Finding Text
Finding 2022-002 Schedule of Expenditures of Federal Awards Preparation Type of Finding: Material Weakness over Financial Reporting. Condition and Context: During the audit, it was identified that the Organization encountered deficiencies in preparing an accurate and complete Schedule of Expenditures of Federal Awards (?SEFA?). The SEFA is a critical component of the organization's reporting process, as it provides a summary of federal funds expended and aids in assessing compliance with federal regulations. The Organization's failure to ensure the accuracy and completeness of the SEFA indicates shortcomings in its reporting practices. It was observed that the SEFA presented inaccuracies and omissions, compromising the completeness and reliability of reported information. The SEFA did not accurately reflect all federal awards received and expended during the audit period, and relevant details such as award numbers, funding sources, and program titles were either missing or misstated. These deficiencies reflect a lack of adherence to reporting requirements. Criteria: Federal regulations and accounting principles generally accepted in the United States of America ("GAAP") mandate the preparation of a comprehensive and accurate SEFA, which provides transparent disclosure of federal funds expended, including the source of funds, program titles, award numbers, and expenditure amounts. Cause: Personnel responsible for SEFA preparation and reporting lack the necessary skills, knowledge, and experience regarding federal reporting requirements. Effect: Failure to prepare an accurate SEFA has several implications. First, the discrepancies in the SEFA could lead to misrepresentation of the extent and nature of federal funds received and expended, potentially misleading stakeholders. Second, the failure to accurately report federal awards and expenditures could result in non-compliance with federal reporting requirements, jeopardizing the organization's eligibility for future federal funding. Finally, an incomplete SEFA hinders transparency and accountability by obscuring the sources of federal funds and the programs they support, making it difficult to track the organization's use of grant funds. Questioned Costs: There were no questioned costs identified. Recommendation: We recommended that the Organization's management establish documented procedures for the preparation, review, and validation of the SEFA to ensure consistency and accuracy in future reporting. Second, management should implement controls to ensure accurate and complete recording of federal awards and corresponding expenditures in the SEFA. Finally, the Organization should procure training for personnel responsible for financial reporting, emphasizing the importance of accurate SEFA preparation and compliance with federal reporting requirements. Views of Responsible Officials: The Organization?s Board and Executive Team consisting of the CEO and the COO acknowledge the finding related to the preparation of the SEFA. Leadership is confident the addition of a staff person dedicated to grants management will ensure the proper tracking of federal awards and reporting for preparation of the SEFA in future audits. The new Grants Manager will be acquiring training and knowledge to develop an appropriate tracking mechanism.