Calaveras County Water DistrictLocal Government

Finding 2024-002 – Significant Deficiency Award No.: 97.039 Federal Grantor: U.S. Department of Homeland Security, Federal Emergency Management Agency, Passed-through California Governor’s Office of Emergency Services Compliance Requirement: Other compliance requirements. Condition: The schedule of Expenditures of Federal Awards (SEFA) was not complete, and expenditures reported on the SEFA were revised during the single audit. Criteria: 2 CFR Part 200, Subpart F (Uniform Guidance) Section 200.502 states, “The auditee should prepare a Schedule of Expenditures of Federal Awards for the period covered by the auditee’s financial statements.” Internal controls over the SEFA should be in place ensure accrual basis expenses incurred under the federal program are properly reported as expenses on the SEFA and are properly reported as revenue in the financial statements prior to the start of the single audit. Cause: SEFA was not fully reconciled and finalized until after the single audit began. Effect: The expenses included on the SEFA for program 97.036, Disaster Grants-Public Assistance (Presidentially Declared Disasters), program FEMA-4683-DR-CA, were revised during the single audit and questioned costs in the amount of $131,195 were identified, which could have resulted in the auditor not selecting the correct major program or expenses for testing and could have resulted in the single audit not satisfying the requirements of the Uniform Guidance. Context: The District provided cost estimates to the California Governor’s Office of Emergency Services (CalOES) for the amount of flood damage expenses incurred for FEMA Project 725590 and 710830 that were used by CalOES to reimburse the District. The District did not adequately reconcile the expenses incurred at year-end to expense reports available in the accounting system and did not revise the expense estimates provided to CalOES to the actual amounts incurred during the year, resulting in CalOES overpaying the District and the District using the estimated costs on the SEFA for the single audit. Recommendation: We recommend additional review procedures be implemented to ensure the SEFA is complete and accurate when the single audit begins, which includes reconciling all expenses incurred under each federal award down to the invoice, payroll check and lowest level of other costs claimed, cutting-off each expense at year-end and claiming the reconciled qualifying expenses within 45 days after each quarter end. At year-end, programs should be reviewed for cost adjustments, extensions, and other changes that should be reflected on the SEFA when reconciling expenses for the SEFA. Separate program codes should be used for each grant on the SEFA that summarizes expenses down to the individual invoice level that should be provided to the auditor for the single audit. If overclaimed amounts are identified, the grantor and/or pass-though agency should be contacted to determine whether to return the funds or apply the overclaimed amounts to future claims. Views of Responsible Officials and Planned Corrective Actions: Management’s response and planned corrective action is included in the Corrective Action Plan included at the end of the report.

Finding 2023-002 – Significant Deficiency Assistance List Number: 97.039 – Hazzard Mitigation Grant Pass-through Agency: California Governor’s Office of Emergency Services, FEMA-4344-DR-CA. Compliance Requirement: Reporting. Condition: The District did not provide project closeout materials to the pass-through agency within 90 days of the end of the period of performance so the pass-through agency could prepare the closeout reporting within 120 days of the end of the period of performance. Criteria: The Notice of Funding Opportunity indicates: “In addition, pass-through entities are responsible for closing out their subawards as described in 2 C.F.R. § 200.344; subrecipients are still required to submit closeout materials within 90 calendar days of the period of performance end date. When a subrecipient completes all closeout requirements, pass-through entities must promptly complete all closeout actions for subawards in time for the recipient to submit all necessary documentation and information to FEMA during the closeout of the prime award.” Cause: The District’s staff were waiting for a requested extension for the period of performance from the pass-through agency and assumed the closeout reporting would not be necessary. Effect: The District is not in compliance with the terms and conditions of the federal award. Recommendation: We understand the District provided the information to the pass-through agency necessary to complete the closeout reporting on November 30, 2023. Views of Responsible Officials and Planned Corrective Actions: Management’s response and planned corrective action is included in the Corrective Action Plan included at the end of the report.

