Audit 327510

FINDING 2022-003 Subject: CDBG - Entitlement Grants Cluster - Program Income Federal Agency: Department of Housing and Urban Development Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listings Number: 14.218 Federal Award Numbers and Years (or Other Identifying Numbers): B-11-UN-18-0002, B-17-UC-18-0016, B-18-UC-18-0016, B-19-UC-18-0016, B-20-UC-18-0016, B-21-UC-18-0016 Compliance Requirement: Program Income Audit Findings: Material Weakness, Modified Opinion Condition and Context The County received program income through various loan programs it offered to qualifying individuals. Once the County received a loan payment, the receipt was posted into the financial accounting system of the County and recorded in a grant fund. The amount received was also to be recorded in the Department of Housing and Urban Development's (HUD) Integrated Disbursement and Information System (IDIS) website. The recorded program income in the IDIS would then appear on the Drawdown Report by Voucher Number report (PR07). One individual was responsible for notifying the County Auditor's office when program income money was received, so it could be receipted in the County's financial accounting system. The same individual was also responsible for reporting the information on the IDIS site. No internal controls were established to ensure the program income that was recorded in the financial accounting system was also reported on the IDIS site and the PR07 report. Four receipts totaling $38,960 were selected for testing from the County's receipt ledger. The four receipts were unable to be located on the PR07 report provided for audit. However, one of the four receipts was recorded in the IDIS system after information regarding the receipt was requested. In addition, we were unable to verify the total amount recorded in the receipt ledger to the total reported on the PR07 report. The County's ledger was greater than the PR07 report by $30,324 and is primarily attributed to under reporting of program income in the IDIS as identified above. The lack of internal controls and noncompliance were systemic issues throughout the audit period. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 21 LAKE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.1 states in part: ". . . Internal controls for non-Federal entities means: (1) Processes designed and implemented by non-Federal entities to provide reasonable assurance regarding the achievement of objectives in the following categories: (i) Effectiveness and efficiency of operations; (ii) Reliability of reporting for internal and external use; . . ." 2 CFR 200.302 states in part: "(a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. . . . (b) The financial management system of each non-Federal entity must provide for the following: . . . (3) Records that identify adequately the source and application of funds for federallyfunded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. . . ." 24 CFR 570.504 states in part: "(a) Recording program income. The receipt and expenditure of program income as defined in § 570.500(a) shall be recorded as part of the financial transactions of the grant program. (b) Disposition of program income received by recipients. (1) Program income received before grant closeout may be retained by the recipient if the income is treated as additional CDBG funds subject to all applicable requirements governing the use of CDBG funds. (2) If the recipient chooses to retain program income, that program income shall be disposed of as follows: (i) Program income in the form of repayments to, or interest earned on, a revolving fund as defined in § 570.500(b) shall be substantially disbursed from the fund before additional cash withdrawals are made from the U.S. Treasury for the same activity. (This rule does not prevent a lump sum disbursement to finance the rehabilitation of privately owned properties as provided for in § 570.513.) (ii) Substantially all other program income shall be disbursed for eligible activities before additional cash withdrawals are made from the U.S. Treasury. . . ." INDIANA STATE BOARD OF ACCOUNTS 22 LAKE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A turnover of staff in the County's Community Development office, and management not ensuring that a system of internal controls that segregated key functions was designed, implemented, and operating effectively, contributed to the program income issue identified above. Effect Without the proper implementation of an effectively designed system of internal controls, the County could not ensure that program income was properly reported and used before the drawdown of federal funds as required. The County could be at risk of losing federal funds by the federal awarding agency due to noncompliance with federal regulations. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the management of the County establish a system of internal controls to ensure that all program income received is properly reported in the IDIS system and expended prior to drawing down federal awards. