Finding Text
2023-003 Material Weakness in Internal Control and Compliance over the Schedule of Expenditures of Federal Awards
Federal Program: All
Criteria or Specific Requirement - Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Section 508 - Auditee Responsibilities, requires the auditee to prepare a schedule of expenditures of federal awards. The schedule must provide the total federal awards expended for each individual federal program and the Assistance Listings Number.
Condition - While performing audit procedures on the initial schedule of expenditures of federal awards (“SEFA”) provided, we noted several errors in the reported amounts as expenditures of federal awards.
Cause - The internal controls in place to report expenditures of federal awards for reporting on the SEFA were not operating effectively.
Effect - The initial SEFA did not accurately reflect the expenditures of federal awards for several programs.
Questioned Costs - None
Context - In performing audit procedures over the initial SEFA, we identified discrepancies for multiple programs where the expenditures of federal awards listed on the initial SEFA did not agree with confirmations received from the corresponding cognizant agency or reconcile to general ledger activity and supporting documentation. While the Organization was ultimately able to reconcile program expenditures and provide an accurate SEFA, there were significant adjustments required resulting in adjustments in excess of $560,000 from the originally prepared SEFA to what is reported in these consolidated financial statements.
Additionally, in performing audit procedures over grants, we identified two programs where the expenditures of federal awards were not included in the original SEFA. The final and correct amounts for those programs were $39,250. Our procedures also identified a program fully funded by state funds that was erroneously included on the SEFA totaling $119,960. This has been excluded from the SEFA in these consolidated financial statements.
Repeat Finding - This is a repeat finding from the prior year. See prior year finding 2022-004.
Recommendation - We recommend that management review the current procedures in place for preparation of the SEFA. We also recommend that the SEFA be prepared by a qualified individual in the accounting department, and that review is performed by the Chief Financial Officer, or an equivalent individual.
Views of Responsible Officials and Planned Corrective Actions - Management concurs the initial Schedule of Federal Awards was prepared using the total program expenditures and not the program expenditures incurred using just the federal portion of the program funding.
Unfortunately, information regarding the federal versus non-federal breakdown of awards is not available in initial program contracts. This information is only disclosed as part of the confirmation process. However, moving forward, management will meet quarterly to update the tracking of federal expenditures. Additionally, management will communicate with funding entities bi-annually to verify what portions of the funding are federal. Management will also work closely with the auditors to ensure funding allocations per confirmations, if different than projected, are reflected properly in the Schedule of Federal Awards.