2023-003 (2019-010) CASH MANAGEMENT – Repeated and Modified
Federal Agency: U.S. Department of Homeland Security/FEMA
Federal Program Title & Assistance Listing Number: Disaster Grants – Public Assistance (Presidentially Declared Disasters) - 97.036
Emergency Management Performance Grants – 97.042
Pre-Disaster Mitigation – 97.047
Homeland Security Grant Program – 97.067
Award Period: Various
Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Non-compliance
Condition
In the audit for fiscal year ended June 30, 2022, the Department was unable to provide sufficient audit evidence regarding the accuracy, completeness, and valuation of the Federal accounts receivable/payable and related deferred inflows of resources balances as of June 30, 2022. During fiscal year 2023 and during fiscal year-end close, management continued to research, identify, and resolve a substantial majority of them by dollar amount. As a result of resolving these issues, the Department made or will make some untimely drawdowns of federal awards outside the quarterly reporting process.
As a result of research performed by management and from the final reconciliation of those balances as of June 30, 2023, management was able to reduce the deficit fund balance in the Federal Grants Fund from $11,169,582 (before restatement) to $8,645,124, as of June 30, 2022 and 2023, respectively.
Of the June 30, 2023 balance, $5,808,116 of the deficit balance is driven by revenues that were classified as deferred inflows, and are considered to be unavailable as they relate to FEMA funds that were not received within 90 days after fiscal year-end. For the two largest balances that make up this amount, first, management expects to draw $1,814,028 in Homeland Security Grant funds in early November 2023. Also, the Department has incurred $2,944,261 in management costs that they expect to bill to the Public Assistance Disaster Grants.
Of the remaining deficit of $2,887,586 in the Federal Grants Fund that is not explained by these deferred inflows, the entire amount relates to $2,989,552 in grants awarded to two subrecipients several years ago, for which the Department is not able to draw funds from the federal government. These amounts have been allowed for (see Note 4).
Management’s Progress for Repeated Findings: Management did make significant progress implementing adequate controls to resolve the finding from the prior years, resulting in an improvement from a Qualified Opinion to an Unmodified Opinion on the Federal Grants Fund, Federal Grants Fund Budgetary Comparison, and for Governmental Activities. However, a material weakness still exists over controls over these account balances.
Criteria
According to §200.303 Internal controls of 2 CFR Part 200, the non- Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Specific to the Department, federal reimbursement requests are completed quarterly with the reporting process.
According to NMSA 1978 §6.-5-2, the Financial Control Division (the division) shall issue a manual of model accounting practices containing the procedures and policies. State agencies shall comply with the model accounting practices established by the division, and the administrative head of each state agency shall ensure that the model accounting practices are followed. According to FIN 16 General Accounting Practices in the Manual of Model Accounting Practices, all reporting of financial information must be timely, complete, and accurate, to the state agency’s management and to oversight agencies and entities.
Effect State agency’s management and other agencies and entities may not be able to rely on the financial information presented by the Department due to untimely, incomplete, and inaccurate financial reporting. The Federal Government may place the Department on controlled draws.
Cause While the Department has made significant improvements from prior year related to the reconciliation and draw down of all federal receivables, the Department continues to lack an effective control environment that allows for timely and accurate drawdowns, financial reporting, and accounting of the Department’s Federal accounts receivable/payable balance and related deferred inflows of resources.
2023-003 (2019-010) CASH MANAGEMENT – Repeated and Modified
Federal Agency: U.S. Department of Homeland Security/FEMA
Federal Program Title & Assistance Listing Number: Disaster Grants – Public Assistance (Presidentially Declared Disasters) - 97.036
Emergency Management Performance Grants – 97.042
Pre-Disaster Mitigation – 97.047
Homeland Security Grant Program – 97.067
Award Period: Various
Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Non-compliance
Condition
In the audit for fiscal year ended June 30, 2022, the Department was unable to provide sufficient audit evidence regarding the accuracy, completeness, and valuation of the Federal accounts receivable/payable and related deferred inflows of resources balances as of June 30, 2022. During fiscal year 2023 and during fiscal year-end close, management continued to research, identify, and resolve a substantial majority of them by dollar amount. As a result of resolving these issues, the Department made or will make some untimely drawdowns of federal awards outside the quarterly reporting process.
