Finding 1216268 (2025-011)

Assistance Listing, Federal Agency, and Program Name - 93.045/93.053, Department of Health and Human Services, Aging Cluster Federal Award Identification Number and Year - N/A Pass through Entity - Area Aging on Aging 1C Finding Type - Material weakness Repeat Finding - No Criteria - Uniform Guidance at 2 CFR 200.510(b) requires the auditee to prepare a Schedule of Expenditures of Federal Awards (SEFA) that accurately reports total federal expenditures for each federal program. In addition, effective internal control over compliance, as required by 2 CFR 200.303, requires controls that ensure expenditures reported on the SEFA are complete, accurate, and properly reconciled to underlying accounting records and amounts billed to the funding agency. Condition - The County did not maintain effective internal control over the reconciliation of expenditures reported on the Schedule of Expenditures of Federal Awards to amounts billed to the funding agency. If questioned costs are not determinable, description of why known questioned costs were undetermined or otherwise could not be reported - None Identification of How Questioned Costs Were Computed - N/A Context - The SEFA is a key component of the Single Audit and serves as the primary basis for determining major programs subject to audit under the Uniform Guidance. As part of the SEFA preparation process, management compiles federal expenditures from multiple sources, including underlying accounting records and amounts billed to funding agencies. Accurate reconciliation of these sources is critical to ensure that federal expenditures are reported completely and accurately, and that major program determinations are appropriately made. As a result of the audit, it was identified that expenditures related to the Aging Cluster were understated by approximately $126,000 on the preliminary SEFA due to the omission of expenditures that had been billed to the funding agency but backed out of amounts reported on the SEFA during the reconciliation process. Management recorded an adjustment to correct the understatement prior to issuance of the final SEFA. Cause and Effect - The County’s SEFA preparation process did not include a sufficiently designed and implemented control to ensure the accuracy of reconciling items between expenditures reported on the SEFA to amounts billed to the funding agency. As a result of this deficiency, expenditures in the Aging Cluster were understated by approximately $126,000 on the preliminary SEFA. The correction of this error on the final SEFA increased total expenditures for the Aging Cluster, resulting in the program being classified as a Type A program rather than a Type B program for major program determination purposes. Because the deficiency resulted in a material misstatement of the SEFA that was not prevented or detected by internal control, it is considered a material weakness in internal control over compliance. Recommendation - We recommend that management design and implement effective controls over the preparation of the SEFA, including maintaining adequate support for adjustments and reconciling items. Such controls should be performed and reviewed by personnel independent of the SEFA preparation process to ensure the completeness and accuracy of federal expenditures reported. Views of Responsible Officials and Planned Corrective Actions - The County has established procedures for reconciling general ledger activity to supporting documentation and Federal Financial Reports (FFRs/FSRs) throughout the fiscal year, including additional reconciliation procedures performed at year end to capture late or adjusting entries. The condition was further impacted by timing differences between departmental reporting and subsequent adjusting entries, as well as the aggregation of adjustments across multiple programs without sufficient program-level detail at the time of review. While follow-up was initiated to obtain supporting breakdowns, the process did not require resolution of these items prior to final classification and inclusion in year-end reporting. The County is strengthening internal controls over grant-related financial activity and SEFA preparation by enhancing and enforcing requirements for accurate transaction recording, supporting documentation, and independent validation. Key improvements include: • Enhanced documentation and classification requirements for grant-related entries • Strengthened review and validation controls to ensure proper support and classification • Improved reconciliation and adjustment protocols, including postreporting revalidation • Control enforcement and escalation for unsupported or unresolved items • Training and guidance on federal compliance requirements