Finding Text
Finding #SA2025-001 Cash Management and Accuracy of Federal Financial Reports Assistance Listing Number: 20.507, 20.526 Assistance Listing Title: COVID-19 – Federal Transit Cluster Name of Federal Agency: Department of Transportation Federal Award Identification Number: CA-2022-083-00, 2020-206, 2020-212 Criteria: The 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Related to these requirements, the City should submit drawdown requests to the Department of Transportation throughout the fiscal year as costs are incurred and Federal Financial Reports should agree with those drawdown requests and supporting accounting records. Drawdown requests should be completed at least quarterly, depending on the volume of program activity, to improve the cash management for the program and to match expenditures with associated revenues throughout the fiscal year. In addition, since the grant is on a reimbursement basis, expenditures should generally be incurred prior to requesting reimbursement from the Department of Transportation unless specifically authorized by the grantor, and costs included in the Federal Financial Reports should be the same as those included in requests for reimbursement. Condition: During our review of the Federal Financial Reports related to grant CA-2022-083-00, we noted that for the first quarter of fiscal year 2025, the report included expenditures in the amount of $515,988, but the City requested reimbursement in the amount of $110,408, during that same time period. In addition, the reports for the third and fourth quarters of fiscal year 2025 included expenditures of $430,210 and $1,944,112, but the City requested reimbursement in the amounts of $1,898,135 and $744,817, respectively during that same time period. In addition to our review of the Federal Financial Reports, we also reviewed the timing of expenditures in relation to the associated reimbursement requests and noted that for the grants listed above, the City did not file for and receive reimbursement for the associated grant expenditures until four months after the activity took place for the first and third quarters. The grant drawdowns took place as follows: Cause: We understand that the City fell behind on drawing down grant funds on a timely basis due to employee turnover and this in turn caused the inaccuracies in the Federal Financial Reports. Effect: The City is not in compliance with the internal control requirements of 2 CFR Section 200.303. The City is not matching expenditures with associated grant revenues throughout the fiscal year by filing timely reimbursement requests as expenditures are incurred and is at risk of filing a reimbursement request after the filing deadlines of the grant. In addition, the late filing of reimbursement requests resulted in inaccurate Federal Financial Reporting to the grantor. Identification as a Repeat Finding: Yes, see prior year finding 2024-001. Recommendation: The City must develop procedures to ensure grant reports are accurate and agree with supporting accounting records prior to being submitted to the grantor. The City must also develop procedures to ensure that all grant-funded expenditures are included on drawdown requests and those requests should be prepared at least quarterly throughout the fiscal year. View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.