Finding Text
MATERIAL WEAKNESS IN INTERNAL CONTROL OVER COMPLIANCE – SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS – ALL FEDERAL PROGRAMS 2025-001 Reporting Compliance Requirement Criteria – 2 CFR § 200.510 requires that the City of South St. Paul, Minnesota (the City) prepare appropriate financial statements, including the Schedule of Expenditures of Federal Awards (SEFA) for the year ended December 31, 2025, which must include the total federal awards expended as determined in accordance with 2 CFR § 200.502. Management is responsible for establishing and maintaining effective internal controls over compliance with requirements applicable to federal programs, including separately tracking federal expenditures within the finance system to provide for accurate preparation of the SEFA. Condition – During our audit, we noted the City did not have sufficient controls in place to ensure the accurate preparation of the SEFA in compliance with this requirement. The City’s SEFA for fiscal 2025 was overstated by $749,656 in federal expenditures, due to the inclusion of costs that were incurred in the previous fiscal year. Questioned Costs – None. The 2025 SEFA was corrected when the misstatement was identified during the audit, and this would not have changed the determination that a Single Audit of federal awards expenditures was required for the 2024 fiscal year and would not have changed the risk assessment and major program testing for the 2024 fiscal year. Context – The City’s SEFA presented for audit for the year ended December 31, 2025 included $749,656 in two programs that should not have been included in this fiscal year. Cause – This was an oversight by city personnel. Repeat Finding – This is a current year finding. Effect – An inaccurate SEFA could result in incorrect major program determination for the Single Audit and could be considered a violation of federal award agreements. Recommendation – We recommend that the City review its internal control procedures over reporting and verify accuracy of expenditures reported on the SEFA in the future. View of Responsible Official and Planned Corrective Actions – The City agrees with the finding. The City has separately issued a Corrective Action Plan related to this finding.