Finding Text
2024-002 Unrecorded Deposits (Material Weakness)
Federal Agency: Department of Homeland Security
Pass-through Agency: N/A
Cluster/Program: Staffing for Adequate Fire and Emergency Response (SAFER)
Assistance Listing Number: 97.083
Passed-through Identification: EMW-2020-FF-00046
Compliance Requirement: Cash Management
Type of Finding:
Internal Control over Compliance – Material Weakness
Material Noncompliance
Criteria or Specific Requirement: Federal regulations 2 CFR 200.303 states, the Town, as a recipient of Federal funds, must establish and maintain effective internal controls 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.
Proper financial management and internal controls should ensure that all transactions related to Federal grants, including revenue recognition, expenditure tracking, and reporting, are accurately recorded in the Town’s general ledger in a timely manner. Failure to record deposits properly may result in financial misstatements, impact budgetary decisions, and affect compliance with Federal grant requirements.
Condition: During the audit, we identified that the Town did not record deposits related to reimbursement requests #18 and #19 in the general ledger. These deposits, totaling $132,701, were reimbursements for payroll expenses associated with the firefighters hired under the SAFER grant.
The unrecorded deposits caused the general ledger to be misstated as of June 30, 2024.
Cause: The Town does not have adequate internal controls to ensure that all cash receipts, particularly those related to federal programs are recorded in the general ledger in a timely manner. This appears to stem from lack of detailed oversight over the cash reconciliation process while there was turnover in the finance office.
Effect: Failure to record $132,701 in deposits resulted in a misstatement in the Town’s financial statements and non-compliance with cash management requirements. Additionally, the lack of timely recorded increases the risk of undetected errors or misuse of funds.
Questioned Costs: None. While the deposits cleared the Town’s operating bank account via ACH from the federal awarding agency, the Town eventually identified the missing deposits and posted them to their general ledger system.
Identification as Repeat Finding: This is not a repeat finding from the prior year.
Recommendation: We recommend that the Town implement procedures to ensure that all grant related deposits are recorded in the general ledger upon receipt. In addition, we recommend that the Town implement additional procedures during the reconciliation process to ensure any identified variances or discrepancies are researched and addressed in a timely manner.
Views of Responsible Officials: Management’s views and corrective action plan is included at the end of this report.