Finding 2021-007 – Lack of County-Wide Internal Controls Over Major Federal Program – Coronavirus Relief Fund
PASS-THROUGH GRANTOR: Oklahoma Office of Management and Enterprise Services
FEDERAL AGENCY: U.S. Department of Treasury
ASSISTANCE LISTING: 21.019
FEDERAL PROGRAM NAME: Coronavirus Relief Fund
FEDERAL AWARD YEAR: 2021
CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; and Period of Performance
QUESTIONED COSTS: $-0-
Condition: County-wide internal controls regarding Control Environment, Risk Assessment, Information and Communication, and Monitoring have not been designed.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure the County complies with grant requirements.
Effect of Condition: This condition could result in noncompliance to grant requirements.
Recommendation: – OSAI recommends that the County design and implement a system of internal controls to ensure compliance with grant requirements.
Management Response:
Chairman of the Board of County Commissioners: We will work to implement a risk assessment plan. We will implement controls to help make sure we are in compliance with all grant requirements and federal funds are expended in accordance with grant agreements and in a timely manner. We will ensure employees have the current and correct compliance supplement to work from.
Criteria: The GAO Standards – Section 1 – Fundamental Concepts of Internal Control – OV1.01 states in part:
Definition of Internal Control
Internal control is a process effected by an entity’s oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved.
Additionally, GAO Standards – Section 2 – Establishing an Effective Internal Control System – OV2.04 states in part:
Components, Principles, and Attributes
Control Environment – The foundation for an internal control system. It provides the discipline and structure to help an entity achieve its objectives.
Risk Assessment – Assesses the risks facing the entity as it seeks to achieve its objectives. This assessment provides the basis for developing appropriate risk responses.
Information and Communication – The quality information management and personnel communicate and use to support the internal control system.
Monitoring – Activities management establishes and operates to assess the quality of performance over time and promptly resolve the findings of audits and other reviews.
Finding 2021-008 – Lack of Internal Controls Over Major Federal Program – Coronavirus Relief Fund
PASS-THROUGH GRANTOR: Oklahoma Office of Management and Enterprise Services
FEDERAL AGENCY: U.S. Department of Treasury
ASSISTANCE LISTING: 21.019
FEDERAL PROGRAM NAME: Coronavirus Relief Fund
FEDERAL AWARD YEAR: 2021
CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; and Period of Performance
QUESTIONED COSTS: $-0-
Condition: During the process of documenting the County’s internal controls regarding federal disbursements, we noted that Delaware County has not established procedures to ensure compliance with the following compliance requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; and Period of Performance.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal grant requirements.
Effect of Condition: This condition could result in noncompliance to grant requirements and could lead to a loss of federal funds to the County.
Recommendation: OSAI recommends the County gain an understanding of requirements for this program and implement a system of internal control procedures to ensure compliance with grant requirements.
Management Response:
Chairman of the Board of County Commissioners: The Board of County Commissioners will work with all County Officials for discussion of all grants and federal monies that Delaware County receives to ensure that proper internal controls are implemented.
Criteria: OMB 2 CFR 200, Subpart D. §_ .303(a) reads as follows:
Subpart D-Post Federal Award Requirements
§200.303 Internal Controls
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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Further, accountability and stewardship should be overall goals in management's accounting of federal funds. Internal controls should be designed to monitor compliance with laws and regulations pertaining to grant contracts.
Finding 2021-009 – Lack of Internal Controls and Noncompliance Over Major Federal Program - Activities Allowed or Unallowed; Allowed Costs/Cost Principles – Coronavirus Relief Fund
PASS-THROUGH GRANTOR: Oklahoma Office of Management and Enterprise Services
FEDERAL AGENCY: U.S. Department of Treasury
ASSISTANCE LISTING: 21.019
FEDERAL PROGRAM NAME: Coronavirus Relief Fund
FEDERAL AWARD YEAR: 2021
CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles
QUESTIONED COSTS: $804,695
Condition: A test of 100% of payroll expenditures reflected program disbursements totaling $804,695 that were not expended in accordance with the Activities Allowed or Unallowed; Allowable Costs/Cost Principles due to ineligible costs.
• The County was reimbursed $726,310 for General Government payroll expenditures for the offices of the County Commissioners, County Clerk, County Treasurer, County Assessor, and the County Court Clerk, for the period March 15, 2020, through October 30, 2020, which was determined to be an unallowed cost to mitigate or prevent the spread of COVID-19 in accordance with grant requirements.
