Internal Controls and Compliance over Allowable Costs/Cost Principles and Period of
Performance Identification of Federal Program: Coronavirus Relief Fund – Assistance Listing No. 21.019
Criteria: 2 CFR Part 200 requires that the City and its Contractor, a non-federal entity 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). The provisions of the Coronavirus Relief Fund (CRF), as stipulated by the U.S. Treasury and subject to restrictions outlines in the guidance set forth in Section 601(d) of the Social Security Act, as added by Section 5001 of the “CARES” Act, restrict use of the funding for allowable costs and activities. Pursuant to Code of Federal Regulation (CFR) 200.403, except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under federal awards: (a) Be necessary and reasonable for the performance of the federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost.
(e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost-sharing or matching requirements of any other federally-financed program in either the current or a prior period. See also CFR 200.306(b). (g) Be adequately documented. See also CFR 200.300 – 200.309. (h) Cost must be incurred during the approved budget period. The federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to CFR 200.308(e)(3). Cause/Condition: During our testing of the Coronavirus Relief Fund program, we noted that the
City, through its contracted employee services, failed to establish and adhere to an effective internal control structure that would facilitate its use of Coronavirus Relief Funding, comply with regulations and terms of the federal award and take prompt action when instances of
noncompliance were identified. As a result, the City was not in compliance with certain provisions of the grant. Results of testing also indicated unallowable and questioned use of the grant funding. The results of testwork performed and correspondence with City management noted the following:
• No backup or supporting documentation for the evaluation, criteria, and selection of the
grantees to be disbursed CRF funding was available or maintained by City personnel.
Online applications were submitted, but there was inadequate documentation and an
absence of evidence of a functioning internal control structure for the disbursement of
funding used for the City’s Small Business Relief Program.
• Approximately $4.25 million use of the funding was disbursed to grantees as part of the
City’s Small Business Relief Program. As there was no backup or supporting
documentation for the evaluation, criteria, and selection of the grantees to be disbursed
CRF funding and because there were individuals responsible for selecting grantees that
were potentially involved in a fraudulent scheme, all amounts tested within our sample of
eighty-one (81) were determined to be questioned costs, which amounted to $3,070,900.
Based on our sample of eighty-one (81) grantees tested, $196,250 was confirmed by the
grantees as amounts requested and/or directed by former City representatives to be
remitted to outside entities for marketing services. Such services were potentially a part
of a fraudulent scheme under direction by former City Officials and later prosecuted.
Such questioned amounts would not tie into delivery or performance of allowable
services.
• During our testing of CRF expenditures, we sampled twenty-one (21) disbursements
made for public health costs incurred as a response to the pandemic, which are an
allowable use of funding. We noted one (1) payment made in the amount of $3,500 for
which no copy or check or disbursement was able to be provided. In addition, we noted
that the disbursement for $3,500 as well as an additional disbursement of $12,000 were
both paid to a City vendor that employed two former contracted City staff. Both amounts
totaling $15,500 were determined to be questioned costs. • During our testing of CRF expenditures, we sampled nine (9) payments made to
contractors, organizations and special services procured with CRF funding. We noted
one (1) payment made in the amount of $50,000 for which no copy or check or
disbursement was able to be provided. In addition, such contractors, organizations, and
special services procured with the funding were noted to have bypassed City
procurement protocol and eight (8) of the payments, totaling $163,500, were for services
outside of the initial period of performance of the grant. As a result, the total tested
disbursements of $213,500 were determined to be questioned costs. Effects or Potential Effects: Noncompliance with CFR related to allowable costs and period of
performance results in an increased risk that charges to the grant do not represent actual costs
incurred. Internal control deficiencies surrounding the grant result in an increased risk that
noncompliance may not be detected or corrected timely.
Questioned Costs: Known questioned costs amounted to $3,299,900. Likely questioned costs
amounted to $5,896,456.
Recommendation: We recommend that incoming City management strengthen its internal
control structure surrounding its designation, use and disbursement of grants as well as
implement and adhere to policies and procedures for the retention and safeguarding of original
source documents to properly substantiate charges made to grants. Auditee’s Response: DeKalb County was given $125 million directly from the federal
government. Of that amount, and through an intergovernmental agreement dated August 10,
2020, $32.6 million was distributed to the County’s municipalities on a per capita basis. The City
of Stonecrest received $6,227,098. The City was to administer and distribute the funds in
accordance with the federal program requirements to combat the public health emergency and
resulting economic impact related to the COVID-19 pandemic. The City was also charged with
maintaining through and accurate records regarding expenditure of the funds.
