Finding Text
Criteria: The Compliance Supplement for Federal Awards and 2 CFR Part 200 Subpart F require that recipients accurately report federal expenditures in the Schedule of Expenditures of Federal Awards (SEFA). The SEFA must present federal award information in accordance with the prescribed format and include all relevant details for accurate reporting and compliance verification. Additionally, the Uniform Guidance, along with the ARPA grant award terms, requires that all federal funds and related expenditures be accurately recorded in the general ledger. Condition: The City expended $1,087,839 in premium pay to employees. However, this
expenditure was not initially recorded in the ARPA designated general ledger fund; instead it was
charged to other funding sources. As a result, the ARPA expenditures reported on the Schedule of
Expenditures of Federal Awards (SEFA) could not be reconciled to the City's general ledger
records at the time of testing. Additionally, a $5,300,000 cash transfer between bank accounts
associated with ARPA was not recorded in the City’s general ledger, further impairing the
completeness and accuracy of ARPA fund activity reported in the City’s financial system. These
discrepancies were subsequently identified and corrected by the City.
Cause of Condition: Discrepancies in the reports and incorrect allocation of expenditures to the
appropriate fund appear to result from inadequate accounting procedures or regular process to
reconcile the general ledger to the SEFA. This lack of periodic reconciliation and review allowed
misclassifications and omissions of ARPA transactions to go unnoticed, resulting in incomplete
and inaccurate accounting records.
Effect: The SEFA does not accurately reflect the federal expenditures of the City and this may
lead to non-compliance with federal regulations and could impact the City’s eligibility for further
federal funding. It also impairs the ability to ensure that ARPA funds are used appropriately and
reported accurately.
Recommendation: It is recommended that the City implement or strengthen procedures for
preparing and reviewing the SEFA to ensure accuracy and completeness. Furthermore, verify that
all federal expenditures are reported in the appropriate funds and implement regular reconciliations
between the SEFA and general ledger to promptly identify and address discrepancies..
Additionally, training should be provided to staff on proper federal fund accounting and reporting
practices.
Questioned Cost: $ 0
Views of Responsible Official: The City partially disagrees with the finding. The classification
approach used by the City was based on guidance provided by the U.S. Department of the
Treasury under SLFRF. Specifically, the City elected to treat up to $10 million in ARPA funds as
revenue replacement and allocated these across two fiscal years to track usage of restricted vs.
unrestricted portions.
However, we acknowledge that SEFA preparation should reflect expenditures as reported under
Uniform Guidance regardless of internal fund classifications. In response, we are:
Updating our SEFA preparation procedures to ensure full alignment with 2 CFR §200
Subpart F; Implementing a review and sign-off process by both Finance and Grants Management
prior to submission;
Providing training to our accounting team on federal expenditure classification and SEFA
reporting standards.
We will also consult with our external auditors during the next reporting cycle to validate fund
treatment and ensure that reporting is accurate and consistent with federal expectations.