As a result of research performed by management and from the final reconciliation of those balances as of June 30, 2023, management was able to reduce the deficit fund balance in the Federal Grants Fund from $11,169,582 (before restatement) to $8,645,124, as of June 30, 2022 and 2023, respectively.
Of the June 30, 2023 balance, $5,808,116 of the deficit balance is driven by revenues that were classified as deferred inflows, and are considered to be unavailable as they relate to FEMA funds that were not received within 90 days after fiscal year-end. For the two largest balances that make up this amount, first, management expects to draw $1,814,028 in Homeland Security Grant funds in early November 2023. Also, the Department has incurred $2,944,261 in management costs that they expect to bill to the Public Assistance Disaster Grants.
Of the remaining deficit of $2,887,586 in the Federal Grants Fund that is not explained by these deferred inflows, the entire amount relates to $2,989,552 in grants awarded to two subrecipients several years ago, for which the Department is not able to draw funds from the federal government. These amounts have been allowed for (see Note 4).
Management’s Progress for Repeated Findings: Management did make significant progress implementing adequate controls to resolve the finding from the prior years, resulting in an improvement from a Qualified Opinion to an Unmodified Opinion on the Federal Grants Fund, Federal Grants Fund Budgetary Comparison, and for Governmental Activities. However, a material weakness still exists over controls over these account balances.
Criteria
According to §200.303 Internal controls of 2 CFR Part 200, the non- Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Specific to the Department, federal reimbursement requests are completed quarterly with the reporting process.
According to NMSA 1978 §6.-5-2, the Financial Control Division (the division) shall issue a manual of model accounting practices containing the procedures and policies. State agencies shall comply with the model accounting practices established by the division, and the administrative head of each state agency shall ensure that the model accounting practices are followed. According to FIN 16 General Accounting Practices in the Manual of Model Accounting Practices, all reporting of financial information must be timely, complete, and accurate, to the state agency’s management and to oversight agencies and entities.
Effect State agency’s management and other agencies and entities may not be able to rely on the financial information presented by the Department due to untimely, incomplete, and inaccurate financial reporting. The Federal Government may place the Department on controlled draws.
Cause While the Department has made significant improvements from prior year related to the reconciliation and draw down of all federal receivables, the Department continues to lack an effective control environment that allows for timely and accurate drawdowns, financial reporting, and accounting of the Department’s Federal accounts receivable/payable balance and related deferred inflows of resources.
2023-003 (2019-010) CASH MANAGEMENT – Repeated and Modified
Federal Agency: U.S. Department of Homeland Security/FEMA
Federal Program Title & Assistance Listing Number: Disaster Grants – Public Assistance (Presidentially Declared Disasters) - 97.036
Emergency Management Performance Grants – 97.042
Pre-Disaster Mitigation – 97.047
Homeland Security Grant Program – 97.067
Award Period: Various
Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Non-compliance
Condition
In the audit for fiscal year ended June 30, 2022, the Department was unable to provide sufficient audit evidence regarding the accuracy, completeness, and valuation of the Federal accounts receivable/payable and related deferred inflows of resources balances as of June 30, 2022. During fiscal year 2023 and during fiscal year-end close, management continued to research, identify, and resolve a substantial majority of them by dollar amount. As a result of resolving these issues, the Department made or will make some untimely drawdowns of federal awards outside the quarterly reporting process.
As a result of research performed by management and from the final reconciliation of those balances as of June 30, 2023, management was able to reduce the deficit fund balance in the Federal Grants Fund from $11,169,582 (before restatement) to $8,645,124, as of June 30, 2022 and 2023, respectively.
