Finding Text
Finding 2025-007 – Failure to Provide Schedule of Expenditures of Federal and State Grant Awards (Material Weakness) Information on the Federal Program – HRSA Health Center Programs, FALN 93.224, June 30, 2025; U.S. Department of Labor Workforce Development Adult Program, FALN 17.258; Department of Labor Workforce Development Youth Program, FALN 17.259 Criteria – Uniform Guidance 2 CFR §200.302(b) requires financial management systems to provide accurate, current, and complete disclosure of financial results of each federally funded program. Additionally, 2 CFR §200.510(b) requires auditees to prepare a Schedule of Expenditures of Federal and State Grant Awards (SEFA) that properly presents federal expenditures by program and assistance listing, supported by the general ledger and accounting records. Condition – During our review of restricted funding programs, restricted program expenditures could not be readily identified in the general ledger. Additionally, OIC was unable to provide a Schedule of Expenditures of Federal and State Grant Awards (SEFA) for audit review. Cause – OIC has not established formal processes to track federal expenditures by program within the general ledger, nor procedures to compile and reconcile a SEFA annually. Management oversight controls related to federal reporting requirements were not adequately implemented. Effect – The absence of a SEFA and lack of identifiable federal expenditures impair OIC’s ability to demonstrate compliance with Single Audit requirements and federal grant terms. This condition increases the risk of inaccurate federal reporting, audit findings, and potential noncompliance with Uniform Guidance. Questioned Costs – $0 Perspective – Although no questioned costs were identified, the lack of a SEFA represents a fundamental compliance deficiency. The inability to readily identify federal expenditures increases audit risk and limits transparency over federal award activity. This finding affects compliance reporting rather than individual transactions. Recommendation – We recommend that the Board of Directors and Audit Committee require management to develop and execute a comprehensive, time-bound remediation plan to address this material weakness and restore effective internal control over revenue recognition and accounts receivable. The remediation plan should be formally reviewed and approved by the Audit Committee and include clearly defined milestones, responsible owners, and reporting protocols. Additionally, we recommend that the Audit Committee: • Maintain active oversight of remediation progress, including periodic updates from management on the design and implementation status of corrective actions. • Require validation that revised controls are not only designed appropriately but are operating effectively for a sustained period, supported by documentation and management certification. • Ensure adequate resourcing and system capability are in place—whether through process redesign, system integration, or external support—to achieve GAAP-compliant revenue recognition and reliable billing system reconciliations. • Evaluate ongoing compliance implications for federal programs, particularly HRSA Section 330, to confirm that corrective actions sufficiently address Uniform Guidance and Single Audit requirements. Timely and effective remediation of this material weakness is critical to restoring confidence in OIC’s financial reporting, strengthening stewardship of federal funds, and reducing the risk of continued adverse audit and compliance outcomes. View of Responsible Officials – Management concurs with the finding. OIC will formalize federal award tracking and SEFA preparation procedures to ensure federal expenditures are complete, accurate, and readily identifiable by program.