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2022-004 Subject: CDBG - Entitlement Grants Cluster - Reporting Federal Agency: Department of Housing and Urban Development Federal Programs: Community Development Block Grants/Entitlement Grants; COVID-19 - Community Development Block Grants/Entitlement Grants Assistance Listings Number: 14.218 Federal Award Numbers and Years (or Other Identifying Numbers): B-11-UN-18-0002, B-17-UC-18-0016, B-18-UC-18-0016, B-19-UC-18-0016, B-20-UC-18-0016, B-21-UC-18-0016, B-20-UW-18-0016 Compliance Requirement: Reporting Audit Finding: Material Weakness Condition and Context The County did not have internal control procedures over the Quarterly Reports (PR29), the IDIS Section 3 Performance Report, and the NSP Quarterly Reports. One individual prepared or generated the report without a review or oversight process. INDIANA STATE BOARD OF ACCOUNTS 23 LAKE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Additionally, the County's internal controls were not consistently documented over the drawdown requests for the CDBG grant during the audit period. The drawdown requests were entered into the IDIS, which then became the basis for several of the reports. The internal control presented by the County was that one individual prepared and entered the request, which would then be printed, and another individual would review and sign the printed request to document the review. Of the 13 reimbursement requests tested, internal control documentation for 8 of the requests was printed and signed during the current period, after the documentation was requested. The creation of documentation of the internal control procedure did not support that internal controls were properly implemented and effective during the audit period. The lack of internal controls were systemic issues throughout the audit period. 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). . . ." 2 CFR 200.1 states in part: ". . . Internal controls for non-Federal entities means: (1) Processes designed and implemented by non-Federal entities to provide reasonable assurance regarding the achievement of objectives in the following categories: (i) Effectiveness and efficiency of operations; (ii) Reliability of reporting for internal and external use; . . ." Cause A turnover of staff in the County's Community Development office, and management not ensuring that a system of internal controls that segregated key functions was designed, implemented, and operating effectively, contributed to the program income issue identified above. Effect Without the proper implementation of an effectively designed system of internal controls, 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 County. INDIANA STATE BOARD OF ACCOUNTS 24 LAKE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the County's management design and implement a proper system of internal controls, and retain documentation of its system of internal controls, to ensure compliance with reporting requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2022-004 Subject: CDBG - Entitlement Grants Cluster - Reporting Federal Agency: Department of Housing and Urban Development Federal Programs: Community Development Block Grants/Entitlement Grants; COVID-19 - Community Development Block Grants/Entitlement Grants Assistance Listings Number: 14.218 Federal Award Numbers and Years (or Other Identifying Numbers): B-11-UN-18-0002, B-17-UC-18-0016, B-18-UC-18-0016, B-19-UC-18-0016, B-20-UC-18-0016, B-21-UC-18-0016, B-20-UW-18-0016 Compliance Requirement: Reporting Audit Finding: Material Weakness Condition and Context The County did not have internal control procedures over the Quarterly Reports (PR29), the IDIS Section 3 Performance Report, and the NSP Quarterly Reports. One individual prepared or generated the report without a review or oversight process. INDIANA STATE BOARD OF ACCOUNTS 23 LAKE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Additionally, the County's internal controls were not consistently documented over the drawdown requests for the CDBG grant during the audit period. The drawdown requests were entered into the IDIS, which then became the basis for several of the reports. The internal control presented by the County was that one individual prepared and entered the request, which would then be printed, and another individual would review and sign the printed request to document the review. Of the 13 reimbursement requests tested, internal control documentation for 8 of the requests was printed and signed during the current period, after the documentation was requested. The creation of documentation of the internal control procedure did not support that internal controls were properly implemented and effective during the audit period. The lack of internal controls were systemic issues throughout the audit period. 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). . . ." 