Finding Text
Finding Number: 2021-SA1 Material Weakness – Internal Control over Compliance
Federal Award: No. 64.024 VA Homeless Providers Grant and Per Diem Program
Federal Agency: U.S. Veterans Administration
Pass-Through Entity: Not applicable
Criteria or Specific Requirement: U.S. Code of Federal Regulations, Title 2, Part 200, section 510(b) Schedule of Expenditures of Federal Awards requires recipients of federal awards to prepare a schedule of expenditures of federal awards (SEFA) for the period covered by the entity’s financial statements to accurately reflect federal awards expended for individual federal programs.
Condition: During the year ended June 30, 2021, program income expended was not identified and inappropriately excluded from the SEFA. In addition, the underlying detail of expenditures did not tie without exception to the SEFA amounts and multiple adjustments to the SEFA were made.
Cause: The error was primarily due to factors beyond the control of current management, including poorly designed policies and procedures, poor recordkeeping and a lack of understanding of the requirements for the reporting of federal expenditures on the SEFA.
Effect or Potential Effect: Improper internal controls and reconciliations of the federal expenditures poses a risk for inaccuracies in SEFA reporting. Additionally, since the Organization’s SEFA serves as the basis in determining the audit scope, including the identification of major programs required to be audited in a given fiscal year, inaccuracies in the SEFA pose a risk of improper identification of major programs.
Questioned Costs: Related questioned costs are unknown.
Context: During the year under audit, the issues represent a systemic problem, beyond the control of current management.
Recommendation: The Organization should establish a more thorough internal review process to ensure the figures reported on the SEFA properly represent expenditures incurred in the Organization’s accounting software and is reconciled timely to the general ledger. The Organization should also take measures to train department personnel on the requirements for SEFA reporting to help ensure that the preparation of the SEFA report is accurate and ties to the general ledger.
View of Responsible Officials: In response to finding number 2021-SA1, management agrees with the finding and will design, implement, and maintain internal controls that ensure the figures reported on the SEFA properly represent expenditures incurred in the Organization’s accounting software; and that the reported figures are reconciled timely to the general ledger. Further, management will take measures to train personnel in SEFA reporting requirements to help ensure that the preparation of the SEFA report is accurate and ties to the general ledger.