Finding Text
Finding 2024-002: Schedule of Expenditures of Federal Awards (Significant Deficiency)
Information on the Federal Programs: U.S. Department of Health and Human Services (HHS) ALN
93.575 and U.S. Department of Agriculture (USDA) ALN 10.558
See Finding 2024-001. Finding 2024-002 is a significant deficiency in internal control over compliance
in addition to non-compliance related to the Reporting compliance area. There were no questioned
costs as a result of the corrections to the SEFA, which are described in Finding 2024-001.Information on the Federal Programs: U.S. Department of Health and Human Services (HHS) ALN
93.575 and U.S. Department of Agriculture (USDA) ALN 10.558
Criteria or Specific Requirement: Management is responsible for the complete and fair presentation
of the financial statements, including any supplementary information that is presented in relation to the
financial statements, such as the Schedule of Expenditures of Federal Awards (SEFA). Also, in
accordance with 2 CFR Section 200.510 (b)(2), Educare is required to include all direct and passthrough
Federal awards expended during the fiscal year in the SEFA.
Condition: After the start of the audit, management noted that a pass-through Federal award had
been excluded from the SEFA. As a result, the SEFA was understated by $253,457 for the year ended
June 30, 2024.
In addition, after the start of the audit, we noted that the SEFA included both Federal and non-Federal
expenditures for one Federal award. Instead of reporting expenditures based on agreed upon units of
service as the appropriate measure of expenditure for the award, the SEFA had been prepared using
actual costs expended by Educare. As a result, the SEFA was overstated by $100,517 for the year
ended June 30, 2024.
Management provided a revised SEFA to correct these two items after the major program had been
determined and audit testing had already begun. However, the corrections to the SEFA did not
change the major program determination and no questioned costs were noted.
Cause: The pass-through Federal award was a new source of funding for Educare, which is why the
expenditures were not originally included on the SEFA. In the prior year, the expenditures related to
the units of service award were included on the SEFA based on the amount of Federal funds received,
which was equal to units of service provided. However, in the current year, the amount reported on the
SEFA was based on total expenditures including both the Federal and non-Federal portions of the
expenditures.
Effect or Potential Effect: The SEFA provided at the start of the audit was understated by $152,940
in the aggregate and, as a result, it did not accurately report Educare’s Federal expenditures. When
the SEFA is not accurately prepared, this could have an effect on the determination of the major
programs.
Recommendation: We recommend that Educare enhance its procedures related to the preparation of
the SEFA to ensure that all required amounts are either included or excluded, depending upon the
terms of the grant award. We also recommend that Educare document the basis for the expenditures
related to each award, such as cost reimbursement or units of service.
Identification as a Repeat Finding: Not applicable.