Following the execution of the agreement with DeKalb County, the City Council adopted a
resolution on September 28, 2020 calling for the Stonecrest CARES Act Funding plan. The City
Council assigned contractor staff to set up protocols to manage the program. The City Manager,
who was not on staff at the time, or designee was authorized to employ an administrator for the
Small Business Support Program, to develop an education component and to create a CARES
Act Relief Fund Committee to vet and select a program administrator. The Stonecrest COVID CARES Act Relief Fund was created
as the umbrella group that would have oversite over the programs. The Committee was later
renamed the Aaron Matthew Allen COVID Small Business Relief/Stonecrest Cares Committee to
honor a local resident. The Committee was organized by contractor staff and included two
members of City Council, several Contractor staff and consultants who were later paid to assist
with the program. The Committee met four times between November 4, 2020 and December 22,
2020, however, there is no evidence that the program management plan, as outlined in the
September 28, 2020 resolution was executed in accordance with the resolution. Contractor staff
reported to other Committee members on activities and events related to the use of CARES Act
funds, and the other committee members had no functional roles in CARES Act fund program.
The updates included the naming of consultants involved in the program, but did not disclose that
consultant contracts had been executed by contractor staff using the emergency procurement
section of the City’s Purchasing Policy. There appears to be no factual basis or authority for use
of emergency procurement procedures or execution of contracts by the contractor staff.
Significantly, on October 30, 2020, a contract was signed by a City contractor staff with a recently
organized not-for-profit organization to prepare disbursements to organizations using CARES Act
funds based on notifications by the City Contractor staff. There were duties related to records and
accounting but no other performance requirements. Other contracts were executed by contractor
City staff who had no authority to enter contracts on the City’s behalf. That process should have
included the City Purchasing agent, also a contractor staff, City Attorney and City Council reviews
and approvals.
The City was successful in obtaining records from the program contractors primarily related to
bank statements, program grant application documents, check copies, front and back, however
no backup or supporting documentation for the evaluation, criteria, and selection of the grantees
to be disbursed funds was available or maintained by the City. The contractor was in full control
of the operation of the CARES Act program.
The City contends that established internal control procedures were not followed by employees
assigned by the private government services contractor retained to provide management and
operations services in a manner sufficient to prevent, detect, and/or correct various issues related
to the City’s CARES Program. The City concedes that City employed staff did not timely submit
reports to DeKalb County pursuant to terms of the Intergovernmental Agreement.Like the response by Mayor and City Council with the
purchasing card findings, the City Attorney was engaged to investigate the CARES Act program
organization and operation. Pursuant to those findings, federal and local law enforcement
agencies were notified, and criminal charges were prosecuted and convictions secured. Based on
those prosecution, the City received restitutions that will be reimbursed to DeKalb County. In
addition, the City has made a claim as part of the January 31, 2023, filed Complaint for damages
and other relief to be indemnified by the contractor for any claims by DeKalb County, including
questioned unallowable costs, for reimbursement of Cares Act funds.
Internal Controls and Compliance over Reporting
Identification of Federal Program: Coronavirus Relief Fund – Assistance Listing No. 21.019
Criteria: The City’s funding was passed through by DeKalb County (the “prime recipient”) and the
County required certain reporting from the City via its Contractor. The City, through its contracted
employee services, did not have proper internal controls in place to verify that all information was
reported accurately and in compliance with the grant requirements.
Cause/Condition: During our consideration and testing of reporting requirements, it was noted
that the City’s funding was passed through from DeKalb County and thus the City was not
determined to be a prime recipient of its CRF funding and therefore reporting requirements under
Uniform Guidance did not apply. However, in December 2020 and through March 2021 the
County requested reporting and supporting documentation for each of its municipalities’ use of
allotted funds. We noted that the City submitted report(s) initially in December 2021, then
additional data was transmitted in May 2024 and thus report(s) were not timely submitted to the
County. Reports submitted provided neither adequate support nor accounting records for the
expenditures reported to the County.
Effects or Potential Effects: Delay in filing and not filing reports resulted in noncompliance with
reporting requirements as stipulated by the County. Inadequate and incomplete reported data
also resulted in noncompliance with reporting requirements.
Questioned Costs: See 2021-004.
Recommendation: We recommend that the City strength controls surrounding its grants report
tracking and submission process and procedures to ensure all required (or requested) reports are
properly reviewed and approved and submitted timely. The City should also review each grant for
reporting requirements and perform reconciliations to amounts reported within the City’s general
ledger. Auditee’s Response: Grant funding related to the Coronavirus Relief Fund (CRF) was controlled
by the City contractor engaged by the City to provide management and related services to the
City. The consultant organized a committee to have oversite over the CRF after the Mayor and
City Council adopted a resolution for the contractor staff to set up protocols to manage the
program. The contractor staff was tasked with developing an educational component and to
create a committee to vet and select a program administrator. The committee met four times
between November 4, 2020, and December 22, 2020, however there is no evidence that the
program management plan, as outlined the resolution, was executed in accordance with the
resolution.