2 CFR 200.1 states in part: ". . . Internal controls for non-Federal entities means: (1) Processes designed and implemented by non-Federal entities to provide reasonable assurance regarding the achievement of objectives in the following categories: (i) Effectiveness and efficiency of operations; (ii) Reliability of reporting for internal and external use; . . ." Cause A turnover of staff in the County's Community Development office, and management not ensuring that a system of internal controls that segregated key functions was designed, implemented, and operating effectively, contributed to the program income issue identified above. Effect Without the proper implementation of an effectively designed system of internal controls, 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 County. INDIANA STATE BOARD OF ACCOUNTS 24 LAKE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the County's management design and implement a proper system of internal controls, and retain documentation of its system of internal controls, to ensure compliance with reporting requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2022-005 Subject: CDBG - Entitlement Grants Cluster - Period of Performance Federal Agency: Department of Housing and Urban Development Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listings Number: 14.218 Federal Award Numbers and Years (or Other Identifying Numbers): B-11-UN-18-0002, B-17-UC-18-0016, B-18-UC-18-0016, B-19-UC-18-0016, B-20-UC-18-0016, B-21-UC-18-0016 Compliance Requirement: Period of Performance Audit Finding: Material Weakness Condition and Context The County did not have internal control procedures over adjustments to Community Development Block Grants/Entitlement Grants funds. During and after the transition to a new financial accounting software system for the County, various adjusting entries were entered by outside consultants without any oversight or review by County management. The lack of internal controls was a systematic issue from July 1, 2022 to December 31, 2022. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 25 LAKE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.1 states in part: ". . . Internal controls for non-Federal entities means: (1) Processes designed and implemented by non-Federal entities to provide reasonable assurance regarding the achievement of objectives in the following categories: (i) Effectiveness and efficiency of operations; (ii) Reliability of reporting for internal and external use; . . ." Cause The conversion process due to the change in financial software in the middle of year 2022 caused abnormal activity which was not a part of the system of internal controls as designed and implemented by the County. Effect Without the proper implementation of an effectively designed system of internal controls, 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 County. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the County's management design and implement a proper system of internal controls, and retain documentation of its system of internal controls, to ensure compliance with period of performance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2022-006 Subject: COVID-19 - Emergency Rental Assistance Program - Reporting Federal Agency: Department of the Treasury Federal Program: COVID-19 - Emergency Rental Assistance Program Assistance Listings Number: 21.023 Federal Award Numbers and Years (or Other Identifying Numbers): ERA-0359, ERA2-0357 Compliance Requirement: Reporting Audit Findings: Significant Deficiency, Other Matters INDIANA STATE BOARD OF ACCOUNTS 26 LAKE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context Recipients are required to submit FFATA (Federal Funding Accountability and Transparency Act) reporting through the FSRS (FFATA Subaward Reporting System) website to the U.S. General Services Administration. This reporting is required to be completed for each action based on subawards of $30,000 or more that are made from the federal program. Information to be reported included the information contained within the subaward. The County did not have any policies or procedures in place related to the FFATA reporting requirements. During the audit period, the County was required to submit the FFATA reporting for one subaward that was over $30,000. The County, however, did not submit the required report on the FSRS website. The lack of internal controls and noncompliance were isolated to the FFATA reporting in 2022. 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). . . ." 2 CFR 170 Appendix A(I)(a) states in part: ". . . you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . ." Cause A system of internal controls over the FFATA reporting was not designed by management of the County to ensure the County provided the U.S. General Services Administration, as well as users of the FSRS website, with complete and accurate information related to the COVID-19 - Emergency Rental Assistance Program awards. Effect Without the proper implementation of an effectively designed system of internal controls, the County cannot ensure compliance with FFATA reporting requirements. 