Finding 1219662 (2025-001)

Material Weakness Repeat Finding
Requirement
P
Questioned Costs
-
Year
2025
Accepted
2026-06-28

AI Summary

  • Core Issue: The Authority misreported federal expenditures in the Schedule of Expenditures of Federal Awards (SEFA), including prior year costs and excluding current year costs, leading to significant misstatements.
  • Impacted Requirements: The Authority failed to comply with its own accounting policy of using the accrual basis, resulting in inaccuracies in federal grants receivable and revenue for the years ended September 30, 2023, 2024, and 2025.
  • Recommended Follow-Up: The Authority should enhance internal controls and procedures to ensure accurate and complete reporting in the SEFA, adhering to the accrual basis of accounting.

Finding Text

Finding No.: 2025-001 Federal Agency: U.S. Department of Transportation AL No. and Title: 20.106 Airport Improvement Program, Infrastructure Investment and Jobs Act Programs, and COVID-19 Airport Programs (ALN 20.106) Federal Award Nos.: 3-66-0001-110-2021, 3-66-0001-116-2022, 3-66-0001-117-2023, 3-66-0001-118-2023, 3-66-0001-119-2023, 3-66-0001-120-2023, 3-66-0001-121-2023, 3-66-0001-122-2024, 3-66-0001-123-2024, 3-66-0001-126-2025, 3-66-0001-127-2025, 3-66-0001-130-2025, 3-66-0001-131-2025, 3-66-0001-132-2025, 3-66-0001-133-2025 Area: P. Other; Preparation of the schedule of expenditures of federal awards Criteria: The Authority’s accounting policy is to report expenditures of federal awards on the accrual basis of accounting. According to the Uniform Guidance, for grants, the basis for determining when award is expended is when the expenditure or expense transactions occur. Condition: In the Schedule of Expenditures of Federal Awards (SEFA) for the year ended September 30, 2025 for ALN 20.106, the Authority improperly included expenditures that occur in prior years amounting to $3,771,161 and improperly excluded expenditures that occur in the current fiscal year amounting to $2,732,252. Further, $81,904 expenditures were improperly excluded in the SEFA for the year ended September 30, 2024. As a result, the federal grants receivable and federal grants as of and for the years ended September 30, 2023, 2024 and 2025 are misstated as follows: 2023 2024 2025 Federal grants receivable - under (over) $2,529,283 $3,852,255 $(1,038,909) Federal grants revenue - under (over) 2,529,283 1,322,972 (3,771,161) The Authority corrected the error and restated prior year financial statements. Cause: The Authority, in effect, used cash basis of accounting in preparing the SEFA. Effect or potential effect: The Authority is in non-compliance with its accounting policy of preparing SEFA on the accrual basis of accounting. The SEFA and the financial statements as of and for the years ended September 30, 2023, 2024 and 2025 are materially misstated as a result. The prior year financial statements and SEFA need to be restated to correct the error. Questioned costs: None Context: During the course of testing controls and compliance, audit team noted expenditures reported in the current year SEFA that occurred in prior years. Audit team communicated the observation to management and obtained the updated SEFA that has been subjected to further audit. Identification as a repeat finding: Not applicable Recommendation: The Authority should ensure compliance with its accounting policy in preparing the SEFA, and formalize steps and internal controls to ensure completeness and accuracy of the SEFA. Views of responsible officials: The Authority acknowledges the finding and attributes it to a change made in the later part of FY23 due to guidance provided by the previous auditor to recognize reimbursements as a receivable only after related invoices were paid. Additionally, a project pending vendor resolution was accrued as an estimate in one fiscal year with the actual invoice and payment approved in a subsequent fiscal year causing a significant portion of the misstatement. Conclusion: We reported this finding based on the requirements of the Uniform Guidance on when an award is expended, and the Authority’s elected accrual basis of accounting.

Corrective Action Plan

Finding No. 2025-001 Preparation of the schedule of expenditures of federal awards Responsible Personnel: John M. Quinata, Executive Manager During the audit, the Authority reviewed the federally funded airport improvement projects (AIP) to ensure that all applicable items charged to the projects were accounted for. Correcting entries were made to FY25 and FY24 was restated to address the identified misstatements. To prevent future issues from occurring, the Authority has updated its procedures to enhance the process for identifying federal receivables and controls for reviewing and reconciling the SEFA with financial statement records. Timely reviews will take place at least quarterly. Any future changes to the process must be discussed, agreed upon with management, and documented.

Categories

Reporting Cash Management

Programs in Audit

ALN Program Name Expenditures
20.106 AIRPORT IMPROVEMENT PROGRAM, INFRASTRUCTURE INVESTMENT AND JOBS ACT PROGRAMS, AND COVID-19 AIRPORTS PROGRAMS $14.68M
21.027 CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS $2.31M
15.875 ECONOMIC, SOCIAL, AND POLITICAL DEVELOPMENT OF THE TERRITORIES $119,520
16.922 EQUITABLE SHARING PROGRAM $60,484
16.U01 Drug Enforcement Administration - GIAA Task Force Program $30,633
16.738 EDWARD BYRNE MEMORIAL JUSTICE ASSISTANCE GRANT PROGRAM $25,000
20.600 STATE AND COMMUNITY HIGHWAY SAFETY $11,866
21.016 EQUITABLE SHARING $3,224