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.