Finding Text
Finding No. SA 2025-002: Internal Control Over Preparation and Review of the Schedule of Expenditures of Federal Awards (SEFA) – (Significant Deficiency) Criteria or Specific Requirements: In accordance with 2 CFR 200.510(b), management is responsible for preparing a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the financial statements. The SEFA should be prepared from the City's underlying accounting records and accurately report federal expenditures by Assistance Listing Number (ALN) and federal program. Management is also responsible for establishing and maintaining effective internal controls to ensure the SEFA is complete, accurate, properly supported, and prepared in accordance with Uniform Guidance requirements. Identified Condition: During our audit, we noted errors in the preparation of the SEFA for three federal programs: ALN 45.310, Library Services and Technology Act (LSTA); ALN 45.129, Promotion of the Humanities Federal/State Partnership; and ALN 16.607, Bulletproof Vest Partnership Program. Specifically, revenue was reported instead of federal expenditures for two programs, and total project expenditures were reported instead of the expenditures allocable to the federal award for one program. As a result, federal expenditures were overstated by approximately $1,018, $29, and $1,401, respectively, on the initial SEFA. The errors were identified and corrected, and management revised the SEFA during the audit process. Cause and Effect: The condition resulted from insufficient review procedures to ensure amounts reported on the SEFA were reconciled to supporting expenditure records and accurately reflected federal expenditures incurred under each program. Consequently, errors in federal expenditure reporting were not identified during the City's SEFA preparation process and required revision during the audit. Had these errors not been detected and corrected, the SEFA would not have complied with the reporting requirements of Uniform Guidance. Questioned Costs: None. Recommendations: We recommend that management strengthen its SEFA preparation and review procedures by reconciling reported amounts to supporting expenditure records, verifying that only allowable federal expenditures are included, and reviewing expenditures by Assistance Listing Number and program prior to finalizing the SEFA. Management should also implement a documented review process to ensure amounts reported on the SEFA agree with the underlying accounting records and supporting grant documentation. Views of Responsible Personnel and Corrective Action Plan: The principal accountant will coordinate with other departments to ensure the Schedule of Expenditures of Federal Awards (SEFA) is accurate and fully supported by the accounting records and grant documentation. Before submission, the accounting team will review the schedule for accuracy, compile and verify supporting documentation, confirm reported amounts, and resolve any discrepancies identified to ensure the SEFA is complete and accurate. Responsible Personnel Name and Position: Julio F. Morales, Finance Director Expected Implementation Date of Corrective Action Plan: Fiscal year 2026