City of American Canyon

Conditions: The expenses and awards originally reported on the Schedule of Expenditures of Federal Awards (SEFA) provided for the financial statement audit were subsequently revised. A corrected SEFA was submitted prior to the completion of the Single Audit. Criteria: Internal controls should be implemented to provide reasonable assurance that the SEFA is complete and accurate before the audit begins. Cause: The City did not accrue certain federal expenditures, which resulted in an inaccurate SEFA. This omission could lead to incomplete reporting of federal program activity and noncompliance with Uniform Guidance requirements. Accurate accrual of federal expenditures is essential to ensure the SEFA reflects all applicable costs and supports proper audit testing. Effect: The expenses reported on the SEFA were updated after the audit began. This may have caused the auditor to select the wrong program for testing during the Single Audit, which could result in the audit not meeting the requirements of the Uniform Guidance. Using outdated information may also have led the auditor to test the wrong compliance requirements. Context: The City initially excluded $43,137 in Section 8 Housing Choice Voucher funds from the SEFA and did not accrue HOME program administrative fees and related expenses for FY 2024–25. These costs were excluded because the City had not been billed by Napa County and was uncertain whether estimated amounts should be accrued or recorded upon billing. Recommendation: We recommend that Finance reconcile the SEFA to the general ledger on a routine basis and include a subsequent review at the end of the year to ensure completeness. We also recommend that Finance compare the SEFA to grants documents and coordinate with other departments, pass through entities and oversight agencies as needed. The objective is to ensure the SEFA includes all grants with a federal funding source and the correct assistance listing numbers for each grant. The City should ensure that grant revenue is properly classified as federal or state in the general ledger during the year. Corrective Action Plan: All errors in the SEFA, including incorrect pass-through grants and outdated grant numbers, have been corrected. A review process is now in place before the audit, with an additional accuracy check. The Senior Accountant will prepare the SEFA, and the Finance Director will review it for completeness and accuracy. We will confirm grant details with the granting agencies to verify federal status and use a checklist to ensure proper classification. Going forward, federal and state grants will be recorded accurately, grants will be properly classified in the general ledger, and annual training on SEFA preparation and Uniform Guidance compliance will be provided.

All errors in the SEFA, including incorrect pass-through grants and outdated grant numbers, have been corrected. A review process is now in place before the audit, with an additional accuracy check. The Senior Accountant will prepare the SEFA, and the Finance Director will review it for completeness and accuracy. We will confirm grant details with the granting agencies to verify federal status and use a checklist to ensure proper classification. Going forward, federal and state grants will be recorded accurately, grants will be properly classified in the general ledger, and annual training on SEFA preparation and Uniform Guidance compliance will be provided.

2024-004

Finding 2024-004 – Schedule of Expenditures of Federal Awards (SEFA) – Significant Deficiency Program: All Federal Programs Compliance Requirement: Reporting Condition: The expenses and awards reported on the Schedule of Expenditures of Federal Awards (SEFA) initially provided for the financial statement audit were revised. A corrected SEFA was provided prior to the completion of the Single Audit. Criteria: Internal controls should be in place that provide reasonable assurance that the SEFA is complete and accurate, prior to the start of the audit. Cause: A pass through grant from the County was excluded from the preliminary SEFA. The assistance listing number and the program number for other grants on the SEFA were outdated. Effect: The expenses included on the SEFA were revised, which could have resulted in the auditor not selecting the correct program for testing during the Single Audit and could have resulted in the Single Audit not satisfying the requirements of the Uniform Guidance. The use of outdated information could have resulted in the auditor testing incorrect requirements of the Uniform Guidance. Context: The City initially excluded a $1.5 million pass through grant from Napa County from the SEFA. The Coronavirus State and Local Fiscal Recovery Funds grant was initially listed under the original assistance listing number, not the updated assistance listing number. The housing grant was originally listed under the previous grant number. Recommendation: We recommend that the City consider all grants where the source is federal when reconciling to the SEFA. The City should communicate with pass-through entities and granting agencies to determine if a grant is federal if it is not clear after review of the grant agreement. The City should also document all assistance listing numbers on grants identified as federal. The City should also ensure grant revenue is properly identified as federal versus state when recording revenue in the general ledger, and that the SEFA is reconciled to the expenditures as well as the revenue on the accrual basis. City’s Response: See Corrective Action Plan.

Finding 2024-004 – Schedule of Expenditures of Federal Awards (SEFA) – Significant Deficiency The errors in the SEFA, including incorrect pass-through grants and outdated grant numbers, have been corrected, and a review process is now in place before the audit, with a second check for accuracy. The Senior Accountant will prepare the SEFA, and the Finance Manager will review it to ensure accuracy. We will communicate with granting agencies to confirm whether grants are federal and use a checklist to ensure proper classifications. Moving forward, federal and state grants will be correctly recorded, grants will be properly classified when recorded in the general ledger, and annual training on SEFA preparation and Uniform Guidance compliance will be provided.