Audit 319322

Federal Program: Assistance Listing #97.036 - Disaster Grants - Public Assistance (Presidentially Declared Disaster) Award Number and Year: FEMA 4630 - 2023 Name of Federal Agency and Pass-Thru Agency (if applicable): U.S. Department of Homeland Security, Passed Through Kentucky Department of Emergency Management Compliance Requirements: Activities Allowed & Allowable Costs, Matching, Level of Effort, Earmarking, Period of Performance, Special Tests and Provisions Type of Finding: Material Weakness Amount of Questioned Costs: None Noted Opinion Modification (if applicable): N/A COVID Related: No Repeat Finding: Repeat finding of 2022-006 This is a repeat finding and was included in the prior year audit report as finding 2022-006. The Marshall County Fiscal Court failed to implement adequate internal controls over the Disaster Grants – Public Assistance (Presidentially Declared Disaster) (FEMA) program to ensure all compliance requirements are being met and that record keeping was being done correctly. The fiscal court relied on a third-party administrator for the recording of all FEMA project activity. The fiscal court also relied on the third-party to satisfy compliance requirements and failed to establish any review process or independent internal controls that verified that activities performed, and amounts charged to the program were allowable under all applicable compliance requirements. By relying on a third-party administrator’s controls, without enacting any internal controls, the county increased the risk of misappropriation of funds, and noncompliance with federal grant guidelines. This could have potentially led to questioned costs that would have to be repaid, and less federal funding in the future. This also resulted in the county’s Schedule of Federal Awards and Expenditures (SEFA) being materially misstated, and several schedules and reports being incomplete or inaccurate. Strong internal controls dictate that the fiscal court should review all federal expenditure documentation and reports to ensure compliance requirements are being met and activities are being completed accurately. 2 CFR 200.303 states “The non-Federal entity must (a): 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.” We recommend the fiscal court strengthen internal controls over the federal expenditure process by ensuring all activity related to federal expenditures is reviewed for accuracy and compliance.

Federal Program: Assistance Listing #97.036 - Disaster Grants - Public Assistance (Presidentially Declared Disaster) Award Number and Year: FEMA 4630 - 2023 Name of Federal Agency and Pass-Thru Agency (if applicable): U.S. Department of Homeland Security, Passed Through Kentucky Department of Emergency Management Compliance Requirements: Activities Allowed & Allowable Costs, Matching, Level of Effort, Earmarking, Period of Performance, Special Tests and Provisions Type of Finding: Material Weakness Amount of Questioned Costs: None Noted Opinion Modification (if applicable): N/A COVID Related: No Repeat Finding: Repeat finding of 2022-006 This is a repeat finding and was included in the prior year audit report as finding 2022-006. The Marshall County Fiscal Court failed to implement adequate internal controls over the Disaster Grants – Public Assistance (Presidentially Declared Disaster) (FEMA) program to ensure all compliance requirements are being met and that record keeping was being done correctly. The fiscal court relied on a third-party administrator for the recording of all FEMA project activity. The fiscal court also relied on the third-party to satisfy compliance requirements and failed to establish any review process or independent internal controls that verified that activities performed, and amounts charged to the program were allowable under all applicable compliance requirements. By relying on a third-party administrator’s controls, without enacting any internal controls, the county increased the risk of misappropriation of funds, and noncompliance with federal grant guidelines. This could have potentially led to questioned costs that would have to be repaid, and less federal funding in the future. This also resulted in the county’s Schedule of Federal Awards and Expenditures (SEFA) being materially misstated, and several schedules and reports being incomplete or inaccurate. Strong internal controls dictate that the fiscal court should review all federal expenditure documentation and reports to ensure compliance requirements are being met and activities are being completed accurately. 2 CFR 200.303 states “The non-Federal entity must (a): 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.” We recommend the fiscal court strengthen internal controls over the federal expenditure process by ensuring all activity related to federal expenditures is reviewed for accuracy and compliance.