Finding Text
Material Weakness – Finding 2025-002: Schedule of Expenditures of Federal Awards Completeness Statement of Condition In connection with our audit, management initially represented that the schedule of expenditures of federal awards was complete and accurate. During the course of the audit, in response to auditor inquiry regarding another grant held by the Organization, management determined that the grant represented federal funds passed through the Housing Authority of Cook County, Illinois under State and Local Fiscal Recovery Funds, ALN 21.027, and that the related expenditures of $709,506 had not been included in the schedule of expenditures of federal awards as initially prepared. This indicates that the Organization's controls did not identify and accumulate all federal awards expended during the year, specifically federal awards received as pass-through funding from a local government unit. Criteria Title 2 U.S. Code of Federal Regulations Part 200 (Uniform Guidance) requires the auditee to prepare a schedule of expenditures of federal awards that includes the total federal awards expended for the period (2 CFR 200.508 and 200.510(b)). Federal awards expended include awards received indirectly from pass-through entities, including state and local governments such as counties. The non-Federal entity is also required to establish and maintain effective internal control over the federal award that provides reasonable assurance the entity is managing the award in compliance with federal statutes, regulations, and the terms and conditions of the award (2 CFR 200.303). A complete and accurate schedule of expenditures of federal awards is necessary for the proper determination of major programs and the scope of the single audit. Cause The Organization's process for identifying federal awards did not include adequate procedures to detect federal funds passed through local government entities. The grant was initially treated as a non-federal award because its federal source was not apparent on its face, and the grant agreement and related funder documentation were not evaluated for indicators of federal funding (such as an Assistance Listing Number, a federal award identification number, the identity of the originating federal agency, or references to the Uniform Guidance). Effect A federal award was omitted from the schedule of expenditures of federal awards as initially prepared, resulting in an understatement of reported federal expenditures of $709,506. An incomplete schedule could result in incorrect determination of major programs and audit scope and in noncompliance with the reporting requirements of the Uniform Guidance. The schedule was subsequently revised to include the program. Questioned Costs None noted. Perspective The finding relates to the identification of a single federal pass-through award received from a local government unit. While isolated to that award, it reflects a deficiency in the design of the Organization's controls over the identification of federal awards. Statistical Sample A statistical sample is not applicable to this finding. Repeat Finding This audit finding is not a repeat finding. Recommendation We recommend that the Organization implement procedures to identify all federal awards expended, including funds passed through state and local governments. For each grant and contract, management should review the executed agreement and related funder documentation for indicators of federal funding, including an Assistance Listing Number, a federal award identification number, the originating federal agency, the pass-through entity identifying number, and references to the Uniform Guidance, and should confirm the federal funding status with the pass-through entity when it is not clear. The Organization should maintain a centralized listing of awards that is reconciled to the general ledger and reviewed for completeness in preparing the schedule of expenditures of federal awards. View of Responsible Officials Management agrees with the finding. Management will implement procedures to identify all federal awards expended, including pass-through awards received from state and local government units, and to evaluate grant agreements and funder documentation for indicators of federal funding, so that the schedule of expenditures of federal awards is complete and accurate.