Audit 322367

FINDING 2023-002 Subject: Coronavirus State and Local Fiscal Recovery Funds - Reporting Federal Agency: U.S. Department of Treasury Assistance Listing Number: 21.027 Federal Award Number: FY 2022 Pass-Through Entity: N/A Compliance Requirements: Reporting Audit Findings: Material Weakness, Modified Opinion Criteria: 2 CFR 200.303 states in part: "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. 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). . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, states in part: ". . . 10. Reporting. All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. . . ." 31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds, . . ." Condition: The City had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties that would likely be effective in preventing, or detecting and correcting, noncompliance. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the Department of Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its population, as well as the recipient's allocation amount. Information to be reported includes projects funded, expenditures, and contracts for the appropriate reporting period. The City was classified as a metropolitan city with a population below 250,000 residents that received an allocation of less than $10 million in Coronavirus State and Local Fiscal Recovery Funds (CSLFRF). As, annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year. Cause: A proper system of internal controls over the P&E report was not designed by management of the City, which would include segregation of key functions to ensure the City provided the Treasury with complete and accurate information related to the CSLFRF awards. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management of what should be done to effect internal control, and procedures should consist of actions that would implement these policies. Context: The City submitted one P&E report during the audit period; however, a single employee prepared and submitted the P&E report without a review or oversight process in place to prevent, or detect and correct errors. In addition, the P&E report was not properly supported by the City’s records. All but $100,000 of the expenditures were reported under the Eligible Use Category of “Administrative Expenses.” However, the City’s expenditures during the audit period consisted of assistance to business and households, sewer infrastructure, and tourism support, none of which qualified as Administrative Expenses. Furthermore, the City reported that it was electing to take the Revenue Loss Standard Allowance, but the amount reported as Revenue Loss was $0. Effect: Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the City. Identification as a repeat finding, if applicable: Yes. The finding appeared in the prior year report as Finding 2022-001. Recommendation: We recommended that management of the City design and implement a proper system of internal controls that would provide a segregation of duties for the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the City provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

FINDING 2023-002 Subject: Coronavirus State and Local Fiscal Recovery Funds - Reporting Federal Agency: U.S. Department of Treasury Assistance Listing Number: 21.027 Federal Award Number: FY 2022 Pass-Through Entity: N/A Compliance Requirements: Reporting Audit Findings: Material Weakness, Modified Opinion Criteria: 2 CFR 200.303 states in part: "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. 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). . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, states in part: ". . . 10. Reporting. All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. . . ." 31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds, . . ." Condition: The City had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties that would likely be effective in preventing, or detecting and correcting, noncompliance. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the Department of Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its population, as well as the recipient's allocation amount. Information to be reported includes projects funded, expenditures, and contracts for the appropriate reporting period. The City was classified as a metropolitan city with a population below 250,000 residents that received an allocation of less than $10 million in Coronavirus State and Local Fiscal Recovery Funds (CSLFRF). As, annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year. Cause: A proper system of internal controls over the P&E report was not designed by management of the City, which would include segregation of key functions to ensure the City provided the Treasury with complete and accurate information related to the CSLFRF awards. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management of what should be done to effect internal control, and procedures should consist of actions that would implement these policies. Context: The City submitted one P&E report during the audit period; however, a single employee prepared and submitted the P&E report without a review or oversight process in place to prevent, or detect and correct errors. In addition, the P&E report was not properly supported by the City’s records. All but $100,000 of the expenditures were reported under the Eligible Use Category of “Administrative Expenses.” However, the City’s expenditures during the audit period consisted of assistance to business and households, sewer infrastructure, and tourism support, none of which qualified as Administrative Expenses. Furthermore, the City reported that it was electing to take the Revenue Loss Standard Allowance, but the amount reported as Revenue Loss was $0. Effect: Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the City. Identification as a repeat finding, if applicable: Yes. The finding appeared in the prior year report as Finding 2022-001. Recommendation: We recommended that management of the City design and implement a proper system of internal controls that would provide a segregation of duties for the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the City provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

