Significant Deficiencies: 2022-002: Compliance and Significant Deficiency in Internal Control over Compliance with Special Tests and Provisions (Obligation, Expenditure and Payment Requirements) Federal agency: U.S. Department of Housing and Urban Development Pass-through agency: None Title: Emergency Solutions Grant Program, including Covid-19 CFDA Number: 14.231 Award Year: 2022 Award Number: E21MC0100002 & EC0MW010002 Criteria: As indicated in the April 2022, OMB Compliance Supplement, Emergency Solutions Grant (ESG) funds allocated to metropolitan cities must be obligated within 180 days after the date that the U.S. Department of Housing and Urban Development (HUD) signs the grant agreement with the metropolitan city. Emergency Solutions Grant COVID-19 (ESG-CV) funds must be obligated within 240 days from the date HUD signs the agreement. Grant recipients must also expend ESG funds to subrecipients for allowable costs within 30 days after receiving the subrecipient?s complete payment request. Condition and perspective: During the course of our testing for compliance with the Obligation, Expenditure and Payment Requirements applicable to the Emergency Solutions Grant (ESG), we noted that the ESG funds awarded to the City of Birmingham (City) were not expended to subrecipients within the required timeframes specified by HUD. Management for the City determined that a subrecipient payment request acknowledged by the Community Development Director represented a complete payment request. Our testing found that for five of the thirty-five (35) payments included in our sample, the subrecipient was not reimbursed within 30 days after the City received the subrecipient?s complete payment request. We found where each of these five subrecipients were paid at least 40 days late. Cause: The City has been overwhelmed with several grant awards with short and similar requirements for spending deadlines while also coping with delays in services due to staffing shortages, shutdowns and restricted services caused by the COVID-19 pandemic. Effect: HUD recaptured over $260,000 in ESG-CV grant funds from the City during the fiscal year as a result of the City?s failure to expend at least 20% of the grant by September 30, 2021, as instructed. The City?s failure to remit timely payments to subrecipients is not in compliance with the terms of the ESG grant agreement, as per 24 CFR ? 576.203(C). Questioned Cost: No questioned costs identified. Recommendation: Directors over the City's ESG federal program should consider revamping their spending plan and develop mechanisms to accelerate service levels to improve spending patterns to ensure that the City meets the award requirements for both ESG and ESG-CV funds. Further, there is a need to identify alternative service mechanisms and devote additional resources (which includes identifying additional service providers), to enhance management?s service capacity levels. Management?s response: Management has arranged for grants training for relevant employees. Directors over the City?s ESG federal program will develop procedures with the City?s Finance Department in order to ensure that the City meets the award requirements for both ESG and ESG-CV funds.
2022-003: Compliance and Significant Deficiency in Internal Control over Compliance with Reporting (Financial Reporting) Federal agency: Department of Treasury Pass-through agency: None Title: Emergency Rental Assistance, including Covid-19 CFDA Number: 21.023 Award Year: 2022 Award Number: ERA-2101123809 & ERA2-0213 Criteria: As indicated in the April 2022, OMB Compliance Supplement, recipients of Emergency Rental Assistance (ERA) awards are required to submit the Federal Financial Report, SF-425, each quarter. Recipients of ERA1 (awarded pursuant to section 501 of the Consolidated Appropriations Act, 2021) and ERA2 (awarded pursuant to section 3201 of the Consolidated appropriations act) funds must submit separate quarterly reports for each ERA award. The requirement to upload the SF-425 form ended with the quarter ended March 31, 2022, and recipients were directed to submit financial reporting data directly into the ERA portal. Condition and perspective: We selected for testing the quarterly reports submitted for the periods ended September 30, 2021 and December 31, 2021. During our testing, it was noted that the City did not have effective internal controls in place to ensure accurate and complete reporting. Applicable backup documentation provided by management did not support the amounts included in each of the submitted reports included in our testing. Cause: The City did not ensure that the individuals preparing and approving financial reports for the ERA program were knowledgeable of how to accurately complete the required financial form. Effect: The City did not have effective internal controls in place to ensure that financial reports were accurate, complete, and sufficiently reviewed prior to submission. This lack of ineffective controls resulted in incomplete and inaccurate reporting. Questioned Cost: No questioned costs identified. Recommendation: We recommend the City design and implement controls that allow for the accurate preparation and adequate approval of financial reporting information prior to its submission. -12- CITY OF BIRMINGHAM, ALABAMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) YEAR ENDED JUNE 30, 2022 Management?s response: Management in the Finance and Community Development Departments will work together to ensure that appropriate training is provided to all individuals responsible for the preparation and approval of financial reporting information.