Of the June 30, 2023 balance, $5,808,116 of the deficit balance is driven by revenues that were classified as deferred inflows, and are considered to be unavailable as they relate to FEMA funds that were not received within 90 days after fiscal year-end. For the two largest balances that make up this amount, first, management expects to draw $1,814,028 in Homeland Security Grant funds in early November 2023. Also, the Department has incurred $2,944,261 in management costs that they expect to bill to the Public Assistance Disaster Grants.
Of the remaining deficit of $2,887,586 in the Federal Grants Fund that is not explained by these deferred inflows, the entire amount relates to $2,989,552 in grants awarded to two subrecipients several years ago, for which the Department is not able to draw funds from the federal government. These amounts have been allowed for (see Note 4).
Management’s Progress for Repeated Findings: Management did make significant progress implementing adequate controls to resolve the finding from the prior years, resulting in an improvement from a Qualified Opinion to an Unmodified Opinion on the Federal Grants Fund, Federal Grants Fund Budgetary Comparison, and for Governmental Activities. However, a material weakness still exists over controls over these account balances.
Criteria
According to §200.303 Internal controls of 2 CFR Part 200, the non- Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Specific to the Department, federal reimbursement requests are completed quarterly with the reporting process.
According to NMSA 1978 §6.-5-2, the Financial Control Division (the division) shall issue a manual of model accounting practices containing the procedures and policies. State agencies shall comply with the model accounting practices established by the division, and the administrative head of each state agency shall ensure that the model accounting practices are followed. According to FIN 16 General Accounting Practices in the Manual of Model Accounting Practices, all reporting of financial information must be timely, complete, and accurate, to the state agency’s management and to oversight agencies and entities.
Effect State agency’s management and other agencies and entities may not be able to rely on the financial information presented by the Department due to untimely, incomplete, and inaccurate financial reporting. The Federal Government may place the Department on controlled draws.
Cause While the Department has made significant improvements from prior year related to the reconciliation and draw down of all federal receivables, the Department continues to lack an effective control environment that allows for timely and accurate drawdowns, financial reporting, and accounting of the Department’s Federal accounts receivable/payable balance and related deferred inflows of resources.
2023-003 (2019-010) CASH MANAGEMENT – Repeated and Modified
Federal Agency: U.S. Department of Homeland Security/FEMA
Federal Program Title & Assistance Listing Number: Disaster Grants – Public Assistance (Presidentially Declared Disasters) - 97.036
Emergency Management Performance Grants – 97.042
Pre-Disaster Mitigation – 97.047
Homeland Security Grant Program – 97.067
Award Period: Various
Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Non-compliance
Condition
In the audit for fiscal year ended June 30, 2022, the Department was unable to provide sufficient audit evidence regarding the accuracy, completeness, and valuation of the Federal accounts receivable/payable and related deferred inflows of resources balances as of June 30, 2022. During fiscal year 2023 and during fiscal year-end close, management continued to research, identify, and resolve a substantial majority of them by dollar amount. As a result of resolving these issues, the Department made or will make some untimely drawdowns of federal awards outside the quarterly reporting process.
As a result of research performed by management and from the final reconciliation of those balances as of June 30, 2023, management was able to reduce the deficit fund balance in the Federal Grants Fund from $11,169,582 (before restatement) to $8,645,124, as of June 30, 2022 and 2023, respectively.
Of the June 30, 2023 balance, $5,808,116 of the deficit balance is driven by revenues that were classified as deferred inflows, and are considered to be unavailable as they relate to FEMA funds that were not received within 90 days after fiscal year-end. For the two largest balances that make up this amount, first, management expects to draw $1,814,028 in Homeland Security Grant funds in early November 2023. Also, the Department has incurred $2,944,261 in management costs that they expect to bill to the Public Assistance Disaster Grants.
Of the remaining deficit of $2,887,586 in the Federal Grants Fund that is not explained by these deferred inflows, the entire amount relates to $2,989,552 in grants awarded to two subrecipients several years ago, for which the Department is not able to draw funds from the federal government. These amounts have been allowed for (see Note 4).