Significantly, on October 30, 2020, a contract was signed by a City contractor staff with a recently
organized not-for-profit organization to prepare disbursements to organizations using CARES Act
funds based on notifications by the City contractor staff. There were duties related to records and
accounting but no other performance and reporting requirements in the agreement. There were
no references in the City contractor approved agreement with the not-for-profit to grant
compliance requirements in the DeKalb County intergovernmental agreement that provided the
CRF amount to the City. In addition, the City contractor did not perform tasks as provided in
Exhibit A-Services of the Professional Services Agreement dated June 15, 2017, relating to
maintaining financial records and preparing routine reports on the status of City accounts.
The committee organized by the City contractor, nor the City contractor staff assigned with
financial management tasks provided information that could be used to comply with reporting
requirements in the DeKalb County intergovernmental agreement. The reports. submitted in
December 2021 and later in May 2024 were prepared using information obtained through a
subpoena issued to the not-for-product for accounting and bank information. The questioned
costs relate to the absence of records relating to program operations and support for
expenditures using those records provided by the not-for-profit.
The City agrees with the recommendations, and now that the contractor contract was terminated
December 31, 2021, City employed staff are monitoring grant program requirements and
preparing reports as required as more fully discussed in the Auditee’s Response to Finding 2021-
004
Internal Controls and Compliance over Allowable Costs/Cost Principles and Period of
Performance Identification of Federal Program: Coronavirus Relief Fund – Assistance Listing No. 21.019
Criteria: 2 CFR Part 200 requires that the City and its Contractor, a non-federal entity 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). The provisions of the Coronavirus Relief Fund (CRF), as stipulated by the U.S. Treasury and subject to restrictions outlines in the guidance set forth in Section 601(d) of the Social Security Act, as added by Section 5001 of the “CARES” Act, restrict use of the funding for allowable costs and activities. Pursuant to Code of Federal Regulation (CFR) 200.403, except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under federal awards: (a) Be necessary and reasonable for the performance of the federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost.
(e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost-sharing or matching requirements of any other federally-financed program in either the current or a prior period. See also CFR 200.306(b). (g) Be adequately documented. See also CFR 200.300 – 200.309. (h) Cost must be incurred during the approved budget period. The federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to CFR 200.308(e)(3). Cause/Condition: During our testing of the Coronavirus Relief Fund program, we noted that the
City, through its contracted employee services, failed to establish and adhere to an effective internal control structure that would facilitate its use of Coronavirus Relief Funding, comply with regulations and terms of the federal award and take prompt action when instances of
noncompliance were identified. As a result, the City was not in compliance with certain provisions of the grant. Results of testing also indicated unallowable and questioned use of the grant funding. The results of testwork performed and correspondence with City management noted the following:
• No backup or supporting documentation for the evaluation, criteria, and selection of the
grantees to be disbursed CRF funding was available or maintained by City personnel.
Online applications were submitted, but there was inadequate documentation and an
absence of evidence of a functioning internal control structure for the disbursement of
funding used for the City’s Small Business Relief Program.
• Approximately $4.25 million use of the funding was disbursed to grantees as part of the
City’s Small Business Relief Program. As there was no backup or supporting
documentation for the evaluation, criteria, and selection of the grantees to be disbursed
CRF funding and because there were individuals responsible for selecting grantees that
were potentially involved in a fraudulent scheme, all amounts tested within our sample of
eighty-one (81) were determined to be questioned costs, which amounted to $3,070,900.
Based on our sample of eighty-one (81) grantees tested, $196,250 was confirmed by the
grantees as amounts requested and/or directed by former City representatives to be
remitted to outside entities for marketing services. Such services were potentially a part
of a fraudulent scheme under direction by former City Officials and later prosecuted.
Such questioned amounts would not tie into delivery or performance of allowable
services.
