Finding 504835 (2024-002)

Federal Program Impacts all programs presented on the Schedule of Expenditures of Federal Awards (SEFA). Criteria Lack of procedures to track and reconcile federal programs to the financial statements. Condition and Context The SEFA initially provided was incomplete and had not been reconciled to capital assets, general ledger data or other supporting documentation. Cause The City does not have adequate procedures to track federal awards in a centralized location. Effect The SEFA required multiple updates during the audit as a result of questions and testing in other areas. • The dollar amount of the final SEFA was more than $3.2 million greater than the dollar amount presented on the initial SEFA. • Programs that were necessary for testing as determined by the final SEFA were not included on the original SEFA. There were also two journal entries necessary to reconcile the SEFA and the general ledger. • Construction in progress and capital assets placed into service (completed projects) required an adjustment to correct expenses related to projects funded by federal grants. • Revenue and accounts receivable were also adjusted to record a federal grant reimbursement that had been placed into service during the fiscal year. Management indicated that while each individual department may have procedures to track their grants, capital assets and projects, there is not a centralized location or process to reconcile those records to the general ledger or other information as obtained from the Finance Department. As a result, the Finance Department was unaware of the progress of certain projects and could not adequately reconcile the financial statement information or the SEFA in preparation for the financial statement audit or single audit. Recommendation We recommend that management establish a centralized system for tracking all federal programs entered into by the City, that includes reconciling such information to the general ledger. We also recommend that reconciliations of federal programs be performed during month-end procedures, instead of performing those procedures while fieldwork is being conducted for the audit. Views of the responsible officials and planned corrective actions Management agrees that a centralized reconciliation control process should be in place, given the large amount of grants that the City has been awarded and will continue to apply for in the future. Management will work to develop those procedures and communicate with other departments. Official Responsible for Ensuring the Corrective Action Plan is Implemented Jeff Davis, City Treasurer/Director of Finance; Stan Reno, Interim-City Manager. Planned Completion Date for the Corrective Action Plan Recommendations are considered at the issuance of the report, October 24, 2024.