• The County was reimbursed $78,385 for 911 Trust Authority payroll expenditures, for the period August 15, 2020, through October 30, 2020, which was determined to be an unallowed cost of non-county employees to mitigate or prevent the spread of COVID-19 in accordance with grant requirements.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure that the County has proper internal controls over federal grant expenditures and that the expenditures were for an allowable cost.
Effect of Condition: This condition resulted in noncompliance with grant requirements. This could hinder the County from receiving future federal funding and could result in the repayment of grants funds to the grantor agency.
Recommendation: OSAI recommends the County design and implement policies and procedures to ensure compliance with applicable grant requirements.
Management Response:
Chairman of the Board of County Commissioners: The Board of County Commissioners will work to ensure federal disbursements comply with federal grant requirements. The County relied on the Oklahoma Office of Management and Enterprise Services to ensure that the County reimbursement request was for eligible expenditures.
Criteria: Title 42 United States Code § 801 – Coronavirus relief fund Section 601(d) requires the States, Tribal governments, or units of local government use the funds received to cover only those costs that (1) are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID-19); (2) were not accounted for in the budget most recently approved as of March 27, 2020, for the State or government; and (3) were incurred during the period that begins on March 1, 2020, and ends on December 30, 2020.
Additionally, CFR § 200.300(a) Internal Controls reads as follows:
The Non-Federal entity must:
(a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the nonfederal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
2 CFR § 200.403 - Factors affecting allowability costs states in part,
Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented.
Finding 2021-010 – Lack of Internal Controls over the Schedule of Expenditures of Federal Awards
PASS-THROUGH GRANTOR: Oklahoma Office of Management and Enterprise Services
FEDERAL AGENCY: U.S. Department of Treasury
ASSISTANCE LISTING: 21.019
FEDERAL PROGRAM NAME: Coronavirus Relief Fund
FEDERAL AWARD YEAR: 2021
CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance
QUESTIONED COSTS: $0
Condition: During the review of 100% of federal expenditures reported on the Schedule of Expenditures of Federal Awards (SEFA), federal programs were identified that were not accurately reported. Actual federal expenditures for the major federal program Assistance Listing 21.019 - Coronavirus Relief Fund were $2,024,981 and the County reported $193,762. Therefore, expenditures were understated $1,831,219 for the major federal program Coronavirus Relief Fund.
Further, actual federal expenditures for Assistance Listing 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) FEMA DR-4438 were $0 and the County reported $109,550. Therefore, the expenditures were overstated by $109,550. Actual federal expenditures for Assistance Listing 97.042 - Emergency Management Performance Grants were $7,177 and the County reported $15,000. Therefore, expenditures were overstated by $7,823.
Additionally, the county reported expenditures of the Social Security Administration, overstating expenditures $1,200, although considered federally sourced, expenditures should not be reported on the SEFA.
Reported Total Expenditures of Federal Awards $ 343,373
Add: Coronavirus Relief Fund (21.019) 1,831,219
Less: Disaster Grants – Public Assistance
(Presidentially Declared Disasters) FEMA DR-4438 (97.036) (109,550)
Less: Emergency Management Performance Grants (97.042) ( 7,823)
Less: Social Security Administration ( 1,200)
Actual Federal Expenditures of Federal Awards $2,056,019
SEFA Understated $1,712,646
Cause of Condition: Policies and procedures have not been designed and implemented to ensure accurate reporting of expenditures for federal awards.
Effect of Condition: This resulted in a material misstatement of the County’s Schedule of Expenditures of Federal Awards and could increase the potential for material noncompliance.
Recommendation: OSAI recommends the County design and implement internal controls to ensure accurate reporting of federal expenditures on the SEFA.
Management Response:
Chairman of the Board of County Commissioners: The BOCC will work to design and implement internal controls to ensure accurate reporting of federal expenditures on the SEFA and ensure compliance with federal requirements.
Criteria: The GAO Standards – Section 1 – Fundamental Concepts of Internal Control – OV1.01 states in part:
Definition of Internal Control
Internal control is a process effected by an entity’s oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved.
Further, Title 2 CFR 200 § 200.510(a)(b) Financial Statements reads as follows:
(a) Financial statements. The auditee must prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The financial statements must be for the same organizational unit and fiscal year that is chosen to meet the requirements of this part. However, non-Federal entity-wide financial statements may also include departments, agencies, and other organizational units that have separate audits in accordance with §200.514 Scope of audit, paragraph (a) and prepare separate financial statements.
(b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended as determined in accordance with §200.502 Basis for determining Federal awards expended.
