Rotunda of the California state capital building in the early morning light, Sacramento
In total there are six major points they recommend that they believe could fix the continuous mishandlings of finance reports for some federal programs.
The first is the most important from the auditor, especially for the child care and development funding issue that saw over $491 million dollars in unresolved differences between the federal reports and state general ledger.
They recommend the California Department of Social Services establish a formal adjustment process between each federal financial report and the general ledger.
This would improve even more by assigning a specific employee that’s responsible for documenting and overseeing the adjustments, while also reporting these monthly instead of quarterly.
Second, the preparation and review of the State’s Federal Expenditure Schedule needs to be more strongly controlled before it ever reaches the auditor.
Third would be to create formal procedures for the sub-award reporting.
Fourth is to make the system durable enough to be able to adjust if or when federal reporting systems change.
Fifth is to fix the sub-recipient agreements before they’re officially signed.
The last recommendation is for increased overall accountabilities, not just policy changes.
To boil it down, the auditors office is essentially asking agencies to implement this system:
- Assign an owner.
- Standardize the process.
- Coordinate to the source reports.
- Investigate any discrepancies before submitting their reports.
- Require a documented supervisor approval.
- Keep an eye on deadlines and subrecipients.
- Train staff and maintain a backup for worse case scenarios.
- Preserve an audit trail so a future auditor can track where every reported number came from.
Each department called out in the report, like the Department Of Social Services, did give a response.
While the CDSS did agree that some things needed to be changed, implemented and improved, they didn’t agree with everything.
When looking at the $491 million discrepancy, the department said that much of the difference was due to timing.
Their initial federal report relies on preliminary figures and is due in July.
The general ledger report is based on final figures and is due later in September.
But to ensure issues like this doesn’t happen again, the department submitted a budget change proposal to ensure completion of the adjustment process.
It has been approved with full implementation expected next month.
This report doesn’t say that California mishandled the full $176 billion that was mentioned in the auditors report, as they did conclude that most of the federal programs did comply with requirements given to them.
