Audit 318680

Department of the Treasury, Passed through North Dakota Office of Management and Budget Federal Financial Assistance Listing 21.027 COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Activities Allowed or Unallowed Material Weakness in Internal Control over Compliance Criteria – A good system of internal accounting control contemplates an adequate system for review of the allocation of payroll expenditures to federal awards. Condition – During the course of our engagement, we noted that the City has no formal review process for the allocation of payroll costs to federal awards, which could result in a material misstatement of the City’s schedule of expenditures of federal awards. Cause – The City does not have an internal control system designed to review the allocation of payroll costs to federal awards. Effect – This deficiency could result in a misstatement to the financial statements and noncompliance with federal awards that would not be prevented or detected. Questioned Costs – None reported. Context/Sampling – A non-statistical sample of 60 transactions out of a population over 250 total transactions were selected for testing, which accounted for $973,584 of $1,232,007 of federal program expenditures. Of these transactions tested, seven of the seven payroll selections did not have approval, and that accounted for $333,540 of the total being tested. Repeat Finding from Prior Year(s) – Yes, prior year finding 2022-006. Recommendation – A thorough review and reconciliation of the allocation of payroll costs to federal awards should take place prior to the beginning of the audit. This review should be done at both the accounting staff and accounting supervisor levels. Views of Responsible Officials – There is no disagreement with the audit finding.

Department of the Treasury, Passed through North Dakota Office of Management and Budget Federal Financial Assistance Listing 21.027 COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Procurement, Suspension, and Debarment Material Weakness in Internal Control Over Compliance Criteria – Uniform Guidance and 2 CFR sections 200.318 through 200.326 set forth the procurement standards non-federal entities other than states must follow when operating federal programs and the procurement procedures required. Condition – In our testing of procurement, suspension, and debarment it was identified that the City did not have a written policy on procurement that satisfied the requirements of 2 CFR sections 200.318 through 200.326. Cause – Lack of oversight, awareness, or understanding of all of the specific requirements under the Uniform Guidance and applicable CFR sections, and controls were not adequately designed to ensure compliance with all of these requirements. Effect – A lack of compliant policies increases the overall risk of non-compliance. Questioned Costs – None reported. Context/Sampling – Overall procurement policy. Repeat Finding from Prior Years – Yes, prior year finding 2022-007. Recommendation – We recommend that management establish a written policy that is in compliance with all of the procurement requirements for federal programs as identified in 2 CFR sections 200.318 through 200.326 and maintain adequate supporting documentation and records to document history and methods of procurement and the procedures performed to comply with these CFR sections. Views of Responsible Officials – There is no disagreement with the audit finding.

Department of the Treasury, Passed through North Dakota Office of Management and Budget Federal Financial Assistance Listing 21.027 COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Activities Allowed or Unallowed Material Weakness in Internal Control over Compliance Criteria – A good system of internal accounting control contemplates an adequate system for review of the allocation of payroll expenditures to federal awards. Condition – During the course of our engagement, we noted that the City has no formal review process for the allocation of payroll costs to federal awards, which could result in a material misstatement of the City’s schedule of expenditures of federal awards. Cause – The City does not have an internal control system designed to review the allocation of payroll costs to federal awards. Effect – This deficiency could result in a misstatement to the financial statements and noncompliance with federal awards that would not be prevented or detected. Questioned Costs – None reported. Context/Sampling – A non-statistical sample of 60 transactions out of a population over 250 total transactions were selected for testing, which accounted for $973,584 of $1,232,007 of federal program expenditures. Of these transactions tested, seven of the seven payroll selections did not have approval, and that accounted for $333,540 of the total being tested. Repeat Finding from Prior Year(s) – Yes, prior year finding 2022-006. Recommendation – A thorough review and reconciliation of the allocation of payroll costs to federal awards should take place prior to the beginning of the audit. This review should be done at both the accounting staff and accounting supervisor levels. Views of Responsible Officials – There is no disagreement with the audit finding.

Department of the Treasury, Passed through North Dakota Office of Management and Budget Federal Financial Assistance Listing 21.027 COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Procurement, Suspension, and Debarment Material Weakness in Internal Control Over Compliance Criteria – Uniform Guidance and 2 CFR sections 200.318 through 200.326 set forth the procurement standards non-federal entities other than states must follow when operating federal programs and the procurement procedures required. Condition – In our testing of procurement, suspension, and debarment it was identified that the City did not have a written policy on procurement that satisfied the requirements of 2 CFR sections 200.318 through 200.326. Cause – Lack of oversight, awareness, or understanding of all of the specific requirements under the Uniform Guidance and applicable CFR sections, and controls were not adequately designed to ensure compliance with all of these requirements. Effect – A lack of compliant policies increases the overall risk of non-compliance. Questioned Costs – None reported. Context/Sampling – Overall procurement policy. Repeat Finding from Prior Years – Yes, prior year finding 2022-007. Recommendation – We recommend that management establish a written policy that is in compliance with all of the procurement requirements for federal programs as identified in 2 CFR sections 200.318 through 200.326 and maintain adequate supporting documentation and records to document history and methods of procurement and the procedures performed to comply with these CFR sections. Views of Responsible Officials – There is no disagreement with the audit finding.