Management’s Progress for Repeated Findings: Management did make significant progress implementing adequate controls to resolve the finding from the prior years, resulting in an improvement from a Qualified Opinion to an Unmodified Opinion on the Federal Grants Fund, Federal Grants Fund Budgetary Comparison, and for Governmental Activities. However, a material weakness still exists over controls over these account balances.
Criteria
According to §200.303 Internal controls of 2 CFR Part 200, the non- Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Specific to the Department, federal reimbursement requests are completed quarterly with the reporting process.
According to NMSA 1978 §6.-5-2, the Financial Control Division (the division) shall issue a manual of model accounting practices containing the procedures and policies. State agencies shall comply with the model accounting practices established by the division, and the administrative head of each state agency shall ensure that the model accounting practices are followed. According to FIN 16 General Accounting Practices in the Manual of Model Accounting Practices, all reporting of financial information must be timely, complete, and accurate, to the state agency’s management and to oversight agencies and entities.
Effect State agency’s management and other agencies and entities may not be able to rely on the financial information presented by the Department due to untimely, incomplete, and inaccurate financial reporting. The Federal Government may place the Department on controlled draws.
Cause While the Department has made significant improvements from prior year related to the reconciliation and draw down of all federal receivables, the Department continues to lack an effective control environment that allows for timely and accurate drawdowns, financial reporting, and accounting of the Department’s Federal accounts receivable/payable balance and related deferred inflows of resources.
2023-004 (2019-015) SUBRECIPIENT MONITORING – Repeated and Modified
Federal Agency: U.S. Department of Homeland Security/FEMA
Federal Program Title & Assistance Listing Number: Homeland Security Grant Program – 97.067
Award Period: Various
Type of Finding: Significant Deficiency in Internal Control over Compliance
Other Non-compliance
Condition
During our testing, we noted the Department did not have adequate internal controls in place to ensure compliance with subrecipient monitoring.
• Homeland Security Grant Program – 97.067
o This program of the Department lacked evidence that a risk assessment was performed for subrecipients as relates to the risk of noncompliance for those subawards subject to the Uniform Guidance.
o This program of the Department lacked evidence that reviews of audits of subrecipients were performed that would allow the Department to identify any potential deficiencies that would require follow-up.
Management’s Progress for Repeated Findings: Management made some progress in the performing of risk assessments and reviews of audits for Emergency Management Performance Grants, Disaster Grants – Public Assistance, and Pre-Disaster Mitigation programs. In other areas noted above, management has not yet implemented adequate controls to resolve the finding from the prior years.
Criteria
According to §200.332 Requirements for pass-through entities of 2 CFR Part 200, all pass-through entities must evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. In addition, the pass-through entity must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.
Pass-through entity monitoring of the subrecipient must include:
(1) Reviewing financial and performance reports required by the pass-through entity.
(2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward.
(3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by §200.521 Management Decision.
Department Policy No. GRA 418 Sub-Grant Recipient Monitoring effective June 30, 2017 establishes and implements policy and procedures for the Department staff engaged in the Department’s sub-grant recipient monitoring process. For Mitigation Sub-Grant Monitoring, the Mitigation Specialist shall review the local progress quarterly reports due to the Department. For Non-Disaster Sub-Grant Recipient Monitoring, the Program Manager shall review the local progress quarterly reports due to the Department. Specific to Pre-Monitoring Requirements and Considerations, Department Program Staff shall perform risk-based assessments and apply the assessment to all of the Department’s approved sub-recipients for monitoring purposes and risk designation.
Effect
The lack of internal controls over this compliance requirement provides an opportunity for noncompliance at the subrecipient level. Potential costs outside the scope of work as well as overall effective project management at the subrecipient level.
Cause The Department lacks established internal controls and procedures over financial grant management to ensure compliance with applicable compliance requirements.
