Finding Text
MATERIAL WEAKNESS; CRITERIA: Title 2 CFR §200.510(b) and the state single audit implementation act require auditees to prepare a Schedule of Expenditures of Federal and State Awards (SEFSA) for the period covered by the financial statements. 2 CFR §200.502(a) further emphasizes that the auditee is responsible for the accurate preparation and fair presentation of the SEFSA in accordance with federal requirements.; CONDITION: The Town of Spruce Pine did not prepare an accurate SEFSA for the fiscal year ended June 30, 2025. During the audit, we identified errors in reported federal expenditures, including the omission of federal program activity and incorrect amounts recorded as receivable under the federal program. As a result, material audit adjustments were required to properly state the SEFSA.; EFFECT: Because the SEFSA was not accurately prepared, there was an increased risk that federal expenditures were misstated and that federal programs subject to audit were not properly identified. This condition could result in noncompliance with federal reporting requirements and impair federal oversight. No questioned costs were identified as a result of this finding.; CAUSE: There were not adequate internal controls in place over the preparation and review of the SEFSA. Management did not maintain a complete and reconciled listing of federal awards expended during the fiscal year and did not perform a formal review of the SEFSA for completeness and accuracy prior to submission to the auditors. RECOMMENDATION: We recommend that the Town of Spruce Pine establish and document internal controls over the identification, tracking, and reporting of federal and state awards. This should include maintenance of a comprehensive schedule of known and potential awards throughout the fiscal year, reconciliation of grant expenditures to the general ledger, and performance of a supervisory review of the SEFSA prior to audit submission to ensure accuracy and completeness in accordance with federal and state requirements.; VIEWS OF RESPONSIBLE OFFICIALS AND CORRECTIVE ACTIONS: The Town of Spruce Pine agrees with this finding. Finance procedures will be updated to include a suspension and debarment requirements. Town staff will be trained on the updated policies and its implementation.