CALLAYOMI COUNTY WATER DISTRICTLocal Government

SINGLE AUDIT FINDING Finding No. SA 2019-001 Federal Grantor Agency: U.S. Department of Homeland Security ? Federal Emergency Management Agency Pass-Through Agency: California Governor?s Office of Emergency Services Program Title: Public Assistance Grants Federal CFDA Number: 97.036 Pass-Through Grantor?s Number FEMA-4240-DR-CA; Cal OES ID: 033-91016 Awarded 2015-16 Year Compliance Requirement: Allowable Costs and Period of Performance Reporting Requirement: Significant Deficiency Criteria In accordance with 2 CFR ?200.303(a), a non-federal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Supervisory approval of invoices is an important internal control over allowable costs/activities and period of performance. Condition The General Manager?s review and approval of all invoices is one of the District?s important internal controls over allowable costs/activities and period of performance. The General Manager?s approval of invoices is documented by his initials or signature on the invoices he reviews. We selected a sample of 20 disbursements for testing. We noted that 5 of the invoices were not signed or initialed by the General Manager. Cause It appears that the General Manager accidentally missed initialing or signing 5 invoices. Because the General Manager?s initials/signature are missing, we could not determine whether or not the General Manager, in fact, reviewed the invoices. Effect or Potential Effect Missed supervisory review of invoices increases the risk of that incorrect expenses will be claimed under the federal program. When supervisory review is not documented in the manner required by the District (initials or signature on the invoice), no proof exists that the internal control procedure was, in fact, performed. Questioned Costs: The error rate is 25%. However, due to compensating controls, we do not question costs. Compensating controls considered in not questioning costs are: (1) all construction invoices are also approved by the Engineer and the Project Manager; and (2) all checks must be signed by two members of the Board. Recommendation We recommend that the District ensure that the General Manager has initialed or signed all invoices to show his approval before the invoice is processed for payment.