Significant Deficiencies: 2022-002: Compliance and Significant Deficiency in Internal Control over Compliance with Special Tests and Provisions (Obligation, Expenditure and Payment Requirements) Federal agency: U.S. Department of Housing and Urban Development Pass-through agency: None Title: Emergency Solutions Grant Program, including Covid-19 CFDA Number: 14.231 Award Year: 2022 Award Number: E21MC0100002 & EC0MW010002 Criteria: As indicated in the April 2022, OMB Compliance Supplement, Emergency Solutions Grant (ESG) funds allocated to metropolitan cities must be obligated within 180 days after the date that the U.S. Department of Housing and Urban Development (HUD) signs the grant agreement with the metropolitan city. Emergency Solutions Grant COVID-19 (ESG-CV) funds must be obligated within 240 days from the date HUD signs the agreement. Grant recipients must also expend ESG funds to subrecipients for allowable costs within 30 days after receiving the subrecipient?s complete payment request. Condition and perspective: During the course of our testing for compliance with the Obligation, Expenditure and Payment Requirements applicable to the Emergency Solutions Grant (ESG), we noted that the ESG funds awarded to the City of Birmingham (City) were not expended to subrecipients within the required timeframes specified by HUD. Management for the City determined that a subrecipient payment request acknowledged by the Community Development Director represented a complete payment request. Our testing found that for five of the thirty-five (35) payments included in our sample, the subrecipient was not reimbursed within 30 days after the City received the subrecipient?s complete payment request. We found where each of these five subrecipients were paid at least 40 days late. Cause: The City has been overwhelmed with several grant awards with short and similar requirements for spending deadlines while also coping with delays in services due to staffing shortages, shutdowns and restricted services caused by the COVID-19 pandemic. Effect: HUD recaptured over $260,000 in ESG-CV grant funds from the City during the fiscal year as a result of the City?s failure to expend at least 20% of the grant by September 30, 2021, as instructed. The City?s failure to remit timely payments to subrecipients is not in compliance with the terms of the ESG grant agreement, as per 24 CFR ? 576.203(C). Questioned Cost: No questioned costs identified. Recommendation: Directors over the City's ESG federal program should consider revamping their spending plan and develop mechanisms to accelerate service levels to improve spending patterns to ensure that the City meets the award requirements for both ESG and ESG-CV funds. Further, there is a need to identify alternative service mechanisms and devote additional resources (which includes identifying additional service providers), to enhance management?s service capacity levels. Management?s response: Management has arranged for grants training for relevant employees. Directors over the City?s ESG federal program will develop procedures with the City?s Finance Department in order to ensure that the City meets the award requirements for both ESG and ESG-CV funds.
2022-003: Compliance and Significant Deficiency in Internal Control over Compliance with Reporting (Financial Reporting) Federal agency: Department of Treasury Pass-through agency: None Title: Emergency Rental Assistance, including Covid-19 CFDA Number: 21.023 Award Year: 2022 Award Number: ERA-2101123809 & ERA2-0213 Criteria: As indicated in the April 2022, OMB Compliance Supplement, recipients of Emergency Rental Assistance (ERA) awards are required to submit the Federal Financial Report, SF-425, each quarter. Recipients of ERA1 (awarded pursuant to section 501 of the Consolidated Appropriations Act, 2021) and ERA2 (awarded pursuant to section 3201 of the Consolidated appropriations act) funds must submit separate quarterly reports for each ERA award. The requirement to upload the SF-425 form ended with the quarter ended March 31, 2022, and recipients were directed to submit financial reporting data directly into the ERA portal. Condition and perspective: We selected for testing the quarterly reports submitted for the periods ended September 30, 2021 and December 31, 2021. During our testing, it was noted that the City did not have effective internal controls in place to ensure accurate and complete reporting. Applicable backup documentation provided by management did not support the amounts included in each of the submitted reports included in our testing. Cause: The City did not ensure that the individuals preparing and approving financial reports for the ERA program were knowledgeable of how to accurately complete the required financial form. Effect: The City did not have effective internal controls in place to ensure that financial reports were accurate, complete, and sufficiently reviewed prior to submission. This lack of ineffective controls resulted in incomplete and inaccurate reporting. Questioned Cost: No questioned costs identified. Recommendation: We recommend the City design and implement controls that allow for the accurate preparation and adequate approval of financial reporting information prior to its submission. -12- CITY OF BIRMINGHAM, ALABAMA SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) YEAR ENDED JUNE 30, 2022 Management?s response: Management in the Finance and Community Development Departments will work together to ensure that appropriate training is provided to all individuals responsible for the preparation and approval of financial reporting information.