Condition: Seventeen closing entries and audit adjustments were posted during the audit to report the District?s financial statements in accordance with Generally Accepted Accounting Principles (GAAP). Criteria: Internal controls over financial reporting should exist to ensure the financial statements are prepared in accordance with GAAP and limit the opportunity for errors and fraud occurring. Cause: The District?s staff did not have enough time to fully close the District?s books before the start of the audit, due to delays caused by the system conversion and staff turnover. Effect: The adjustments and closing entries posted during the audit increased the likelihood of an error being made in the District?s financial statements. Recommendation: We recommend that management ensure all balance sheet accounts are reviewed for proper cut-off and income statement accounts are reviewed for proper classification during the closing process, focusing on accounts affected by audit adjustments provided to the Finance Department. Views of Responsible Officials and Planned Corrective Actions: Management?s response and planned corrective action is included in the Corrective Action Plan included at the end of the report.

CURRENT YEAR FINDINGS ? FINANCIAL STATEMENT AUDIT INTERNAL CONTROL OVER FINANCIAL REPORTING Finding 2021-001 ? Significant Deficiency Condition: Forty closing entries and audit adjustments were posted during the audit to report the District?s financial statements in accordance with Generally Accepted Accounting Principles (GAAP). Criteria: Internal controls over financial reporting should exist to ensure the financial statements are prepared in accordance with GAAP and limit the opportunity for errors and fraud occurring. Cause: The District?s staff did not have enough time to fully close the District?s books before the start of the audit. Effect: The adjustments and closing entries posted during the audit increased the likelihood of an error being made in the District?s financial statements. Recommendation: We recommend that management ensure all balance sheet accounts are reviewed for proper cut-off and income statement accounts are reviewed for proper classification during the closing process, focusing on accounts affected by audit adjustments provided to the Finance Department. Views of Responsible Officials and Planned Corrective Actions: Management?s response and planned corrective action is included in the Corrective Action Plan included at the end of the report. COMPLIANCE AND OTHER MATTERS See Finding 2021-002 described under the CURRENT YEAR FINDINGS AND QUESTIONED COSTS ? MAJOR FEDERAL AWARD PROGRAM section below.

INTERNAL CONTROL OVER COMPLIANCE Finding 2021-002 - Significant Deficiency CFDA: 97.039 Federal Grantor: U.S. Department of Homeland Security, Federal Emergency Management Agency (FEMA), Hazard Mitigation Grant Program (HMGP) Passed-through: California Governor?s Office of Emergency Services Award No.: FEMA-4344-DR-CA, Project #PJ0119, FIPS#009-91002 Compliance Requirement: Reporting Condition: The final balance of grant expenses reported on the Schedule of Expenditures of Federal Awards (SEFA) was not consistent with revenue recognized for each federal program and was not finalized until after the single audit began. Criteria: 2 CFR Part 200, Subpart F (Uniform Guidance) Section 200.502 states, ?The auditee should prepare a Schedule of Expenditures of Federal Awards for the period covered by the auditee?s financial statements.? Closing procedures should be in place to reconcile grant expenses incurred at year-end, confirm the amount with the grantor, claim the grant revenues on a timely basis and reconcile the claim to the general ledger to ensure the expenses that will be claimed under federal awards are properly reported on the SEFA and audited financial statements prior to the start of the single audit. Cause: It did not appear that the District?s staff had adequate time to reconcile the expenditures reported on the SEFA with claims prior to the start of the audit. Effect: A number of adjustments were needed to properly report expenses in the District?s SEFA. If expenses are not properly reported on the SEFA prior to the start of the single audit, the auditor could select the wrong program to test as a major program, which would result in the District?s single audit not complying with audit standards. Recommendation: We recommend the District add additional review procedures over the SEFA, which may include providing the SEFA to program managers to review for propriety based on their program knowledge prior to the start of the financial statement audit and single audit. The District should continue to ask vendors to use a June 30 cut-off date for the last invoice of the fiscal year and program managers should cut-off claims at June 30 rather than including dates that span two fiscal years to make the reconciliation process easier. The project report from the general ledger should be used to prepare claims and the SEFA since the general ledger would reflect accrual basis expenses. When adding grants to the SEFA, the grant or application that indicates the assistance list number and GL detail that supports the expenditures added to the SEFA should be retained and provided with the SEFA. View of Responsible Officials and Planned Corrective Action: Management?s response and planned corrective action is included at the end of this report.

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