Lack of County-Wide Internal Controls Over Major Federal Program Coronavirus State and Local Fiscal Recovery Funds
PASS-THROUGH GRANTOR: Direct Grant
FEDERAL AGENCY: U.S. Department of Treasury
ASSISTANCE LISTING: 21.027
FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds
FEDERAL AWARD YEAR: 2021
CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance; Procurement, Suspension and Debarment; Reporting; Subrecipient Monitoring
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 with grant requirements and could result in loss of federal funds to the County.
Recommendation: OSAI recommends the County 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 make sure we comply with grant requirements and that 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.
Lack of Internal Controls Over Major Federal Program Coronavirus State and Local Fiscal Recovery Funds
PASS-THROUGH GRANTOR: Direct Grant
FEDERAL AGENCY: U.S. Department of Treasury
ASSISTANCE LISTING: 21.027
FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds
FEDERAL AWARD YEAR: 2021
CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Procurement and Suspension and Debarment; Reporting; Subrecipient Monitoring
QUESTIONED COSTS: $-0-
Condition: During the process of documenting the County’s internal controls regarding federal disbursements, we noted that the County has not established procedures to ensure compliance with the following compliance requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Procurement and Suspension and Debarment; Reporting; Subrecipient Monitoring.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements.
Lack of Internal Controls and Noncompliance with Subrecipient Monitoring Over Federal Grant – Coronavirus State and Local Fiscal Recovery Fund
PASS-THROUGH GRANTOR: Direct Grant
FEDERAL AGENCY: U.S. Department of Treasury
ASSISTANE LISTING: 21.027
FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds
FEDERAL AWARD YEAR: 2021
CONTROL CATEGORY: Subrecipient Monitoring
QUESTIONED COSTS: $-0-
Condition: The County does not have a subrecipient monitoring policy, and not all subrecipient agreements are comprised of the following information:
• Federal Award Identification Number (FAIN)
• Name of Federal Awarding Agency
Contact information for the official at the Federal Awarding Agency
• Catalog of Assistance Listing (AL) number and name
• Provide Close out terms and conditions
In addition, of the five (5) subrecipients and one (1) beneficiary tested, it was noted the subrecipient or beneficiary agreement for one (1) subrecipient, and one (1) beneficiary could not be located.
Further, subrecipient and beneficiary agreements approved by the Board of County Commissioners state that subrecipient or beneficiary shall provide monthly performance reports until all ARPA funds awarded hereunder have been expended. Through the observation of records, it was determined that monthly performance reports were not submitted each month by entities receiving ARPA funding.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with compliance requirements.
Effect of Condition: This condition resulted in noncompliance with federal grant requirements.
Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements. OSAI also recommends that entities receiving ARPA funding submit monthly progress reports as stated under the reporting section of the agreements signed by the Board of County Commissioners.
Management Response:
Chairman of the Board of County Commissioners: The Board of County Commissioners will take measures to ensure future compliance with all requirements of federal grants.
Criteria: 2 CFR 200, §200.332 Requirements for Pass-Through Entities states in part:
All pass-through entities must:
(a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward.
(2) All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award.
(5) A requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient's records and financial statements as necessary for the pass-through entity to meet the requirements of this part.
(6) Appropriate terms and conditions concerning closeout of the subaward.
Lack of Internal Controls and Noncompliance with Reporting Requirements Over Federal Grant Coronavirus State and Local Fiscal Recovery Funds
PASS-THROUGH GRANTOR: Direct Grant
FEDERAL AGENCY: U.S. Department of Treasury
ASSISTANCE LISTING: 21.027
FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds
FEDERAL AWARD YEAR: 2021
CONTROL CATEGORY: Reporting
QUESTIONED COSTS: $-0-
Condition: The County has not established internal controls to ensure the correct expenditure category is used for reporting payments to subrecipients. The quarterly reports improperly classified payments totaling $1,600,000 to subrecipients as a ‘Revenue Replacement’ expense instead of using the ‘Infrastructure’ expense category.
In addition, it was noted the 2nd Quarter Report was not timely submitted.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements.
Effect of Condition: This condition resulted in noncompliance with grant requirements.
Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements.
Management Response:
Chairman of the Board of County Commissioners: The Board of County Commissioners will take measures to ensure future compliance with all requirements of federal grants.
Criteria: Title 2 CFR § 200.303(a) Internal Controls reads (a) reads as follows:
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 Controls Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting.) reads as follows:
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.
In addition, where appropriate, you organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting.
Further, 2 CFR § 200.329 Monitoring and Reporting Program Performance (c)(1) reads as follows:
The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.