2023-003 (2019-010) CASH MANAGEMENT – Repeated and Modified
Federal Agency: U.S. Department of Homeland Security/FEMA
Federal Program Title & Assistance Listing Number: Disaster Grants – Public Assistance (Presidentially Declared Disasters) - 97.036
Emergency Management Performance Grants – 97.042
Pre-Disaster Mitigation – 97.047
Homeland Security Grant Program – 97.067
Award Period: Various
Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Non-compliance
Condition
In the audit for fiscal year ended June 30, 2022, the Department was unable to provide sufficient audit evidence regarding the accuracy, completeness, and valuation of the Federal accounts receivable/payable and related deferred inflows of resources balances as of June 30, 2022. During fiscal year 2023 and during fiscal year-end close, management continued to research, identify, and resolve a substantial majority of them by dollar amount. As a result of resolving these issues, the Department made or will make some untimely drawdowns of federal awards outside the quarterly reporting process.
As a result of research performed by management and from the final reconciliation of those balances as of June 30, 2023, management was able to reduce the deficit fund balance in the Federal Grants Fund from $11,169,582 (before restatement) to $8,645,124, as of June 30, 2022 and 2023, respectively.
Of the June 30, 2023 balance, $5,808,116 of the deficit balance is driven by revenues that were classified as deferred inflows, and are considered to be unavailable as they relate to FEMA funds that were not received within 90 days after fiscal year-end. For the two largest balances that make up this amount, first, management expects to draw $1,814,028 in Homeland Security Grant funds in early November 2023. Also, the Department has incurred $2,944,261 in management costs that they expect to bill to the Public Assistance Disaster Grants.
Of the remaining deficit of $2,887,586 in the Federal Grants Fund that is not explained by these deferred inflows, the entire amount relates to $2,989,552 in grants awarded to two subrecipients several years ago, for which the Department is not able to draw funds from the federal government. These amounts have been allowed for (see Note 4).
Management’s Progress for Repeated Findings: Management did make significant progress implementing adequate controls to resolve the finding from the prior years, resulting in an improvement from a Qualified Opinion to an Unmodified Opinion on the Federal Grants Fund, Federal Grants Fund Budgetary Comparison, and for Governmental Activities. However, a material weakness still exists over controls over these account balances.
Criteria
According to §200.303 Internal controls of 2 CFR Part 200, the non- Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Specific to the Department, federal reimbursement requests are completed quarterly with the reporting process.
According to NMSA 1978 §6.-5-2, the Financial Control Division (the division) shall issue a manual of model accounting practices containing the procedures and policies. State agencies shall comply with the model accounting practices established by the division, and the administrative head of each state agency shall ensure that the model accounting practices are followed. According to FIN 16 General Accounting Practices in the Manual of Model Accounting Practices, all reporting of financial information must be timely, complete, and accurate, to the state agency’s management and to oversight agencies and entities.
Effect State agency’s management and other agencies and entities may not be able to rely on the financial information presented by the Department due to untimely, incomplete, and inaccurate financial reporting. The Federal Government may place the Department on controlled draws.
Cause While the Department has made significant improvements from prior year related to the reconciliation and draw down of all federal receivables, the Department continues to lack an effective control environment that allows for timely and accurate drawdowns, financial reporting, and accounting of the Department’s Federal accounts receivable/payable balance and related deferred inflows of resources.
2023-003 (2019-010) CASH MANAGEMENT – Repeated and Modified
Federal Agency: U.S. Department of Homeland Security/FEMA
Federal Program Title & Assistance Listing Number: Disaster Grants – Public Assistance (Presidentially Declared Disasters) - 97.036
Emergency Management Performance Grants – 97.042
Pre-Disaster Mitigation – 97.047
Homeland Security Grant Program – 97.067
Award Period: Various
Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Non-compliance
Condition
In the audit for fiscal year ended June 30, 2022, the Department was unable to provide sufficient audit evidence regarding the accuracy, completeness, and valuation of the Federal accounts receivable/payable and related deferred inflows of resources balances as of June 30, 2022. During fiscal year 2023 and during fiscal year-end close, management continued to research, identify, and resolve a substantial majority of them by dollar amount. As a result of resolving these issues, the Department made or will make some untimely drawdowns of federal awards outside the quarterly reporting process.
