City of Webster

Finding: 2025-001. Insufficient Controls Over Monitoring Federal Expenditures and SEFA Preparation Federal Agency: Federal Highway Administration Pass-through Agency: Texas Department of Transportation Assistance Listing Number: 20.205 Federal Program Name: Highway Planning and Construction Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: 2 CFR §200.303 requires entities to establish and maintain effective internal control over Federal awards that provides reasonable assurance the entity is managing the awards in compliance with Federal statutes, regulations, and the terms and conditions of the awards. 2 CFR §200.501 requires a Single Audit when a non-Federal entity expends $1,000,000 or more in Federal awards during the current fiscal year (or $750,000 during the prior year). 2 CFR §200.510(b) requires the preparation of a complete and accurate Schedule of Expenditures of Federal Awards (SEFA). Applicable GAAP requires recognition of grant revenue and related receivables when allowable expenditures are incurred. Condition: The City incurred reimbursable federal expenditures in the prior year but did not submit reimbursement requests or record the related receivable and revenue. As a result, certain federal expenditures were omitted from the SEFA, and total federal expenditures were understated below the $750,000 threshold for a Single Audit in the prior year. Cause: Grant administration is decentralized across multiple departments, and formal controls were not in place to reconcile grant expenditures to reimbursement requests or to monitor total federal expenditures and review the SEFA for completeness. Effect: Grant revenue and related receivables were understated, and the prior year SEFA was incomplete. As a result, the City did not include this grant award in the Single Audit in the prior year as required by Uniform Guidance. Questioned costs: N/A Context: N/A Repeat finding reference: N/A Recommendation: The City should strengthen oversight of federal grant activity by implementing procedures to monitor federal expenditures and ensure the SEFA is complete and accurate. This may include centralizing grant oversight within the finance function or designating a responsible grant administrator. Procedures should include periodic reconciliations of grant expenditures to reimbursement requests and a formal year-end review of total federal expenditures and the SEFA, with coordination between the finance function and departments administering federal programs. Personnel involved in grant administration should receive training on Uniform Guidance requirements. View of Responsible Officials Management’s response and corrective action plan are included in the accompanying corrective action plan.