FINDING 2023-002 Subject: Coronavirus State and Local Fiscal Recovery Funds - Reporting Federal Agency: U.S. Department of Treasury Assistance Listing Number: 21.027 Federal Award Number: FY 2022 Pass-Through Entity: N/A Compliance Requirements: Reporting Audit Findings: Material Weakness, Modified Opinion Criteria: 2 CFR 200.303 states in part: "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. 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). . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, states in part: ". . . 10. Reporting. All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. . . ." 31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds, . . ." Condition: The City had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties that would likely be effective in preventing, or detecting and correcting, noncompliance. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the Department of Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its population, as well as the recipient's allocation amount. Information to be reported includes projects funded, expenditures, and contracts for the appropriate reporting period. The City was classified as a metropolitan city with a population below 250,000 residents that received an allocation of less than $10 million in Coronavirus State and Local Fiscal Recovery Funds (CSLFRF). As, annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year. Cause: A proper system of internal controls over the P&E report was not designed by management of the City, which would include segregation of key functions to ensure the City provided the Treasury with complete and accurate information related to the CSLFRF awards. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management of what should be done to effect internal control, and procedures should consist of actions that would implement these policies. Context: The City submitted one P&E report during the audit period; however, a single employee prepared and submitted the P&E report without a review or oversight process in place to prevent, or detect and correct errors. In addition, the P&E report was not properly supported by the City’s records. All but $100,000 of the expenditures were reported under the Eligible Use Category of “Administrative Expenses.” However, the City’s expenditures during the audit period consisted of assistance to business and households, sewer infrastructure, and tourism support, none of which qualified as Administrative Expenses. Furthermore, the City reported that it was electing to take the Revenue Loss Standard Allowance, but the amount reported as Revenue Loss was $0. Effect: Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the City. Identification as a repeat finding, if applicable: Yes. The finding appeared in the prior year report as Finding 2022-001. Recommendation: We recommended that management of the City design and implement a proper system of internal controls that would provide a segregation of duties for the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the City provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

FINDING 2023-002 Subject: Coronavirus State and Local Fiscal Recovery Funds - Reporting Federal Agency: U.S. Department of Treasury Assistance Listing Number: 21.027 Federal Award Number: FY 2022 Pass-Through Entity: N/A Compliance Requirements: Reporting Audit Findings: Material Weakness, Modified Opinion Criteria: 2 CFR 200.303 states in part: "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. 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). . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, states in part: ". . . 10. Reporting. All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. . . ." 31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds, . . ." Condition: The City had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties that would likely be effective in preventing, or detecting and correcting, noncompliance. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the Department of Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its population, as well as the recipient's allocation amount. Information to be reported includes projects funded, expenditures, and contracts for the appropriate reporting period. The City was classified as a metropolitan city with a population below 250,000 residents that received an allocation of less than $10 million in Coronavirus State and Local Fiscal Recovery Funds (CSLFRF). As, annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year. Cause: A proper system of internal controls over the P&E report was not designed by management of the City, which would include segregation of key functions to ensure the City provided the Treasury with complete and accurate information related to the CSLFRF awards. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management of what should be done to effect internal control, and procedures should consist of actions that would implement these policies. Context: The City submitted one P&E report during the audit period; however, a single employee prepared and submitted the P&E report without a review or oversight process in place to prevent, or detect and correct errors. In addition, the P&E report was not properly supported by the City’s records. All but $100,000 of the expenditures were reported under the Eligible Use Category of “Administrative Expenses.” However, the City’s expenditures during the audit period consisted of assistance to business and households, sewer infrastructure, and tourism support, none of which qualified as Administrative Expenses. Furthermore, the City reported that it was electing to take the Revenue Loss Standard Allowance, but the amount reported as Revenue Loss was $0. Effect: Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the City. Identification as a repeat finding, if applicable: Yes. The finding appeared in the prior year report as Finding 2022-001. Recommendation: We recommended that management of the City design and implement a proper system of internal controls that would provide a segregation of duties for the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the City provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.