As a result of research performed by management and from the final reconciliation of those balances as of June 30, 2023, management was able to reduce the deficit fund balance in the Federal Grants Fund from $11,169,582 (before restatement) to $8,645,124, as of June 30, 2022 and 2023, respectively.
Of the June 30, 2023 balance, $5,808,116 of the deficit balance is driven by revenues that were classified as deferred inflows, and are considered to be unavailable as they relate to FEMA funds that were not received within 90 days after fiscal year-end. For the two largest balances that make up this amount, first, management expects to draw $1,814,028 in Homeland Security Grant funds in early November 2023. Also, the Department has incurred $2,944,261 in management costs that they expect to bill to the Public Assistance Disaster Grants.
Of the remaining deficit of $2,887,586 in the Federal Grants Fund that is not explained by these deferred inflows, the entire amount relates to $2,989,552 in grants awarded to two subrecipients several years ago, for which the Department is not able to draw funds from the federal government. These amounts have been allowed for (see Note 4).
Management’s Progress for Repeated Findings: Management did make significant progress implementing adequate controls to resolve the finding from the prior years, resulting in an improvement from a Qualified Opinion to an Unmodified Opinion on the Federal Grants Fund, Federal Grants Fund Budgetary Comparison, and for Governmental Activities. However, a material weakness still exists over controls over these account balances.
Criteria
According to §200.303 Internal controls of 2 CFR Part 200, the non- Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Specific to the Department, federal reimbursement requests are completed quarterly with the reporting process.
According to NMSA 1978 §6.-5-2, the Financial Control Division (the division) shall issue a manual of model accounting practices containing the procedures and policies. State agencies shall comply with the model accounting practices established by the division, and the administrative head of each state agency shall ensure that the model accounting practices are followed. According to FIN 16 General Accounting Practices in the Manual of Model Accounting Practices, all reporting of financial information must be timely, complete, and accurate, to the state agency’s management and to oversight agencies and entities.
Effect State agency’s management and other agencies and entities may not be able to rely on the financial information presented by the Department due to untimely, incomplete, and inaccurate financial reporting. The Federal Government may place the Department on controlled draws.
Cause While the Department has made significant improvements from prior year related to the reconciliation and draw down of all federal receivables, the Department continues to lack an effective control environment that allows for timely and accurate drawdowns, financial reporting, and accounting of the Department’s Federal accounts receivable/payable balance and related deferred inflows of resources.
2023-003 (2019-010) CASH MANAGEMENT – Repeated and Modified
Federal Agency: U.S. Department of Homeland Security/FEMA
Federal Program Title & Assistance Listing Number: Disaster Grants – Public Assistance (Presidentially Declared Disasters) - 97.036
Emergency Management Performance Grants – 97.042
Pre-Disaster Mitigation – 97.047
Homeland Security Grant Program – 97.067
Award Period: Various
Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Non-compliance
Condition
In the audit for fiscal year ended June 30, 2022, the Department was unable to provide sufficient audit evidence regarding the accuracy, completeness, and valuation of the Federal accounts receivable/payable and related deferred inflows of resources balances as of June 30, 2022. During fiscal year 2023 and during fiscal year-end close, management continued to research, identify, and resolve a substantial majority of them by dollar amount. As a result of resolving these issues, the Department made or will make some untimely drawdowns of federal awards outside the quarterly reporting process.
As a result of research performed by management and from the final reconciliation of those balances as of June 30, 2023, management was able to reduce the deficit fund balance in the Federal Grants Fund from $11,169,582 (before restatement) to $8,645,124, as of June 30, 2022 and 2023, respectively.
