Audit - Operating Grants Fund Balance
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Beginning in fiscal year (FY) 2006, and reported each year thereafter, the City’s Comprehensive Annual Financial Report (CAFR) has included Finding #06-16 pertaining to the operating grants fund balance. The finding states that the City is unable to identify the sources making up the fund balance, as old/inactive grants have not been closed-out or reconciled. This finding was categorized as a ‘significant deficiency’ in fiscal years 2011, 2012, and 2013. Although the finding addresses the City’s inability to identify the various sources that make up the fund balance, and not the ending balance itself, the magnitude of the balance is important. At June 30, 2013, the fund balance totaled over $4.5 million dollars. The operating grants fund balance is the result of multiple grants, some dating back to 1998, or earlier, which were not properly reconciled or closed-out. This audit addresses the City’s processes to resolve past, and prevent future, unidentified amounts in the operating grants fund balance.
The City has not established a written corrective action plan to address the remaining unidentified operating grants fund balance. The Department of Finance and Administrative Services (DFAS) Grants Administration Division (Grants Administration) was given the responsibility to resolve CAFR Finding #06-16 but does not have the authority to enforce grantee department compliance. Prior to July 2012, the City did not have formal policies or procedures for accounting for grants. Instead, DFAS – Accounting personnel provided general guidance to grantee departments. Turnover in grantee departments’ grant accounting positions and the passage of time have resulted in a loss of historical knowledge and paperwork related to old grants. Due to the complexity of the operating grant fund balance, Grants Administration’s philosophy has been not to involve the grantee departments directly. Because of this, the grantee departments have not been notified of their respective portion of the remaining operating grant fund balance. Not involving the grantee departments has led to limited participation, ownership and accountability by the grantee departments.
The City has initiated the implementation of the grants management module, but has not dedicated the resources necessary to complete the project. Grants Administration does not have the available resources to dedicate toward the implementation of the grants management module. Grants Administration is made up of five full-time equivalents (FTEs) but often operates with at least one vacancy. Of the five FTEs, two are temporary grant accountant positions that will be eliminated following the reconciliation of inactive grants and identification of the operating grants fund balance. Adequately staffing Grants Administration will help the Division to effectively manage its responsibilities and achieve its priorities. Continuous training to address Grants Administration’s business needs would allow the Division to successfully utilize the Grants module.
To ensure the unidentified fund balance does not recur, the following areas must also be addressed:
- Formal Policies and Procedures
- Grantee Department Training
- Structure of Fiscal Operations of Grants (survey results are included as Appendix B)
If left uncorrected, the unidentified operating grants fund balance could negatively affect the City’s ability to receive future grant funding as granting agencies may rely on audit reports to assess the adequacy of the City’s financial management controls.