Moulton Niguel Water DistrictLocal Government

Condition: During our testing of expenditures incurred under the program we identified $275,978 of costs that were the result of a duplicate entry in the general ledger. The District investigated the matter, identifying an additional $292,942 of invoices that were entered in error, resulting from a transposition of invoice amount instead of quantity of units purchased. In total $568,920 of invoices were recorded in error, resulting in an overstatement of expenditures and accounts payable in the District?s general ledger. When claiming expenditures, the District claimed and was reimbursed for $147,919 of costs ($568,920 x federal reimbursement rate of 26%), which were related to this input error. Of this amount, the auditor identified $71,754, while the District, as a result of its due diligence, identified the additional $76,165. The District subsequently reclassified all of these amounts and has recorded a liability for amounts drawn down under this grant. Future expenditures will be applied before the grant is closed out. Cause: While the District performs a 3-way match for all disbursements, the District?s internal controls did not identify the input error on a timely basis, or prior to the funds being claimed for reimbursement. Effect: The District has replenished the federal program with its own funds, and recorded unearned revenues of $79,499 for the amounts received from the Federal agency prior to June 30, 2020 but before incurring costs. Future grant disbursements will be reimbursed through these funds, or from the $68,420 that was drawn down after June 30, 2020, before additional funds are drawn down, and before the grant is closed out, in accordance with the terms and condition of the award. Questioned Costs: The District recorded a journal entry to replenish the federal program with its own funds, and will deduct from subsequent drawdown requests. However, as costs were not supported by invoices at the time of audit, questioned costs of $71,754 were identified by the auditor. Context/Sampling: A nonstatistical sample of 12 transactions out of a 43 total transactions were selected for testing, which accounted for $951,363 of $1,204,354 total program expenditures. As a result of the items identified by the auditor and the District, the SEFA was adjusted by $147,919 to a total of $1,056,435 program expenditures. Repeat Finding from Prior Year(s): No Recommendation: We recommend the District enhance its grant expenditure procedures to ensure that invoices are carefully reviewed against supporting documentation, and payment has been incurred, prior to requesting reimbursements from the granting agency. By carefully reviewing prior to submitting reimbursements, the District can validate costs are properly supported by invoices. Views of Responsible Officials: See Separate Corrective Action Plan.