff should coordinate with grant reporting personnel to verify the completeness and accuracy of the SEFA prior to its finalization.