Finding Text
FINDING NUMBER: 2025-001 Criteria or specific requirement: Management is responsible for the accuracy and completeness of all financial records. This includes having controls over grant-funded capital projects process which serve to prevent and detect errors in grant expenditure reporting that ensure that the financial statements and grant reports are free of material misstatements. Condition: During the audit, we noted that communication between the City’s finance department and engineers or other City staff responsible for managing grants and capital projects is not consistently formalized. Context: Some engineering and other project-related costs associated with construction-in-progress (CIP) projects were not consistently accumulated as part of the total project cost. Also, this has, at times, resulted in delays in obtaining complete project and grant information, the need for corrections to grant tracking documentation, and challenges reconciling grant expenditures to the City’s accounting records. Effect: There is an increase risk that: 1.) capital assets and construction in progress are understated due to incomplete accumulation of project related costs, 2.) grant expenditures reported to granting agencies do not reconcile to the City’s accounting records, and 3.) errors or omissions related to grant compliance and financial reporting may not be identified timely. Cause: These issues appear to stem from reliance on invoice-level capitalization thresholds rather than a project-based review of capital activity, as well as the absence of a formal process for ongoing communication and reconciliation between the finance department and personnel responsible for managing capital and grant-funded projects. Recommendation: The City should enhance its project‑level oversight by encouraging periodic coordination between the finance department, engineers, and other City staff involved in grant‑funded projects. At year end, we recommend meeting with project and grant administrators to identify reimbursable expenditures incurred but not yet received, so that grant receivables and related revenues are accurately reflected in the City’s financial statements. Management’s response: Management is committed to strengthening coordination and oversight of the City’s grant-funded capital projects through centralizing project tracking via grant/project management software, implementing rigorous compliance monitoring, and improving intradepartmental communication. By centralizing our grants through the course of their lifespans, we intend to better track the progress of our grant projects and budgets and with the inclusion of grant document storage, to enhance compliance across departments. We will also designate coordination teams consisting of liaisons across administration, finance, engineering, public works, and grant writers to ensure internal alignment.