Lack of County-Wide Internal Controls Over Major Federal Program Coronavirus State and Local Fiscal Recovery Funds
PASS-THROUGH GRANTOR: Direct Grant
FEDERAL AGENCY: U.S. Department of Treasury
ASSISTANCE LISTING: 21.027
FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds
FEDERAL AWARD YEAR: 2021
CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance; Procurement, Suspension and Debarment; Reporting; Subrecipient Monitoring
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 with grant requirements and could result in loss of federal funds to the County.
Recommendation: OSAI recommends the County 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 make sure we comply with grant requirements and that 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.
Lack of Internal Controls Over Major Federal Program Coronavirus State and Local Fiscal Recovery Funds
PASS-THROUGH GRANTOR: Direct Grant
FEDERAL AGENCY: U.S. Department of Treasury
ASSISTANCE LISTING: 21.027
FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds
FEDERAL AWARD YEAR: 2021
CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Procurement and Suspension and Debarment; Reporting; Subrecipient Monitoring
QUESTIONED COSTS: $-0-
Condition: During the process of documenting the County’s internal controls regarding federal disbursements, we noted that the County has not established procedures to ensure compliance with the following compliance requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Procurement and Suspension and Debarment; Reporting; Subrecipient Monitoring.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements.
Lack of Internal Controls and Noncompliance with Subrecipient Monitoring Over Federal Grant – Coronavirus State and Local Fiscal Recovery Fund
PASS-THROUGH GRANTOR: Direct Grant
FEDERAL AGENCY: U.S. Department of Treasury
ASSISTANE LISTING: 21.027
FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds
FEDERAL AWARD YEAR: 2021
CONTROL CATEGORY: Subrecipient Monitoring
QUESTIONED COSTS: $-0-
Condition: The County does not have a subrecipient monitoring policy, and not all subrecipient agreements are comprised of the following information:
• Federal Award Identification Number (FAIN)
• Name of Federal Awarding Agency
Contact information for the official at the Federal Awarding Agency
• Catalog of Assistance Listing (AL) number and name
• Provide Close out terms and conditions
In addition, of the five (5) subrecipients and one (1) beneficiary tested, it was noted the subrecipient or beneficiary agreement for one (1) subrecipient, and one (1) beneficiary could not be located.
Further, subrecipient and beneficiary agreements approved by the Board of County Commissioners state that subrecipient or beneficiary shall provide monthly performance reports until all ARPA funds awarded hereunder have been expended. Through the observation of records, it was determined that monthly performance reports were not submitted each month by entities receiving ARPA funding.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with compliance requirements.
Effect of Condition: This condition resulted in noncompliance with federal grant requirements.
Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements. OSAI also recommends that entities receiving ARPA funding submit monthly progress reports as stated under the reporting section of the agreements signed by the Board of County Commissioners.
Management Response:
Chairman of the Board of County Commissioners: The Board of County Commissioners will take measures to ensure future compliance with all requirements of federal grants.
Criteria: 2 CFR 200, §200.332 Requirements for Pass-Through Entities states in part:
All pass-through entities must:
(a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward.
(2) All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award.
(5) A requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient's records and financial statements as necessary for the pass-through entity to meet the requirements of this part.
(6) Appropriate terms and conditions concerning closeout of the subaward.
Lack of Internal Controls and Noncompliance with Reporting Requirements Over Federal Grant Coronavirus State and Local Fiscal Recovery Funds
PASS-THROUGH GRANTOR: Direct Grant
FEDERAL AGENCY: U.S. Department of Treasury
ASSISTANCE LISTING: 21.027
FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds
FEDERAL AWARD YEAR: 2021
CONTROL CATEGORY: Reporting
QUESTIONED COSTS: $-0-
Condition: The County has not established internal controls to ensure the correct expenditure category is used for reporting payments to subrecipients. The quarterly reports improperly classified payments totaling $1,600,000 to subrecipients as a ‘Revenue Replacement’ expense instead of using the ‘Infrastructure’ expense category.
In addition, it was noted the 2nd Quarter Report was not timely submitted.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements.
Effect of Condition: This condition resulted in noncompliance with grant requirements.
Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements.
Management Response:
Chairman of the Board of County Commissioners: The Board of County Commissioners will take measures to ensure future compliance with all requirements of federal grants.
Criteria: Title 2 CFR § 200.303(a) Internal Controls reads (a) reads as follows:
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 Controls Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting.) reads as follows:
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.
In addition, where appropriate, you organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting.
Further, 2 CFR § 200.329 Monitoring and Reporting Program Performance (c)(1) reads as follows:
The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.