Finding Text
Criteria:
The auditee must prepare a Schedule of Expenditures of Federal Awards for the period covered by the auditee's financial statements. The schedule must include the total Federal awards expended as determined in accordance with § 200.502. See 2 CFR 300.510(b). The auditee must have records sufficient to identify of all Federal awards received and expended and the Federal programs under which they were received. Further, the auditee must maintain records that sufficiently identify the amount, source, and expenditure of Federal funds for federal awards. While auditors may assist with the compilation of the Schedule of Expenditures of Federal Awards, Statement on Auditing Standards 115 clarifies that an auditor may not be part of an auditee’s internal control. See 2 CFR 300.302.
Proper internal controls over financial reporting include, but are not limited to, internal controls that identify misstatements in the SEFA and an adequate design of internal control over the preparation of the SEFA.
Condition:
We requested the Schedule of Expenditures of Federal Award (SEFA) just after beginning the audit. Initially, the District provided a worksheet summarizing the federal award billing indicating that the individual costs items were in these worksheets (the “Billing Worksheets”). We tested the Billing Worksheets against the SF 270s with very minor exception. We then used the details of transactions shown in the Billing Worksheets as a basis for selecting samples and began audit tests. Soon thereafter, the District provided a draft SEFA. We noted that the expenditures in the SEFA for the Cooperative Forestry Assistance program did not match the expenditures for this program on the Billing Worksheets. We requested a reconciliation, but the District was unable to provide a complete reconciliation. The amounts on the SEFA were later adjusted. However, the amounts for this program on the SEFA were never reconciled to the Billing Worksheets, which formed the basis of the billings to the Forest Service.
Cause: This is a small District, which is not often subject the Single Audit requirements.
Effect: In performing a Single Audit, we must, as the beginning task, analyze “major programs.” Without knowing federal expenditure amounts for the programs, analyzing “major programs” (meaning what programs must be audited) becomes very difficult. As well, before we can select a sample for testing, we must know the “population” or the details of transactions which are subject to testing. Not having the SEFA at the beginning of the audit and including the details of the individual transactions which total a specific program on the SEFA causes audit inefficiencies.
Repeat Finding: No.
Questioned Costs: No costs are questioned.
Recommendation: We recommend that the District impose a procedure to require that the Billing Worksheets be reconciled to the QuickBooks general ledger on a monthly basis.
Views of Responsible Officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.