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 County. Additionally, the County not meeting the COVID-19 - Emergency Rental Assistance Program reporting requirements increases the likelihood that the U.S. General Services Administration, as well as users of the FSRS website, will not have access to transparent and accurate information regarding subawards of federal awards. INDIANA STATE BOARD OF ACCOUNTS 27 LAKE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County design and implement a proper system of internal controls to ensure that all subrecipients awarded $30,000 or more are properly reported in accordance with the FFATA reporting requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2022-003 Subject: CDBG - Entitlement Grants Cluster - Program Income Federal Agency: Department of Housing and Urban Development Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listings Number: 14.218 Federal Award Numbers and Years (or Other Identifying Numbers): B-11-UN-18-0002, B-17-UC-18-0016, B-18-UC-18-0016, B-19-UC-18-0016, B-20-UC-18-0016, B-21-UC-18-0016 Compliance Requirement: Program Income Audit Findings: Material Weakness, Modified Opinion Condition and Context The County received program income through various loan programs it offered to qualifying individuals. Once the County received a loan payment, the receipt was posted into the financial accounting system of the County and recorded in a grant fund. The amount received was also to be recorded in the Department of Housing and Urban Development's (HUD) Integrated Disbursement and Information System (IDIS) website. The recorded program income in the IDIS would then appear on the Drawdown Report by Voucher Number report (PR07). One individual was responsible for notifying the County Auditor's office when program income money was received, so it could be receipted in the County's financial accounting system. The same individual was also responsible for reporting the information on the IDIS site. No internal controls were established to ensure the program income that was recorded in the financial accounting system was also reported on the IDIS site and the PR07 report. Four receipts totaling $38,960 were selected for testing from the County's receipt ledger. The four receipts were unable to be located on the PR07 report provided for audit. However, one of the four receipts was recorded in the IDIS system after information regarding the receipt was requested. In addition, we were unable to verify the total amount recorded in the receipt ledger to the total reported on the PR07 report. The County's ledger was greater than the PR07 report by $30,324 and is primarily attributed to under reporting of program income in the IDIS as identified above. The lack of internal controls and noncompliance were systemic issues throughout the audit period. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 21 LAKE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.1 states in part: ". . . Internal controls for non-Federal entities means: (1) Processes designed and implemented by non-Federal entities to provide reasonable assurance regarding the achievement of objectives in the following categories: (i) Effectiveness and efficiency of operations; (ii) Reliability of reporting for internal and external use; . . ." 2 CFR 200.302 states in part: "(a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. . . . (b) The financial management system of each non-Federal entity must provide for the following: . . . (3) Records that identify adequately the source and application of funds for federallyfunded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. . . ." 24 CFR 570.504 states in part: "(a) Recording program income. The receipt and expenditure of program income as defined in § 570.500(a) shall be recorded as part of the financial transactions of the grant program. (b) Disposition of program income received by recipients. (1) Program income received before grant closeout may be retained by the recipient if the income is treated as additional CDBG funds subject to all applicable requirements governing the use of CDBG funds. (2) If the recipient chooses to retain program income, that program income shall be disposed of as follows: (i) Program income in the form of repayments to, or interest earned on, a revolving fund as defined in § 570.500(b) shall be substantially disbursed from the fund before additional cash withdrawals are made from the U.S. Treasury for the same activity. (This rule does not prevent a lump sum disbursement to finance the rehabilitation of privately owned properties as provided for in § 570.513.) (ii) Substantially all other program income shall be disbursed for eligible activities before additional cash withdrawals are made from the U.S. Treasury. . . ." INDIANA STATE BOARD OF ACCOUNTS 22 LAKE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A turnover of staff in the County's Community Development office, and management not ensuring that a system of internal controls that segregated key functions was designed, implemented, and operating effectively, contributed to the program income issue identified above. Effect Without the proper implementation of an effectively designed system of internal controls, the County could not ensure that program income was properly reported and used before the drawdown of federal funds as required. The County could be at risk of losing federal funds by the federal awarding agency due to noncompliance with federal regulations. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the management of the County establish a system of internal controls to ensure that all program income received is properly reported in the IDIS system and expended prior to drawing down federal awards. