Finding 961218 (2023-002)

2023-002 – SINGLE AUDIT DETERMINATION AND COMPLETION OF THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Type of Finding: (E) Material Weakness in Internal Control Over Compliance of Federal Awards and (H) Other Non-compliance Required to be Reported per Section 12-6-5 NMSA 1978 Funding Agency: All (see Schedule of Expenditures of Federal Awards) Title: All (see Schedule of Expenditures of Federal Awards) AL #: All (see Schedule of Expenditures of Federal Awards) Award #: All (see Schedule of Expenditures of Federal Awards) Award Period: All (see Schedule of Expenditures of Federal Awards) Questioned Costs: None Statement of Condition The Authority is responsible for preparing the Schedule of Expenditures of Federal Awards (SEFA), based on grant and loan information obtained from the financial accounting records. During the audit process, it was determined that the Authority received multiple loans and grants which were under Uniform Guidance; Clean Water Drinking State Revolving Fund and Drinking Water State Revolving Fund. The Authority was under the impression that these loans and grants were state funded, however it was determined they are federal funds and are required to be included on a Schedule of Expenditures of Federal Awards. The Authority spent over $750,000 in federal expenses related to these loans and grants, which triggered the requirement for a single audit. Criteria Per the Uniform Guidance 200.508 Auditee responsibilities; the auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended as determined in accordance with section 200.502 ‘Basis for Determining Federal Awards Expended’. The SEFA should be correct when provided to the auditors, as it affects the determination of major federal programs required to be audited and to be properly presented as supplementary information of the audited financial statements. Cause The Authority was under the impression that these loans and grants were state funded due to their names. Effect The Authority could have been out of compliance with Uniform Guidance requirements and greatly increased the risk of the auditors not being aware of the requirement of performing a single audit, which would result in a substandard audit report. Recommendation We recommend that the Authority review all grants and loans carefully for language related to assistance list numbers (previously referred to as CFDA numbers) and uniform guidance requirements. Additionally, if the loans and grants are unclear, we recommend the Authority follow up with the grantor to confirm if they have an applicable assistance list number and are under Uniform Guidance. Finally, we recommend the Authority include the assistance list numbers on their grant summary trackers and update them throughout the year. Management Response CRRUA had an oversight issue with identifying the federal components of the state grants/loans. CRRUA will implement recommendations and all grants with federal funding will be identified with Assistance Listing #. In addition, CRRUA will confirm with Grant and Loan agencies during the agreement process to determine if federal funding is involved, so that CRRUA follows Uniform Guidance Requirements for Federal Awards. Prior to signing a grant or loan, the (Interim) Executive Director will identify the type of grant and loan so that appropriate reporting measure is in place for federally funded grants and loans. Finding resolved timeline: Immediately for current grants and loans and with a process in place for federal identification of future grants and loans. Designation of employee position responsible for meeting this deadline: (Interim) Executive Director.