CITY OF TAHLEQUAH

2025-001: Filing with the State Auditor and Federal Audit Clearinghouse Criteria: In order to comply with filing reports with the Oklahoma State Auditor and Inspector (State Auditor), management needs to appropriately monitor the timing of the submission of the filing of the audit report within six months after the end of the fiscal year. The Federal Audit Clearinghouse (FAC) submission must be completed by the earlier of nine months after the year-end or 30 days from the report issuance. Condition: The City did not submit its audit report to the State Auditor prior to the deadline of six months after the end of the fiscal year ending June 30, 2025. Additionally, the city did not submit its audit report to the FAC within nine months from the year ending June 30, 2025. Cause and Effect: Due to delayed financial reporting close out of fiscal year 2024 the City was not in compliance with its required deadline to provide the State Auditor and the FAC with its issued audit report within the established deadlines. Recommendation: We recommend the internal controls for reporting be reviewed to allow for compliance with the State Auditor and FAC established deadlines.

The City did not submit its audit report to the State Auditor prior to the deadline of six months after the end of the fiscal year ending June 30, 2024. Additionally, the city did not submit its audit report to the FAC within nine months from the year ending June 30, 2024.

The City’s internal controls over reporting compliance requirements were not thoroughly monitored and were not timely, and reports were not accurately submitted.

Criteria: The Schedule of Expenditures of Federal Awards (SEFA) should be accurately captured, reconciled, and reviewed by the City. Adequate documentation of procedures performed as well as evidence of thorough reviews should be in place. According to GAAP, expenditures should be recognized in the period services are performed or goods are received. Condition: Internal controls over financial reporting lacked oversight and thorough review of federal expenditures being included within the SEFA during fiscal year 2023. Cause and Effect: As a result, the City improperly included approximately $569,000 in expenditures in the initial SEFA received during audit fieldwork. Of this total, $430,000 was only transfers during the year rather than funds spent during fiscal year 2023. The remaining roughly $139,000 related to expenditures in assistance listing number (AL#) 21.106 which were appropriately recorded for financial statement purposes during fiscal year 2022 but failed to include these costs in the 2022 SEFA. The City then initially reported the approximately $139,000 spending on the 2023 SEFA. Recommendation: We recommend that the City review the current procedures for SEFA preparation and implement the necessary changes to ensure accurate reporting of financial information on the SEFA. We also recommend the City establish procedures to timely reconcile federal revenues to its federal expenditures. Management Response: We have reviewed current procedures regarding SEFA preparation and have implemented necessary changes to ensure accuracy. We have also established procedures to ensure a timely reconciliation of federal revenues and expenses.

Criteria: In order to comply with filing of reports with the Oklahoma State Auditor and Inspector (State Auditor), management needs to appropriately monitor the timing of the submission of the filing of the audit report within six months after the end of the fiscal year. Additionally, the Federal Audit Clearinghouse (FAC) submission should occur the earlier of nine months subsequent to year end or 30 days from report issuance. Condition: The City did not submit its audit report to the State Auditor prior to the deadline of six months after the end of the fiscal year ending June 30, 2023. Additionally, the City did not submit its audit report to the FAC within nine months from year ending June 30, 2023. Cause and Effect: Due to delayed financial reporting close out of fiscal year 2023 the City was not in compliance with its required deadline to provide the State Auditor and the FAC with its issued audit report within the established deadlines. Recommendation: We recommend the internal controls for reporting be reviewed to allow for compliance with the State Auditor and FAC established deadlines. Management Response: Management recognizes the need to submit its single audit reports to the State Auditor and FAC in accordance with the required deadlines in order to remain compliant with requirements. Management has made Professional Services changes to ensure timely audit compliance moving forward.

Criteria: Per the Compliance and Reporting Guidance for Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) assistance listing number (AL#) 21.027, all recipients are required to submit Project and Expenditure Reports. Annual reports are required for cities below 250,000 residents that are allocated less than $10 million in CSLFRF funding and must be submitted to the Department of Treasury by April 30. In addition, per the Airport Improvement Program (AIP) handbook for AL# 20.106, grant recipients must submit timely and accurate SF-425 financial reports annually, by December 31, to summarize expenditures and status of project funds. Condition: The City’s internal controls over reporting compliance requirements were not thoroughly monitored and were not timely, and reports were not accurately submitted. Questioned Costs: $0 Cause and Effect: Due to the City not having a centralized reporting requirement schedule, the required annual report for CSLFRF funding was submitted by April 30 deadline however the reported amount $0 did not agree to the amount reported on the SEFA of $297,394. As it relates to the AIP, as of the end of audit field work, the SF-425 report was still pending submission to the Department of Transportation. Recommendation: We recommend the City centrally track its required grant reporting and related deadlines with specific individuals identified by grant program to ensure timely and accurate reporting is achieved. Management Response: We have reviewed current procedures regarding report preparation and have implemented necessary changes to ensure accuracy. We have also established procedures to ensure a timely reconciliation of federal revenues and expenses.

Criteria: The Schedule of Expenditures of Federal Awards (SEFA) should be accurately captured, reconciled, and reviewed by the City. Adequate documentation of procedures performed as well as evidence of thorough reviews should be in place. According to generally accepted accounting principles in the United States of America (GAAP), expenditures should be recognized in the period services are performed or goods are received. Accurate reporting of federal expenditures should be reported via SF-425 financial reports. Also, single audit uploads should be timely submitted to the federal audit clearinghouse the earlier of nine months subsequent to year end or 30 days after report issuance. Condition: Internal controls over financial reporting lacked oversight and thorough review, as federal expenditures were excluded from the SEFA during fiscal year 2022. Additionally, accurate SF-425 federal reporting did not reflect the expenditures incurred for the appropriate reporting period. Lastly, the City did not submit its audit report to the federal audit clearinghouse within nine months from the year ending June 30, 2022. Questioned Costs: $0 Cause and Effect: As a result, the City improperly excluded approximately $139,000 in federal expenditures relating to assistance listing number (AL#) 21.106 in the initial SEFA reported on during fiscal year 2022. These costs were appropriately reported for financial statement purposes during fiscal year 2022, however, the SEFA was incomplete. Thus, the City then exceeded the $750,000 federal threshold, triggering a single audit. The City’s SF-425 report excluded expenditures incurred during fiscal year ending 2022. This also led to noncompliance as the City did not provide the federal audit clearinghouse with its issued audit report within the established deadline. Recommendation: We recommend that the City review the current procedures for SEFA preparation and implement the necessary changes to ensure accurate reporting of financial information on the SEFA. We also recommend the City establish procedures to timely reconcile federal revenues to its federal expenditures for accurate SF-425 presentation and monitoring completeness of the SEFA. Lastly, we recommend the internal controls for reporting to the federal audit clearinghouse be reviewed to ensure that future filings are completed within the established deadline. Management Response: We have reviewed our current procedures related to SEFA reporting and have increased our training to ensure accurate reporting of financial information on the SEFA. We have established procedures to ensure timely reconciliation of federal expenses. We have internal controls in place to ensure that future filings are completed within the established deadlines.