Finding Text
FS 2023-001 – Improve Internal Control in the Preparation of the Schedule of Expenditures of
Federal Awards (SEFA)
Criteria:
The following sections of the Uniform Guidance provide the following requirements:
Section §200.510 (b) Schedule of Expenditures of Federal Awards;
The auditee must also 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. For a cluster of programs, provide the
cluster name, list individual Federal programs within the cluster of programs, and provide the
applicable Federal agency name.
• 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 not available. For a cluster of programs also provide the total for the cluster.
Section 200.303: The non-federal entity should establish and maintain effective internal control over
the Federal award that provides reasonable assurance that the non-federal entity is managing the
Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the
Federal Award.
Section 200.1 defines internal control for non-Federal entities as the processes designed and
implemented by non-Federal entities to provide reasonable assurance regarding the achievement of
the objectives in the following categories:
(i) Effectiveness and efficiency of operations;
(ii) Reliability of reporting for internal and external use
Condition:
During our audit of the fiscal year 2023 SEFA submitted by the District, we noted that the schedule
includes federal expenditures for the South Santa Clara County Recycled Water Project which was
incurred in 2022. The information for these expenditures was included in the fiscal year 2023 SEFA
since these were claimed for reimbursement in March 2023. The total amount of expenditures was
$980,932 which exceeded the threshold for a single audit. Because of these conditions, the 2022
single audit was not performed.
The expenditures were included in the 2023 SEFA and the program was considered a major program
in the 2023 single audit.
Questioned Costs
None
Recommendation
We recommend that the District update its current internal control processes to ensure all federal
awards and expenditures are identified for reporting and compliance in the right reporting period. We
also recommend that the District prepare the SEFA in a format that is in accordance with the Uniform
Guidance.
Views of responsible officials and planned corrective actions
Brian Mendenhall, Grants and Claims Unit Manager
The planned corrective actions would be as follows:
The construction for this project was delayed from FY2015 and there were no contract services
expenses incurred until FY2022, fourth quarter. The Grants and Claims Management Unit was
not informed until November 2022 (FY2023, second quarter) that the District had incurred
construction costs, which led to the reimbursement claim in FY2023 to include both FY2022
and FY2023 expenditures.
The District has been monitoring and reporting expenditures accurately and timely on all active
grants. It was a one-time issue and the District still has an overall solid internal control process
in place. The District has since taken action and corrected the issues related to this finding.
The Grants and Claims Management Unit implemented additional controls over the year-end
close processes to ensure that all expenditures are accrued for year-end and included in the
SEFA. The District is now running a general ledger report quarterly for grants with semi-annual
reporting requirements to ensure expenditures are captured within the fiscal year regardless
of when construction activity has begun. In addition, the year-end checklist has been updated
to ensure that the year-end expenditure review is completed by the project management team
for each grant.
The Finance department will provide more training and frequent communication with the
project management team to ensure that all grant expenditures during the year are accounted
for. The department will also continue to proactively enforce the existing policies and
procedures requiring departments to complete expenditure reporting.