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2022-004 Subject: CDBG - Entitlement Grants Cluster - Reporting Federal Agency: Department of Housing and Urban Development Federal Programs: Community Development Block Grants/Entitlement Grants; COVID-19 - Community Development Block Grants/Entitlement Grants Assistance Listings Number: 14.218 Federal Award Numbers and Years (or Other Identifying Numbers): B-11-UN-18-0002, B-17-UC-18-0016, B-18-UC-18-0016, B-19-UC-18-0016, B-20-UC-18-0016, B-21-UC-18-0016, B-20-UW-18-0016 Compliance Requirement: Reporting Audit Finding: Material Weakness Condition and Context The County did not have internal control procedures over the Quarterly Reports (PR29), the IDIS Section 3 Performance Report, and the NSP Quarterly Reports. One individual prepared or generated the report without a review or oversight process. INDIANA STATE BOARD OF ACCOUNTS 23 LAKE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Additionally, the County's internal controls were not consistently documented over the drawdown requests for the CDBG grant during the audit period. The drawdown requests were entered into the IDIS, which then became the basis for several of the reports. The internal control presented by the County was that one individual prepared and entered the request, which would then be printed, and another individual would review and sign the printed request to document the review. Of the 13 reimbursement requests tested, internal control documentation for 8 of the requests was printed and signed during the current period, after the documentation was requested. The creation of documentation of the internal control procedure did not support that internal controls were properly implemented and effective during the audit period. The lack of internal controls were systemic issues throughout the audit period. 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). . . ." 2 CFR 200.1 states in part: ". . . Internal controls for non-Federal entities means: (1) Processes designed and implemented by non-Federal entities to provide reasonable assurance regarding the achievement of objectives in the following categories: (i) Effectiveness and efficiency of operations; (ii) Reliability of reporting for internal and external use; . . ." Cause A turnover of staff in the County's Community Development office, and management not ensuring that a system of internal controls that segregated key functions was designed, implemented, and operating effectively, contributed to the program income issue identified above. Effect Without the proper implementation of an effectively designed system of internal controls, 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 County. INDIANA STATE BOARD OF ACCOUNTS 24 LAKE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the County's management design and implement a proper system of internal controls, and retain documentation of its system of internal controls, to ensure compliance with reporting requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2022-004 Subject: CDBG - Entitlement Grants Cluster - Reporting Federal Agency: Department of Housing and Urban Development Federal Programs: Community Development Block Grants/Entitlement Grants; COVID-19 - Community Development Block Grants/Entitlement Grants Assistance Listings Number: 14.218 Federal Award Numbers and Years (or Other Identifying Numbers): B-11-UN-18-0002, B-17-UC-18-0016, B-18-UC-18-0016, B-19-UC-18-0016, B-20-UC-18-0016, B-21-UC-18-0016, B-20-UW-18-0016 Compliance Requirement: Reporting Audit Finding: Material Weakness Condition and Context The County did not have internal control procedures over the Quarterly Reports (PR29), the IDIS Section 3 Performance Report, and the NSP Quarterly Reports. One individual prepared or generated the report without a review or oversight process. INDIANA STATE BOARD OF ACCOUNTS 23 LAKE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Additionally, the County's internal controls were not consistently documented over the drawdown requests for the CDBG grant during the audit period. The drawdown requests were entered into the IDIS, which then became the basis for several of the reports. The internal control presented by the County was that one individual prepared and entered the request, which would then be printed, and another individual would review and sign the printed request to document the review. Of the 13 reimbursement requests tested, internal control documentation for 8 of the requests was printed and signed during the current period, after the documentation was requested. The creation of documentation of the internal control procedure did not support that internal controls were properly implemented and effective during the audit period. The lack of internal controls were systemic issues throughout the audit period. 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). . . ." 