Finding 2021-007 – Lack of County-Wide Internal Controls Over Major Federal Program – Coronavirus Relief Fund
PASS-THROUGH GRANTOR: Oklahoma Office of Management and Enterprise Services
FEDERAL AGENCY: U.S. Department of Treasury
ASSISTANCE LISTING: 21.019
FEDERAL PROGRAM NAME: Coronavirus Relief Fund
FEDERAL AWARD YEAR: 2021
CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; and Period of Performance
QUESTIONED COSTS: $-0-
Condition: County-wide internal controls regarding Control Environment, Risk Assessment, Information and Communication, and Monitoring have not been designed.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure the County complies with grant requirements.
Effect of Condition: This condition could result in noncompliance to grant requirements.
Recommendation: – OSAI recommends that the County design and implement a system of internal controls to ensure compliance with grant requirements.
Management Response:
Chairman of the Board of County Commissioners: We will work to implement a risk assessment plan. We will implement controls to help make sure we are in compliance with all grant requirements and federal funds are expended in accordance with grant agreements and in a timely manner. We will ensure employees have the current and correct compliance supplement to work from.
Criteria: The GAO Standards – Section 1 – Fundamental Concepts of Internal Control – OV1.01 states in part:
Definition of Internal Control
Internal control is a process effected by an entity’s oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved.
Additionally, GAO Standards – Section 2 – Establishing an Effective Internal Control System – OV2.04 states in part:
Components, Principles, and Attributes
Control Environment – The foundation for an internal control system. It provides the discipline and structure to help an entity achieve its objectives.
Risk Assessment – Assesses the risks facing the entity as it seeks to achieve its objectives. This assessment provides the basis for developing appropriate risk responses.
Information and Communication – The quality information management and personnel communicate and use to support the internal control system.
Monitoring – Activities management establishes and operates to assess the quality of performance over time and promptly resolve the findings of audits and other reviews.
Finding 2021-008 – Lack of Internal Controls Over Major Federal Program – Coronavirus Relief Fund
PASS-THROUGH GRANTOR: Oklahoma Office of Management and Enterprise Services
FEDERAL AGENCY: U.S. Department of Treasury
ASSISTANCE LISTING: 21.019
FEDERAL PROGRAM NAME: Coronavirus Relief Fund
FEDERAL AWARD YEAR: 2021
CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; and Period of Performance
QUESTIONED COSTS: $-0-
Condition: During the process of documenting the County’s internal controls regarding federal disbursements, we noted that Delaware County has not established procedures to ensure compliance with the following compliance requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; and Period of Performance.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal grant requirements.
Effect of Condition: This condition could result in noncompliance to grant requirements and could lead to a loss of federal funds to the County.
Recommendation: OSAI recommends the County gain an understanding of requirements for this program and implement a system of internal control procedures to ensure compliance with grant requirements.
Management Response:
Chairman of the Board of County Commissioners: The Board of County Commissioners will work with all County Officials for discussion of all grants and federal monies that Delaware County receives to ensure that proper internal controls are implemented.
Criteria: OMB 2 CFR 200, Subpart D. §_ .303(a) reads as follows:
Subpart D-Post Federal Award Requirements
§200.303 Internal Controls
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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Further, accountability and stewardship should be overall goals in management's accounting of federal funds. Internal controls should be designed to monitor compliance with laws and regulations pertaining to grant contracts.
Finding 2021-009 – Lack of Internal Controls and Noncompliance Over Major Federal Program - Activities Allowed or Unallowed; Allowed Costs/Cost Principles – Coronavirus Relief Fund
PASS-THROUGH GRANTOR: Oklahoma Office of Management and Enterprise Services
FEDERAL AGENCY: U.S. Department of Treasury
ASSISTANCE LISTING: 21.019
FEDERAL PROGRAM NAME: Coronavirus Relief Fund
FEDERAL AWARD YEAR: 2021
CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles
QUESTIONED COSTS: $804,695
Condition: A test of 100% of payroll expenditures reflected program disbursements totaling $804,695 that were not expended in accordance with the Activities Allowed or Unallowed; Allowable Costs/Cost Principles due to ineligible costs.
• The County was reimbursed $726,310 for General Government payroll expenditures for the offices of the County Commissioners, County Clerk, County Treasurer, County Assessor, and the County Court Clerk, for the period March 15, 2020, through October 30, 2020, which was determined to be an unallowed cost to mitigate or prevent the spread of COVID-19 in accordance with grant requirements.