Of the June 30, 2023 balance, $5,808,116 of the deficit balance is driven by revenues that were classified as deferred inflows, and are considered to be unavailable as they relate to FEMA funds that were not received within 90 days after fiscal year-end. For the two largest balances that make up this amount, first, management expects to draw $1,814,028 in Homeland Security Grant funds in early November 2023. Also, the Department has incurred $2,944,261 in management costs that they expect to bill to the Public Assistance Disaster Grants.
Of the remaining deficit of $2,887,586 in the Federal Grants Fund that is not explained by these deferred inflows, the entire amount relates to $2,989,552 in grants awarded to two subrecipients several years ago, for which the Department is not able to draw funds from the federal government. These amounts have been allowed for (see Note 4).
Management’s Progress for Repeated Findings: Management did make significant progress implementing adequate controls to resolve the finding from the prior years, resulting in an improvement from a Qualified Opinion to an Unmodified Opinion on the Federal Grants Fund, Federal Grants Fund Budgetary Comparison, and for Governmental Activities. However, a material weakness still exists over controls over these account balances.
Criteria
According to §200.303 Internal controls of 2 CFR Part 200, the non- Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Specific to the Department, federal reimbursement requests are completed quarterly with the reporting process.
According to NMSA 1978 §6.-5-2, the Financial Control Division (the division) shall issue a manual of model accounting practices containing the procedures and policies. State agencies shall comply with the model accounting practices established by the division, and the administrative head of each state agency shall ensure that the model accounting practices are followed. According to FIN 16 General Accounting Practices in the Manual of Model Accounting Practices, all reporting of financial information must be timely, complete, and accurate, to the state agency’s management and to oversight agencies and entities.
Effect State agency’s management and other agencies and entities may not be able to rely on the financial information presented by the Department due to untimely, incomplete, and inaccurate financial reporting. The Federal Government may place the Department on controlled draws.
Cause While the Department has made significant improvements from prior year related to the reconciliation and draw down of all federal receivables, the Department continues to lack an effective control environment that allows for timely and accurate drawdowns, financial reporting, and accounting of the Department’s Federal accounts receivable/payable balance and related deferred inflows of resources.
2023-003 (2019-010) CASH MANAGEMENT – Repeated and Modified
Federal Agency: U.S. Department of Homeland Security/FEMA
Federal Program Title & Assistance Listing Number: Disaster Grants – Public Assistance (Presidentially Declared Disasters) - 97.036
Emergency Management Performance Grants – 97.042
Pre-Disaster Mitigation – 97.047
Homeland Security Grant Program – 97.067
Award Period: Various
Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Non-compliance
Condition
In the audit for fiscal year ended June 30, 2022, the Department was unable to provide sufficient audit evidence regarding the accuracy, completeness, and valuation of the Federal accounts receivable/payable and related deferred inflows of resources balances as of June 30, 2022. During fiscal year 2023 and during fiscal year-end close, management continued to research, identify, and resolve a substantial majority of them by dollar amount. As a result of resolving these issues, the Department made or will make some untimely drawdowns of federal awards outside the quarterly reporting process.
As a result of research performed by management and from the final reconciliation of those balances as of June 30, 2023, management was able to reduce the deficit fund balance in the Federal Grants Fund from $11,169,582 (before restatement) to $8,645,124, as of June 30, 2022 and 2023, respectively.
Of the June 30, 2023 balance, $5,808,116 of the deficit balance is driven by revenues that were classified as deferred inflows, and are considered to be unavailable as they relate to FEMA funds that were not received within 90 days after fiscal year-end. For the two largest balances that make up this amount, first, management expects to draw $1,814,028 in Homeland Security Grant funds in early November 2023. Also, the Department has incurred $2,944,261 in management costs that they expect to bill to the Public Assistance Disaster Grants.
Of the remaining deficit of $2,887,586 in the Federal Grants Fund that is not explained by these deferred inflows, the entire amount relates to $2,989,552 in grants awarded to two subrecipients several years ago, for which the Department is not able to draw funds from the federal government. These amounts have been allowed for (see Note 4).
