Finding Text
2024-002 – IMPROPER CODING AND IDENTIFICATION OF FEDERAL AWARDS
Criteria: §200.302 of the Uniform Guidance states that "The financial management system of each non-Federal entity must provide for the following: Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received." Additionally, §200.400 of the Uniform Guidance states that “the accounting practices of the recipient and subrecipient must be consistent with these cost principles and support the accumulation of costs as required by these cost principles, including maintaining adequate documentation to support costs charged to the Federal award.” Finally, §200.508 of the Uniform Guidance states that the auditee must "Prepare appropriate financial statements, including the schedule of expenditures of Federal Awards." As such, it is the auditee's responsibility to identify all federal funding received and is tracked sufficiently to ensure completeness and accuracy of the Schedule of Expenditures of Federal Awards (SEFA). Condition: The SEFA prepared by UCSC was incomplete and inaccurately reported expenditures of federal awards. Additionally, federal expenditures relating to one federal program were coded to the unrestricted resource code. Cause: The SEFA was not sufficiently prepared and reviewed by personnel with adequate knowledge of the requirements of the Uniform Guidance. Effect: The result was that the SEFA was understated by a net amount of $85,363. Additionally, a $218,000 expense reclassification entry identified during the audit was necessary to properly track expenditures of federal awards under a federal resource code. Recommendation: We recommend that UCSC enhance its tracking of federal expenditures within the general ledger and ensure personnel receive frequent Uniform Guidance training to ensure proper tracking and reporting of all federal awards. UCSC’s Corrective Action Plan: Management agrees to enhance the tracking of federal expenditures in the general ledger, conduct frequent Uniform Guidance training for finance personnel, and implement monthly reconciliations of federal grants. A tracking system will be implemented within the general ledger to ensure accuracy and compliance, with monthly reconciliations conducted to align grant expenditures with reporting requirements. Finance personnel will receive ongoing Uniform Guidance training on federal grant coding and SEFA preparation, while the back-office provider will perform monthly reviews to prevent misclassification. Key milestones include implementing the tracking system by March 31, 2025, and initiating monthly expenditure reviews starting April 1, 2025.