Finding Text
Finding No. SA 2025-001 – Schedule of Expenditures of Federal Awards (SEFA) Preparation and Review (Material Weakness) Criteria: Under Uniform Guidance, the auditee is responsible for preparing a complete and accurate Schedule of Expenditures of Federal Awards (SEFA). Title 2: Grant and Agreements, Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”), Subpart F Audit Requirements, specifically 200.510 (b) Schedule of expenditures of Federal Awards: The auditee must prepare a schedule of expenditures of federal awards for the period covered by the auditee's financial statements, which must include the total Federal awards expended as determined in accordance with §200.502 - Basis for determining Federal awards expended. While not required, the auditee may choose to provide the information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amounts of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: • List individual Federal programs by Federal agency using the applicable Assistance Listing number(s). For a cluster of programs, the non-Federal entity must provide the cluster name, a list of individual Federal programs within the cluster, and provide the Federal agency name and the applicable Assistance Listing number(s). • For Federal awards received as a subrecipient, the name of the pass-through entity and the identifying number assigned by the pass-through entity must be included. • Provide total Federal awards expended for each individual Federal program and the Assistance Listings number or other identifying number when the Assistance Listings information is unavailable. For a cluster of programs, the auditee must also provide the total for the cluster. Condition: Audit procedures identified a material omission of $3,008,167 in expenditures reported for ALN 93.224, Community Health Centers Program, Section 330. As a result, reported expenditures increased from $5,101,362 on the initial SEFA to $8,109,529 on the final SEFA. The revision was necessary for the SEFA to be fairly stated in all material respects, in accordance with the requirements of Uniform Guidance. Cause: Management's controls over the preparation and review of the SEFA were not adequately designed or operating effectively to identify and correct material errors before the schedule was provided for audit. Effect: Without auditor detection and correction, the SEFA would have been materially misstated. An inaccurate SEFA could result in an incorrect program risk assessment process and improper major program determination, inaccurate compliance reporting, and an increased risk that users of the Single Audit reporting package may rely on incomplete or inaccurate information. Questioned Costs None. Recommendation: The SEFA, which is prepared by the auditee and considered supplementary information to the financial statements, is a key part of the reporting package required by the Uniform Guidance. The SEFA also serves as the primary basis that auditors use to determine which programs will be audited as part of the single audit. Therefore, the auditee’s responsibility for preparing an accurate and complete SEFA is critical. We recommend that management strengthen its controls over the preparation and review of the SEFA by: • Performing a detailed reconciliation of SEFA expenditures to the underlying general ledger and grant reports. • Reviewing Assistance Listing Numbers and pass-through information for accuracy and completeness. • Implementing a documented supervisory review process prior to submission of the SEFA. • Utilizing a year-end SEFA preparation checklist to ensure all federal programs and disclosures are properly reported. Views of responsible officials and planned corrective actions: Management concurs with the finding. Previous CFO submitted a SEFA based on revenue recognized without reconciling grant allowable expenses. To remediate the identified material weakness in financial reporting oversight, the CEO has initiated a restructuring of the fiscal leadership team. Effective May 22, 2026, an interim CFO with extensive knowledge of healthcare accounting, GAAP and Uniform Guidance has been appointed. Corrective Action Plan: Senior accountants have been provided training on federal grant accounting procedures. Drawdowns are now performed after proper reconciliation of allowable expenses per grant budgets. Personnel responsible for implementation: Kristopher Zuniga Position of responsible personnel: Interim Chief Financial Officer Expected date of implementation: Implemented as of June 30, 2026.