Finding Text
2023-004 Improve Controls Over Reporting Federal Program Information Federal Agency: U.S. Department of the Interior Award Name: Natural Resource Stewardship Assistance Listing Number(s): 15.944 Award Year: 2023 Compliance Requirement: Reporting Type of Finding Compliance Internal Control Over Compliance – Material Weakness Criteria or Specific Requirement Per OMB’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (UG) and program requirements, recipients must submit accurate annual Federal Financial Reports (SF-425) and annual performance reports grouped by task agreement. Reports must be supported by underlying financial records and be subject to adequate review and oversight prior to submission. Condition and Context During our audit, we tested a sample of two SF-425 reports submitted for the period 10/1/2022 – 9/30/2023. Of both reports tested, the amounts reported as expenditures did not agree with the underlying general ledger detail. The amounts reported reflected cumulative drawdowns to the reporting date, not the actual expenditures incurred, as required. Further, there was no evidence of a formal review or approval of the SF-425 reports prior to their submission. Additionally, we tested a sample of two annual performance reports and found that these were also submitted without evidence of formal review or approval prior to submission. Cause The Organization did not have established procedures or control activities to ensure reported expenditures on the SF-425 are based on actual expenditures per the general ledger, and all required reports are formally reviewed and approved prior to submission. Effect or Potential Effect Due to the weakness in internal controls noted above, there is a risk that reporting cumulative drawdowns rather than actual expenditures on the SF-425 can result in inaccurate financial information being provided to the federal awarding agency, which may impact program oversight and compliance. The lack of formal review increases the risk of errors and misreporting in both financial and performance reports. Recommendation The Organization should develop and implement procedures to ensure that amounts reported on the SF-425 are reconciled to the general ledger and reflect actual expenditures incurred. Additionally, all SF-425 and annual performance reports should be subject to documented review and approval by management prior to submission to the federal awarding agency. Views of Responsible Official Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.