Finding Text
Criteria - Recipients must specify whether a cash or accrual basis was used for preparing the Federal Financial Report (SF-425). Financial reports should be prepared in accordance with the specified accounting basis. 2 CFR 200.303, Internal Controls, requires that recipients establish and maintain effective internal control over Federal awards that provides reasonable assurance that the recipient is managing Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. Condition - The City indicated the cash basis of accounting was used to prepare the Federal Financial Report (SF-425). For the reporting period ended March 31, 2022, the Federal share of expenditures, the Federal share of unliquidated obligations, and the recipient share of expenditures were improperly reported. For the reporting period ended September 30, 2022, the Federal share of expenditures and the Federal share of unliquidated obligations were improperly reported. In these instances, instructions attached to the Federal Financial Report (SF-425) were not properly followed. In addition, the City failed to comply with certain reporting requirements included in the U.S. Department of Commerce - Economic Development Administration Standard Terms and Conditions for Construction Projects. Effect - The City did not report accurate amounts on the Federal Financial Reports (SF-425) due to errors in compiling amounts from accounting records. For the reporting period ended March 31, 2022, the Federal share of expenditures was understated by approximately $875,000, the Federal share of unliquidated obligations was overstated by approximately $113,000, and the recipient share of expenditures was understated by approximately $52,000. For the reporting period ended September 30, 2022, the Federal share of expenditures was understated by approximately $320,000 and the Federal share of expenditures was overstated by approximately $320,000. Cause - The City?s policies and procedures and internal controls over federal award reporting were not adequate. There is a lack of monitoring and appropriate review by the City of the reports prepared by the external grant administrator. Recommendation - The City should strengthen its policies and procedures and internal controls related to federal award reporting and should implement policies and procedures to monitor and review all reports prepared and submitted by the external grant administrator on behalf of the City. Views of responsible officials - The City agrees with the finding. The City will implement additional review procedures over grant reporting requirements, including more adequate review of reports prepared by third party grant administrators. Identification of repeat finding - This is a repeat finding of prior year finding 2021-007.