Finding 555341 (2024-004)

Finding 2024-004 – Schedule of Expenditures of Federal Awards (SEFA) – Significant Deficiency Program: All Federal Programs Compliance Requirement: Reporting Condition: The expenses and awards reported on the Schedule of Expenditures of Federal Awards (SEFA) initially provided for the financial statement audit were revised. A corrected SEFA was provided prior to the completion of the Single Audit. Criteria: Internal controls should be in place that provide reasonable assurance that the SEFA is complete and accurate, prior to the start of the audit. Cause: A pass through grant from the County was excluded from the preliminary SEFA. The assistance listing number and the program number for other grants on the SEFA were outdated. Effect: The expenses included on the SEFA were revised, which could have resulted in the auditor not selecting the correct program for testing during the Single Audit and could have resulted in the Single Audit not satisfying the requirements of the Uniform Guidance. The use of outdated information could have resulted in the auditor testing incorrect requirements of the Uniform Guidance. Context: The City initially excluded a $1.5 million pass through grant from Napa County from the SEFA. The Coronavirus State and Local Fiscal Recovery Funds grant was initially listed under the original assistance listing number, not the updated assistance listing number. The housing grant was originally listed under the previous grant number. Recommendation: We recommend that the City consider all grants where the source is federal when reconciling to the SEFA. The City should communicate with pass-through entities and granting agencies to determine if a grant is federal if it is not clear after review of the grant agreement. The City should also document all assistance listing numbers on grants identified as federal. The City should also ensure grant revenue is properly identified as federal versus state when recording revenue in the general ledger, and that the SEFA is reconciled to the expenditures as well as the revenue on the accrual basis. City’s Response: See Corrective Action Plan.