2 CFR 200.1 states in part: ". . . Internal controls for non-Federal entities means: (1) Processes designed and implemented by non-Federal entities to provide reasonable assurance regarding the achievement of objectives in the following categories: (i) Effectiveness and efficiency of operations; (ii) Reliability of reporting for internal and external use; . . ." Cause A turnover of staff in the County's Community Development office, and management not ensuring that a system of internal controls that segregated key functions was designed, implemented, and operating effectively, contributed to the program income issue identified above. Effect Without the proper implementation of an effectively designed system of internal controls, 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 County. INDIANA STATE BOARD OF ACCOUNTS 24 LAKE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the County's management design and implement a proper system of internal controls, and retain documentation of its system of internal controls, to ensure compliance with reporting requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2022-005 Subject: CDBG - Entitlement Grants Cluster - Period of Performance Federal Agency: Department of Housing and Urban Development Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listings Number: 14.218 Federal Award Numbers and Years (or Other Identifying Numbers): B-11-UN-18-0002, B-17-UC-18-0016, B-18-UC-18-0016, B-19-UC-18-0016, B-20-UC-18-0016, B-21-UC-18-0016 Compliance Requirement: Period of Performance Audit Finding: Material Weakness Condition and Context The County did not have internal control procedures over adjustments to Community Development Block Grants/Entitlement Grants funds. During and after the transition to a new financial accounting software system for the County, various adjusting entries were entered by outside consultants without any oversight or review by County management. The lack of internal controls was a systematic issue from July 1, 2022 to December 31, 2022. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 25 LAKE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.1 states in part: ". . . Internal controls for non-Federal entities means: (1) Processes designed and implemented by non-Federal entities to provide reasonable assurance regarding the achievement of objectives in the following categories: (i) Effectiveness and efficiency of operations; (ii) Reliability of reporting for internal and external use; . . ." Cause The conversion process due to the change in financial software in the middle of year 2022 caused abnormal activity which was not a part of the system of internal controls as designed and implemented by the County. Effect Without the proper implementation of an effectively designed system of internal controls, 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 County. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the County's management design and implement a proper system of internal controls, and retain documentation of its system of internal controls, to ensure compliance with period of performance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2022-006 Subject: COVID-19 - Emergency Rental Assistance Program - Reporting Federal Agency: Department of the Treasury Federal Program: COVID-19 - Emergency Rental Assistance Program Assistance Listings Number: 21.023 Federal Award Numbers and Years (or Other Identifying Numbers): ERA-0359, ERA2-0357 Compliance Requirement: Reporting Audit Findings: Significant Deficiency, Other Matters INDIANA STATE BOARD OF ACCOUNTS 26 LAKE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context Recipients are required to submit FFATA (Federal Funding Accountability and Transparency Act) reporting through the FSRS (FFATA Subaward Reporting System) website to the U.S. General Services Administration. This reporting is required to be completed for each action based on subawards of $30,000 or more that are made from the federal program. Information to be reported included the information contained within the subaward. The County did not have any policies or procedures in place related to the FFATA reporting requirements. During the audit period, the County was required to submit the FFATA reporting for one subaward that was over $30,000. The County, however, did not submit the required report on the FSRS website. The lack of internal controls and noncompliance were isolated to the FFATA reporting in 2022. 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). . . ." 2 CFR 170 Appendix A(I)(a) states in part: ". . . you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . ." Cause A system of internal controls over the FFATA reporting was not designed by management of the County to ensure the County provided the U.S. General Services Administration, as well as users of the FSRS website, with complete and accurate information related to the COVID-19 - Emergency Rental Assistance Program awards. Effect Without the proper implementation of an effectively designed system of internal controls, the County cannot ensure compliance with FFATA reporting requirements. 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 County. Additionally, the County not meeting the COVID-19 - Emergency Rental Assistance Program reporting requirements increases the likelihood that the U.S. General Services Administration, as well as users of the FSRS website, will not have access to transparent and accurate information regarding subawards of federal awards. INDIANA STATE BOARD OF ACCOUNTS 27 LAKE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County design and implement a proper system of internal controls to ensure that all subrecipients awarded $30,000 or more are properly reported in accordance with the FFATA reporting requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.