• The County was reimbursed $78,385 for 911 Trust Authority payroll expenditures, for the period August 15, 2020, through October 30, 2020, which was determined to be an unallowed cost of non-county employees to mitigate or prevent the spread of COVID-19 in accordance with grant requirements.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure that the County has proper internal controls over federal grant expenditures and that the expenditures were for an allowable cost.
Effect of Condition: This condition resulted in noncompliance with grant requirements. This could hinder the County from receiving future federal funding and could result in the repayment of grants funds to the grantor agency.
Recommendation: OSAI recommends the County design and implement policies and procedures to ensure compliance with applicable grant requirements.
Management Response:
Chairman of the Board of County Commissioners: The Board of County Commissioners will work to ensure federal disbursements comply with federal grant requirements. The County relied on the Oklahoma Office of Management and Enterprise Services to ensure that the County reimbursement request was for eligible expenditures.
Criteria: Title 42 United States Code § 801 – Coronavirus relief fund Section 601(d) requires the States, Tribal governments, or units of local government use the funds received to cover only those costs that (1) are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID-19); (2) were not accounted for in the budget most recently approved as of March 27, 2020, for the State or government; and (3) were incurred during the period that begins on March 1, 2020, and ends on December 30, 2020.
Additionally, CFR § 200.300(a) Internal Controls reads as follows:
The Non-Federal entity must:
(a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the nonfederal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
2 CFR § 200.403 - Factors affecting allowability costs states in part,
Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented.
Finding 2021-010 – Lack of Internal Controls over the Schedule of Expenditures of Federal Awards
PASS-THROUGH GRANTOR: Oklahoma Office of Management and Enterprise Services
FEDERAL AGENCY: U.S. Department of Treasury
ASSISTANCE LISTING: 21.019
FEDERAL PROGRAM NAME: Coronavirus Relief Fund
FEDERAL AWARD YEAR: 2021
CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance
QUESTIONED COSTS: $0
Condition: During the review of 100% of federal expenditures reported on the Schedule of Expenditures of Federal Awards (SEFA), federal programs were identified that were not accurately reported. Actual federal expenditures for the major federal program Assistance Listing 21.019 - Coronavirus Relief Fund were $2,024,981 and the County reported $193,762. Therefore, expenditures were understated $1,831,219 for the major federal program Coronavirus Relief Fund.
Further, actual federal expenditures for Assistance Listing 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) FEMA DR-4438 were $0 and the County reported $109,550. Therefore, the expenditures were overstated by $109,550. Actual federal expenditures for Assistance Listing 97.042 - Emergency Management Performance Grants were $7,177 and the County reported $15,000. Therefore, expenditures were overstated by $7,823.
Additionally, the county reported expenditures of the Social Security Administration, overstating expenditures $1,200, although considered federally sourced, expenditures should not be reported on the SEFA.
Reported Total Expenditures of Federal Awards $ 343,373
Add: Coronavirus Relief Fund (21.019) 1,831,219
Less: Disaster Grants – Public Assistance
(Presidentially Declared Disasters) FEMA DR-4438 (97.036) (109,550)
Less: Emergency Management Performance Grants (97.042) ( 7,823)
Less: Social Security Administration ( 1,200)
Actual Federal Expenditures of Federal Awards $2,056,019
SEFA Understated $1,712,646
Cause of Condition: Policies and procedures have not been designed and implemented to ensure accurate reporting of expenditures for federal awards.
Effect of Condition: This resulted in a material misstatement of the County’s Schedule of Expenditures of Federal Awards and could increase the potential for material noncompliance.
Recommendation: OSAI recommends the County design and implement internal controls to ensure accurate reporting of federal expenditures on the SEFA.
Management Response:
Chairman of the Board of County Commissioners: The BOCC will work to design and implement internal controls to ensure accurate reporting of federal expenditures on the SEFA and ensure compliance with federal requirements.
Criteria: The GAO Standards – Section 1 – Fundamental Concepts of Internal Control – OV1.01 states in part:
Definition of Internal Control
Internal control is a process effected by an entity’s oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved.
Further, Title 2 CFR 200 § 200.510(a)(b) Financial Statements reads as follows:
(a) Financial statements. The auditee must prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The financial statements must be for the same organizational unit and fiscal year that is chosen to meet the requirements of this part. However, non-Federal entity-wide financial statements may also include departments, agencies, and other organizational units that have separate audits in accordance with §200.514 Scope of audit, paragraph (a) and prepare separate financial statements.
(b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended as determined in accordance with §200.502 Basis for determining Federal awards expended.