{"database": "mytown-research", "table": "audit_findings", "rows": [[12, "wa-sao", "1020019", "2016-006", 4, "WA", "City of Seattle", "City/Town", "0433", "5363000", "geoid_place", "Washington State Auditor's Office", "Financial and Federal audit \u2014 City of Seattle", "Financial and Federal", 2016, "2016-01-01", "2016-12-31", "2019-08-19", "federal_award_compliance", "material_weakness", null, null, "The City did not have adequate internal controls in place to ensure accurate financial reporting on the Schedule of Expenditures of Federal Awards", "Background \nCity management is responsible for designing and following internal controls that \nprovide reasonable assurance regarding the reliability of financial reporting. These \ncontrols should ensure financial events are identified properly and presented \ncompletely. Controls should also ensure the criteria and accounting methodology \napplied to financial events are correct. \nLocal governments in Washington that spend federal funds must prepare a Schedule of \nExpenditures of Federal Awards (SEFA) as part of the annual financial report. Federal \nregulations require grantees to identify, in their accounts, all federal money spent on \nthe SEFA each fiscal year. \nOur audit identified a deficiency in internal controls that adversely affected the City\u2019s \nability to produce a relia ble SEFA. Because of its effect on the City\u2019s financial \nreporting, we consider this a significant deficiency. \nDescription of Condition \nWhen preparing the SEFA, the Citywide Accounting department relied on other City \ndepartments\u2019 supporting documentation a nd information to ensure accurate \npresentation. During the 2017 audit, Citywide Accounting brought to our attention that \na department did not report its 2016 grant expenditures for the CFDA 66.458 \nCapitalization Grants for Clean Water State Revolving Funds , which were funded by \nthe U.S. Environmental Protection Agency (EPA). \nCause of Condition \nThe City did not clearly understand the SEFA reporting requirements for the grant \nunder the Budgeting, Accounting and Reporting System (BARS) Manual and Uniform \nGuidance. The Department treated this grant as a federal loan and reported the 2016 \nexpenditures upon its first drawdown in 2017. \nWashington State Auditor's Office \nEffect of Condition \nInaccurate financial reports limit access to financial information used by City officials, \nthe public, state and federal agencies and other interested parties. In addition, these \nconditions delay the audit process and increase audit costs. \nThe City understated its 2016 SEFA by $17,760,345 because it did not include \nexpenditures for the CFDA 66.458 Capitalization Grants for Clean Water State \nRevolving Funds. The correct amount makes this a major program required to be \naudited for fiscal year 2016. \nThe City subsequently corrected the misstatement. Our Office completed the review \nof this grant, and updated and reissued our financial audit report and federal single \naudit report in 2019. \nRecommendations \nWe recommend the City dedicate sufficient time and resources to strengthen internal \ncontrols over SEFA preparation to ensure the information received from the \ndepartments is accurate and based on federal expenditures. \nWe further recommend the City to tra in departmental staff responsible for SEFA \npreparation to review the BARS Manual and Uniform Guidance to ensure \nexpenditures are reported in the correct year. \nCity\u2019s Response \nThe City acknowledges the Auditor\u2019s concerns regarding inadequate internal controls \nover financial reporting on the SEFA. As relates to the specific deficiency, the \nDepartment of Ecology Loan for the Henderson North Combined Sewer Overflow \nReductions project, the auditor asserts that the loan drawdowns covering 2015 and \n2016 were not recorded in those years. The City disputes the finding for 2015. Because \nthe loan in question was not awarded to the City until 2016, expenditures of federal \nfunds were not known when the SEFA was prepared for 2015. Further, the City \nreceived guidance from the EPA indicating that the triggering action for audit purposes \nis when an SRF borrower submits an invoice/disbursement/payment request to the \nstate. The City did not submit a disbursement until 7/31/2016. \nRegarding 2016, the City acknowledges that the drawdown request submitted in 2016 \nbut received in 2017 was not included in the 2016 SEFA. As federal (EPA) and State \n(Department of Ecology) agencies have provided conflicting guidelines, the City will \nwork to clarify rules and procedures for reporting retroactive awards on the SEFA. \nThe City appreciate SAO\u2019s guidance on this issue. \nWashington State Auditor's Office \nAuditor\u2019s Remarks \nPer OMB Circular A-133 Compliance Supplement 2015 Part 4 for the CFDA 66.458 \nCapitalization Grants for Clean Water State Revolving Funds (CWSRF), \nEnvironmental Protection Agency (EPA) requires the grantees to include project \nexpenditures during the audit period when they were incurred, regardless of when the \ngrantee received reimbu rsement. EPA further clarifies that if a subrecipient incurs \nexpenditures under an approved CWSRF loan in one audit period for which it is not \nreimbursed by the State until a subsequent audit period, those expenditures should be \nreported on the subrecipie nt\u2019s SEFA in the year in which the outlay was made, \nregardless of when the subrecipient received reimbursement. \nWe thank the City for its commitment to fiscal accountability and accurate financial \nreporting. \nApplicable Laws and Regulations \nTitle 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative \nRequirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform \nGuidance), section 510 \u2013 Financial Statements, establishes criteria and requirements \nrelated to the preparation of the schedule of expenditures of Federal awards. \nThe American Institute of Certified Public A ccountants defines significant \ndeficiencies and material weaknesses in its Codification of Statements on Auditing \nStandards, section 935, paragraph 11. \nBudget, Accounting and Reporting Standards (BARS) manu al 4.8.5 establishes \nreporting requirements related to the schedule of expenditures of Federal awards. \nTitle 2 CFR Part 200, Uniform Guidance, section 302 \u2013 Financial Management, \nrequires grantees to identify, in their accounts, all Federal awards re ceived and \nexpended and the Federal programs under which the awards were received. \nTitle 2 CFR Part 200, Uniform Guidance, section 514 \u2013 Scope of Audit, requires the \naudit be conducted in accordance with Generally Accepted Government Audit ing \nStandards (GAGAS) and encompass the financial statements and s chedule of \nexpenditure of Federal awards (SEFA). \nOMB Circular A-133 Compliance Supplement 2016 Part 4 Environmental Protection \nAgency (EPA) CFDA 66.458 Capitalization Grants for Clean Water State Revolving \nFunds IV. Other Information requires the grantees to include project expenditures \nduring the audit period when they were incurred, regardless of when the grantee \nreceived reimbursement. \nWashington State Auditor's Office", "https://portal.sao.wa.gov/ReportSearch/Home/ViewReportFile?arn=1020019&isFinding=false&sp=false", "2026-07-30 13:24:54"]], "columns": ["rowid", "source", "report_number", "finding_number", "muni_id", "state", "entity_name", "entity_type", "entity_ext_id", "place_geoid", "match_method", "auditor", "report_title", "audit_type", "fiscal_year", "period_start", "period_end", "published_date", "finding_category", "severity", "questioned_cost", "cost_basis", "finding_title", "finding_text", "report_url", "fetched_at"], "primary_keys": ["rowid"], "primary_key_values": ["12"], "units": {}, "query_ms": 0.5095670057926327, "source": "MyTown", "source_url": "https://mytown.theboringparts.com", "license": "CC BY 4.0", "license_url": "https://creativecommons.org/licenses/by/4.0/"}