Finding 3129 (2022-002)

Material Weakness
Requirement
ABCGHI
Questioned Costs
-
Year
2022
Accepted
2023-12-04

AI Summary

  • Core Issue: The City mismanaged grant accounting by recording activities on a cash basis, leading to significant misstatements in financial reports.
  • Impacted Requirements: Financial statements and the Schedule of Expenditures of Federal Awards were not aligned with generally accepted accounting principles.
  • Recommended Follow-Up: Implement reconciliations for each grant to ensure that revenues match expenditures and comply with Uniform Guidance reporting standards.

Finding Text

Criteria or specific requirement: The City’s management is responsible for the presentation of financial statements in accordance with generally accepted accounting principles. In addition, the City’s management is responsible for the preparation of the schedule of expenditures of federal awards. Condition: The City received a significant amount of grant funding during the year ending June 30, 2022 including federal funds that were received in advance. Material audit adjustments were required to increase grant receivables and grant revenue. In addition, previously recognized grant expenditures were removed from the current year activity. Cause: The grant activity was primarily recorded on the cash basis in the general ledger, which is not consistent with generally accepted accounting principles. Effect or potential effect: The controls over the financial activities of the City’s grants are weakened. The preliminary federal grant activity was materially misstated within the basic financial statements and in the Schedule of Expenditures of Federal Awards. The failure to reconcile the grant activity increases the risk that errors may occur and remain undetected. Questioned costs: None. Context: The City expended in excess of $750,000 in federal awards and assistance during the year ending June 30, 2022 requiring a compliance audit in accordance with the Uniform Guidance. The recognition of expenditures and the applicable federal revenue in the general ledger was not properly reconciled at the grant level and did not agree with the preliminary schedule of expenditures of federal awards provided for the compliance audit. Recommendation: We recommend that grant activity be reconciled on a per grant basis. Grant awards are for a specified amount; therefore, grant revenue should agree with the corresponding grant expenditures. We further recommend that all federal award expenditures be reported on the Schedule of Expenditures of Federal Awards in accordance with the Uniform Guidance. Views of Responsible Officials: The City’s management concurs with this audit finding.

Categories

Reporting

Other Findings in this Audit

  • 3124 2022-002
    Material Weakness
  • 3125 2022-002
    Material Weakness
  • 3126 2022-002
    Material Weakness
  • 3127 2022-002
    Material Weakness
  • 3128 2022-002
    Material Weakness
  • 3130 2022-002
    Material Weakness
  • 579566 2022-002
    Material Weakness
  • 579567 2022-002
    Material Weakness
  • 579568 2022-002
    Material Weakness
  • 579569 2022-002
    Material Weakness
  • 579570 2022-002
    Material Weakness
  • 579571 2022-002
    Material Weakness
  • 579572 2022-002
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
20.106 Airport Improvement Program $1.62M
14.228 Community Development Block Grants/state's Program and Non-Entitlement Grants in Hawaii $300,000
66.458 Capitalization Grants for Clean Water State Revolving Funds $111,555
97.036 Disaster Grants - Public Assistance (presidentially Declared Disasters) $69,898
97.044 Assistance to Firefighters Grant $14,286
21.027 Coronavirus State and Local Fiscal Recovery Funds $4,136
15.916 Outdoor Recreation_acquisition, Development and Planning $2,727
66.468 Capitalization Grants for Drinking Water State Revolving Funds $2,256
20.205 Highway Planning and Construction $2,169