Finding 1236819 (2025-003)

2025-003 - Federal Transit Cluster - Federal Transit - Formula Grants and State of Good Repair Grants Program - Assistance Listing No. 20.507 and 20.525; For the year ended December 31, 2025 Criteria: Uniform Guidance requires non-Federal entities to establish and maintain effective internal control over Federal awards and to maintain financial management systems that provide accurate, current, and complete disclosure of the financial results of each Federal award, including the source and application of funds (2 C.F.R. §§ 200.303 and 200.302). Condition: For the Federal Transit Cluster, the County did not consistently perform and document timely reconciliations between federal award activity (e.g., reimbursement claims/drawdowns), underlying eligible expenditures, and amounts recorded in the general ledger and reported on the Schedule of Expenditures of Federal Awards (SEFA). In addition, delays in submitting reimbursement claims by County departments contributed to improper timing of revenue recognition, as federal revenue was not consistently recognized in the period aligned with the underlying eligible expenditure activity. Cause: Controls were not adequately designed and/or consistently implemented to ensure that: departments prepared and submitted Federal Transit reimbursement claims timely and in accordance with award requirements; claim/drawdown status and supporting documentation were centrally tracked and communicated to the finance function; periodic reconciliations were performed between (1) claims/drawdowns, (2) supporting expenditure detail, and (3) the general ledger and SEFA; and period-end cutoff procedures evaluated whether federal revenue and related receivables/deferred inflows (as applicable) were recorded in the proper period based on underlying eligible expenditures. Effect of Condition: The lack of timely reconciliations and delays in claiming increase the risk that Federal Transit revenues, receivables/deferred inflows, and expenditures could be misstated and that SEFA reporting could be inaccurate. In addition, these conditions increase the risk of noncompliance with Uniform Guidance financial management and internal control requirements that may not be detected and corrected on a timely basis. Recommendation: The County should strengthen controls over Federal Transit grant financial management, claiming, and reporting by: implementing a standardized claiming calendar with assigned responsibilities and due dates by department; establishing a centralized tracking log for claims/drawdowns (submitted, approved, paid, pending) including required supporting documentation; performing and documenting routine reconciliations between claims/drawdowns, supporting expenditure detail, and the general ledger and SEFA; requiring documented supervisory review of reconciliations and period-end revenue cutoff (including evaluation of receivables/deferred inflows, as applicable); and providing periodic training to departmental and finance personnel on claiming requirements, reconciliation procedures, and period-end cutoff for federal awards.