Finding 387796 (2023-001)

Material Weakness
Requirement
P
Questioned Costs
-
Year
2023
Accepted
2024-03-28
Audit: 299850
Organization: City of Temecula (CA)
Auditor: Eide Bailly LLP

AI Summary

  • Core Issue: The City has a material weakness in internal controls, leading to inaccuracies in the Schedule of Expenditures of Federal Awards (SEFA).
  • Impacted Requirements: Compliance with Title 2 U.S. CFR Part 200 is not met, as the City failed to accurately report federal expenditures, resulting in a net overstatement of $2,174,498.
  • Recommended Follow-up: The City should implement stronger internal controls and policies to ensure accurate tracking and reporting of federal expenditures, with regular reviews by knowledgeable personnel.

Finding Text

2023-001 Program: CDBG - Entitlement Grants Cluster / Highway Planning and Construction / Nationally Significant Freight and Highway Project Funds Federal Financial Assistance Listing No.: 14.218 / 20.205 / 20.934 Federal Agency: U.S. Department of Housing and Urban Development / U.S. Department of Transportation Direct Award: U.S. Department of Housing and Urban Development Pass-through: California Department of Transportation in relation to the Highway Planning and Construction and Nationally Significant Freight and Highway Project Funds Award Year: Multiple Grant Award Number: Multiple Compliance Requirements: Other - Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) §200.510(b) - Schedule of expenditures of Federal awards Type of Finding: Material Weakness in Internal Control over Compliance Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) §200.510(b) states that the auditee (the City) must prepare a Schedule of Expenditures of Federal Awards (SEFA) 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. In addition, §200.303 of the Uniform Guidance states that the City must establish and maintain effective internal control over the federal awards, including controls over the accuracy of program information and expenditure amounts. Condition: During our audit procedures performed over the SEFA and expenditures reported for the CDBG - Entitlement Grants Cluster, Highway Planning and Construction, and Nationally Significant Freight and Highway Project Funds, we noted the following: 1. The City did not properly identify the amount expended for the CDBG - Entitlement Grants Cluster, AL No. 14.218. The expenditures reported by the City were understated by $154,071. 2. The City did not properly identify the amount expended for the Highway Planning and Construction, AL No. 20.205. The expenditures reported by the City were overstated by $5,098,179. 3. The City did not properly classify the amount expended for the Nationally Significant Freight and Highway Project Funds, AL No. 20.934. The expenditures reported by the City were understated by $2,769,610. Cause: As a result, the City lacks adequate internal controls to ensure the SEFA is completely and accurately stated. Specifically, the City’s processes for recording and tracking expenditures of federal awards are not designed so that expenditures are identified when incurred and assigned to the correct program name or cluster in a complete and timely manner. Effect: The SEFA, as originally presented, was overstated by $2,174,498. Questioned Costs: No questioned costs were identified as a result of our procedures. Context/Sampling: No sampling was used. Program expenditures on the SEFA were reconciled to supporting records. Repeat Finding from the Prior Year(s): No. Recommendation: The City should establish policies and implement internal controls to ensure all federal expenditures are accurately tracked and reported on the SEFA. Personnel knowledgeable of federal expenditures should review amounts coded to federal programs for completeness and accuracy. The SEFA should be prepared and reviewed in a timely manner and reconciled to underlying records as well as the basic financial statements. View of Responsible Official and Planned Corrective Actions See separate corrective action plan.

Categories

Reporting Allowable Costs / Cost Principles Material Weakness

Other Findings in this Audit

  • 387792 2023-001
    Material Weakness
  • 387793 2023-002
    Material Weakness
  • 387794 2023-001
    Material Weakness
  • 387795 2023-002
    Material Weakness
  • 387797 2023-002
    Material Weakness
  • 387798 2023-001
    Material Weakness
  • 387799 2023-002
    Material Weakness
  • 387800 2023-001
    Material Weakness
  • 387801 2023-002
    Material Weakness
  • 387802 2023-001
    Material Weakness
  • 387803 2023-002
    Material Weakness
  • 387804 2023-001
    Material Weakness
  • 387805 2023-002
    Material Weakness
  • 387806 2023-001
    Material Weakness
  • 387807 2023-001
    Material Weakness
  • 387808 2023-001
    Material Weakness
  • 387809 2023-001
    Material Weakness
  • 387810 2023-001
    Material Weakness
  • 387811 2023-003
    Material Weakness
  • 387812 2023-004
    Material Weakness
  • 964234 2023-001
    Material Weakness
  • 964235 2023-002
    Material Weakness
  • 964236 2023-001
    Material Weakness
  • 964237 2023-002
    Material Weakness
  • 964238 2023-001
    Material Weakness
  • 964239 2023-002
    Material Weakness
  • 964240 2023-001
    Material Weakness
  • 964241 2023-002
    Material Weakness
  • 964242 2023-001
    Material Weakness
  • 964243 2023-002
    Material Weakness
  • 964244 2023-001
    Material Weakness
  • 964245 2023-002
    Material Weakness
  • 964246 2023-001
    Material Weakness
  • 964247 2023-002
    Material Weakness
  • 964248 2023-001
    Material Weakness
  • 964249 2023-001
    Material Weakness
  • 964250 2023-001
    Material Weakness
  • 964251 2023-001
    Material Weakness
  • 964252 2023-001
    Material Weakness
  • 964253 2023-003
    Material Weakness
  • 964254 2023-004
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
21.027 Covid-19 Coronavirus State and Local Fiscal Recovery Funds $7.04M
20.934 Nationally Significant Freight and Highway Projects $2.77M
14.218 Covid-19 Community Development Block Grants/entitlement Grants $277,239
14.218 Community Development Block Grants/entitlement Grants $175,481
97.067 Homeland Security Grant Program $12,894
20.205 Highway Planning and Construction $869