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Cit 6.1. B. - Page 221 �ity J Single Audit Reports Schedule of Findings and Questioned Costs, Continued For the Year Ended June 30, 2011 B. FINDINGS - FINANCIAL STATEMENTS AUDIT Schedule of Expenditures of Federal Awards & Prior Period Adjustment to the Financial Statements Criteria: As described in § .310(b)(3) of OMB Circular A-133, the schedule of expenditures of federal awards for the period covered by the City's fulancial statenlents shall include a list of individual Federal progranls by Federal agency, and provide total Federal awards e�ended for each individual Federal program. At the saine tin1e, all reinlbursable grant revenues should be accrued on t11e fulancial statenlents. Condition: The City 11ad incurred e�enditures for fl1e Redwood City Recycled Water Project, and had received federal funduzg for t11e Project wzder t11e Water Reclanlation and Peuse Progranl (CFDA #15.504). During the performance of the audit, we noted that t11e City had not reported $1,037,656 in prior period federal expenditures u1 the schedule of expenditures of federal awards for the respective reportulg periods. As a result, the City did not accrue those b ant revenues u1 prior fiscal years. Cause: The City has a decentralized process for requesting grant awards. However departments applying for federal grant awards usually obtain City Council's approval. The City Council grant approval requests are then forwarded to the City's fulance department, who rely on this process to ensure that all of the City's federal grants are accounted for, which in turn ensures that all expenditures of federal grant awards are reported on the Schedule of Expenditures of Federal awards for each fiscal year. The department which applied for federal funding under the Water Reclamation and Reuse Program applied for and had incurred expenditures for t11e federal award prior to seeking approval from City council. Questioned Costs: Not applicable. Context and Effect: The Schedules of Expenditure of Federal Awards were incomplete and tlle City was not complying wit11 the requireinents under OMB Circular A-133 u1 prior fiscal years. In addition, prior years' financial stateinents 11ave been nusstated. Recommendation: We reconunend that the City formalize a written grant reportulg process to be comnlunicated to all depart�nents to ensure t11at all federal grant expenditures are reported on the schedule of expenditures of federal awards, and all grant reimbursable revenues are properly accrued. 10