Assistance Listing Number, Federal Agency, and Program Name
ALN 20.205, Department of Transportation, Highway Planning and Construction
Federal Transit Cluster, ALNs 20.500 (Federal Transit Capital Investment Grants), 20.507 (Federal Transit Formula Grants), 20.507 (COVID 19, Federal Transit Formula Grants), and 20.526 (Bus and Bus Facilities Formula Program & Discretionary Programs), Department of Transportation
Federal Award Identification Number and Year
ALN 20.205: STU M455 125, SHO M455 124, and STU CO60 086
ALN 20.500: 1138 2022 1
ALN 20.507: CO 2023 015 00, CO 2021 031, CO 2023 015 00, and CO 2023 014 (COVID 19)
ALN 20.526: CO 2023 013 00, 1138 2023 4, 1138 2023 7, 1138 2023 3, CO 2022 003 00, and CO 2023 001
Pass through Entity
ALN 20.205 Colorado Department of Transportation
ALNs 20.500, 20.507, and 20.526 N/A
Finding Type Material weakness
Repeat Finding No
Criteria According to 2 CFR 200.502, the determination of when a federal award is expended must be based on when the activity related to the federal award occurs. Generally, the activity pertains to the events that require the nonfederal entity to comply with federal status, regulations, and the terms and conditions of federal awards, such as expenditure/expense transactions associated with awards including grants.
Per GASB Implementation Guide 2019 1 Question 4.7, in the absence of an executed grant agreement before the end of the reporting period, a government cannot establish that it has incurred allowable costs. Additionally, the applicable FTA section of the federal register for the grants in question indicates that "pre award authority is not a legal or implied commitment that the subject project will be approved for FTA assistance or that FTA will obligate federal funds."
Condition The fiscal year 2023 schedule of expenditures of federal awards (SEFA) that was initially provided to the auditors was incorrect because it included expenditures related to fiscal year 2022, as well as expenditures that were incurred before an executed grant agreement was in place.
Questioned Costs None
Identification of How Questioned Costs Were Computed N/A
Context The expenditures on the City's SEFA were misreported as follows:
ALN 20.205, Highway Planning and Construction The expenditures reported on the initial SEFA included $641,174 that related to expenditures incurred in fiscal year 2022.
ALNs 20.500, 20.507, and 20.526, Federal Transit Cluster The expenditures reported on the initial SEFA included $5,250,990 that related to expenditures incurred in prior fiscal years, or for which an executed grant agreement had not yet been received as of December 31, 2023.
ALNs 20.507, 20.507 (COVID 19), and 20.526, Federal Transit Cluster The expenditures reported on the initial SEFA excluded $9,103,948 that related to expenditures incurred in fiscal year 2022, during which an executed grant agreement had not yet been received, but was received during the year ended December 31, 2023.
Cause and Effect Related to the instance where fiscal year 2022 expenditures were reported on the fiscal year 2023 SEFA, the City reported federal expenditures in congruence with requests for reimbursement from the federal agency, rather than when the expenditures was incurred.
Related to the Federal Transit Cluster, the City has historically interpreted pre award authority granted by the FTA as the trigger to recognized federal expenditures, even without an executed grant agreement.
As a result, the SEFA in fiscal year 2023 was initially misstated requiring a restatement of the 2022 SEFA. These errors did impact major program determination, wherein ALN 20.205, Highway Planning and Construction, which was originally required to be tested in fiscal year 2023, did not need to be assessed as a major program based on the reissued 2022 SEFA. The final SEFA for fiscal year 2023 has been corrected for these errors.
Recommendation The City should implement controls to ensure that the SEFA is prepared in accordance with applicable rules and regulations.
Views of Responsible Officials and Corrective Action Plan Expenditures will be reported on the SEFA only for grant programs with an executed award regardless of the year incurred. SEFA preparation procedures have been updated to ensure analysis of grant execution date.