San Francisco Municipal Transportation AgencyLocal Government

Findings and Questioned Costs Relating to Federal AwardsFinding Number 2019-001 Inaccurate Reporting of Cash Reimbursement RecordsFederal Program Federal Transit ClusterFederal Catalog Number 20.500Federal Agency Department of TransportationFederal Award Number CA-05-0259 and CA-05-0272Federal Award Year FY2011 and FY2013CriteriaPer 2 CFR part 200, subpart D, section 200.303, the nonfederal entity must establish and maintain effectiveinternal control over the federal award that provides reasonable assurance that the nonfederal entity ismanaging the federal award is compliance with federal statues, regulations, and the terms and conditionsof the federal award.Per SFMTA's elected policy, costs must be paid prior to the date of the reimbursement request.Additionally, per 2 CFR section 200.305(9), Interest earned amounts up to $500 per year may be retainedby the non-Federal entity for administrative expense.ConditionWe found that SFMTA did not have proper controls over cash draw down transactions.We selected a sample of 15 cash reimbursement requests and identified one reimbursement request thatwas submitted in ECHO web for reimbursement prior to management approval. The reimbursementrequest was submitted on June 20, 2019 and the cash reimbursement form was approved by managementon June 21, 2019.We extended our sample by selecting an additional 10 reimbursement requests. In our additional sampleselection, we found one reimbursement request that included an ineligible expenditure. This ineligibleexpenditure was paid by the Federal Agency. In addition, interest was not calculated on the portion of theineligible payment.Questioned CostsThe total questioned costs are $762,592, which relate to the ineligible expenditure identified above.Management performed an analysis on all cash reimbursements and further identified an additionalineligible expenditure in the amount of $762,592 for a total of $1,526,866. Management calculated interestamount of $1,682 through June 30, 2019 using the federal reserve rate against the total ineligibleexpenditure amount.Cause and EffectIn discussing these conditions with management, the process control gap occurred in two instances: 1)when the preparer submitted for reimbursement prior to approval due inadequate oversight of the reviewprocess and 2) when the preparer of the reimbursement request included unposted adjustments initiated bythe Controller?s Office to SFMTA?s general ledger and the adjustments were not identified by the approverprior to submission. The unposted entries adjustments are not true expenditures and should have beenexcluded from the reimbursement requests. The entity did not have effective internal controls in place asrequired by 2 CFR part 200.303, which resulted in advanced request of expenditures by one day andinaccurate submission of reimbursement amounts as well as inaccurate federal government interestpayment amount.

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