Management’s Progress for Repeated Findings: Management did make significant progress implementing adequate controls to resolve the finding from the prior years, resulting in an improvement from a Qualified Opinion to an Unmodified Opinion on the Federal Grants Fund, Federal Grants Fund Budgetary Comparison, and for Governmental Activities. However, a material weakness still exists over controls over these account balances.
Criteria
According to §200.303 Internal controls of 2 CFR Part 200, the non- Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Specific to the Department, federal reimbursement requests are completed quarterly with the reporting process.
According to NMSA 1978 §6.-5-2, the Financial Control Division (the division) shall issue a manual of model accounting practices containing the procedures and policies. State agencies shall comply with the model accounting practices established by the division, and the administrative head of each state agency shall ensure that the model accounting practices are followed. According to FIN 16 General Accounting Practices in the Manual of Model Accounting Practices, all reporting of financial information must be timely, complete, and accurate, to the state agency’s management and to oversight agencies and entities.
Effect State agency’s management and other agencies and entities may not be able to rely on the financial information presented by the Department due to untimely, incomplete, and inaccurate financial reporting. The Federal Government may place the Department on controlled draws.
Cause While the Department has made significant improvements from prior year related to the reconciliation and draw down of all federal receivables, the Department continues to lack an effective control environment that allows for timely and accurate drawdowns, financial reporting, and accounting of the Department’s Federal accounts receivable/payable balance and related deferred inflows of resources.
2023-004 (2019-015) SUBRECIPIENT MONITORING – Repeated and Modified
Federal Agency: U.S. Department of Homeland Security/FEMA
Federal Program Title & Assistance Listing Number: Homeland Security Grant Program – 97.067
Award Period: Various
Type of Finding: Significant Deficiency in Internal Control over Compliance
Other Non-compliance
Condition
During our testing, we noted the Department did not have adequate internal controls in place to ensure compliance with subrecipient monitoring.
• Homeland Security Grant Program – 97.067
o This program of the Department lacked evidence that a risk assessment was performed for subrecipients as relates to the risk of noncompliance for those subawards subject to the Uniform Guidance.
o This program of the Department lacked evidence that reviews of audits of subrecipients were performed that would allow the Department to identify any potential deficiencies that would require follow-up.
Management’s Progress for Repeated Findings: Management made some progress in the performing of risk assessments and reviews of audits for Emergency Management Performance Grants, Disaster Grants – Public Assistance, and Pre-Disaster Mitigation programs. In other areas noted above, management has not yet implemented adequate controls to resolve the finding from the prior years.
Criteria
According to §200.332 Requirements for pass-through entities of 2 CFR Part 200, all pass-through entities must evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. In addition, the pass-through entity must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.
Pass-through entity monitoring of the subrecipient must include:
(1) Reviewing financial and performance reports required by the pass-through entity.
(2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward.
(3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by §200.521 Management Decision.
Department Policy No. GRA 418 Sub-Grant Recipient Monitoring effective June 30, 2017 establishes and implements policy and procedures for the Department staff engaged in the Department’s sub-grant recipient monitoring process. For Mitigation Sub-Grant Monitoring, the Mitigation Specialist shall review the local progress quarterly reports due to the Department. For Non-Disaster Sub-Grant Recipient Monitoring, the Program Manager shall review the local progress quarterly reports due to the Department. Specific to Pre-Monitoring Requirements and Considerations, Department Program Staff shall perform risk-based assessments and apply the assessment to all of the Department’s approved sub-recipients for monitoring purposes and risk designation.
Effect
The lack of internal controls over this compliance requirement provides an opportunity for noncompliance at the subrecipient level. Potential costs outside the scope of work as well as overall effective project management at the subrecipient level.
Cause The Department lacks established internal controls and procedures over financial grant management to ensure compliance with applicable compliance requirements.