• During our testing of CRF expenditures, we sampled twenty-one (21) disbursements
made for public health costs incurred as a response to the pandemic, which are an
allowable use of funding. We noted one (1) payment made in the amount of $3,500 for
which no copy or check or disbursement was able to be provided. In addition, we noted
that the disbursement for $3,500 as well as an additional disbursement of $12,000 were
both paid to a City vendor that employed two former contracted City staff. Both amounts
totaling $15,500 were determined to be questioned costs. • During our testing of CRF expenditures, we sampled nine (9) payments made to
contractors, organizations and special services procured with CRF funding. We noted
one (1) payment made in the amount of $50,000 for which no copy or check or
disbursement was able to be provided. In addition, such contractors, organizations, and
special services procured with the funding were noted to have bypassed City
procurement protocol and eight (8) of the payments, totaling $163,500, were for services
outside of the initial period of performance of the grant. As a result, the total tested
disbursements of $213,500 were determined to be questioned costs. Effects or Potential Effects: Noncompliance with CFR related to allowable costs and period of
performance results in an increased risk that charges to the grant do not represent actual costs
incurred. Internal control deficiencies surrounding the grant result in an increased risk that
noncompliance may not be detected or corrected timely.
Questioned Costs: Known questioned costs amounted to $3,299,900. Likely questioned costs
amounted to $5,896,456.
Recommendation: We recommend that incoming City management strengthen its internal
control structure surrounding its designation, use and disbursement of grants as well as
implement and adhere to policies and procedures for the retention and safeguarding of original
source documents to properly substantiate charges made to grants. Auditee’s Response: DeKalb County was given $125 million directly from the federal
government. Of that amount, and through an intergovernmental agreement dated August 10,
2020, $32.6 million was distributed to the County’s municipalities on a per capita basis. The City
of Stonecrest received $6,227,098. The City was to administer and distribute the funds in
accordance with the federal program requirements to combat the public health emergency and
resulting economic impact related to the COVID-19 pandemic. The City was also charged with
maintaining through and accurate records regarding expenditure of the funds.
Following the execution of the agreement with DeKalb County, the City Council adopted a
resolution on September 28, 2020 calling for the Stonecrest CARES Act Funding plan. The City
Council assigned contractor staff to set up protocols to manage the program. The City Manager,
who was not on staff at the time, or designee was authorized to employ an administrator for the
Small Business Support Program, to develop an education component and to create a CARES
Act Relief Fund Committee to vet and select a program administrator. The Stonecrest COVID CARES Act Relief Fund was created
as the umbrella group that would have oversite over the programs. The Committee was later
renamed the Aaron Matthew Allen COVID Small Business Relief/Stonecrest Cares Committee to
honor a local resident. The Committee was organized by contractor staff and included two
members of City Council, several Contractor staff and consultants who were later paid to assist
with the program. The Committee met four times between November 4, 2020 and December 22,
2020, however, there is no evidence that the program management plan, as outlined in the
September 28, 2020 resolution was executed in accordance with the resolution. Contractor staff
reported to other Committee members on activities and events related to the use of CARES Act
funds, and the other committee members had no functional roles in CARES Act fund program.
The updates included the naming of consultants involved in the program, but did not disclose that
consultant contracts had been executed by contractor staff using the emergency procurement
section of the City’s Purchasing Policy. There appears to be no factual basis or authority for use
of emergency procurement procedures or execution of contracts by the contractor staff.
Significantly, on October 30, 2020, a contract was signed by a City contractor staff with a recently
organized not-for-profit organization to prepare disbursements to organizations using CARES Act
funds based on notifications by the City Contractor staff. There were duties related to records and
accounting but no other performance requirements. Other contracts were executed by contractor
City staff who had no authority to enter contracts on the City’s behalf. That process should have
included the City Purchasing agent, also a contractor staff, City Attorney and City Council reviews
and approvals.
The City was successful in obtaining records from the program contractors primarily related to
bank statements, program grant application documents, check copies, front and back, however
no backup or supporting documentation for the evaluation, criteria, and selection of the grantees
to be disbursed funds was available or maintained by the City. The contractor was in full control
of the operation of the CARES Act program.
The City contends that established internal control procedures were not followed by employees
assigned by the private government services contractor retained to provide management and
operations services in a manner sufficient to prevent, detect, and/or correct various issues related
to the City’s CARES Program. The City concedes that City employed staff did not timely submit
reports to DeKalb County pursuant to terms of the Intergovernmental Agreement.Like the response by Mayor and City Council with the
purchasing card findings, the City Attorney was engaged to investigate the CARES Act program
organization and operation. Pursuant to those findings, federal and local law enforcement
agencies were notified, and criminal charges were prosecuted and convictions secured. Based on
those prosecution, the City received restitutions that will be reimbursed to DeKalb County. In
addition, the City has made a claim as part of the January 31, 2023, filed Complaint for damages
and other relief to be indemnified by the contractor for any claims by DeKalb County, including
questioned unallowable costs, for reimbursement of Cares Act funds.
Internal Controls and Compliance over Reporting
Identification of Federal Program: Coronavirus Relief Fund – Assistance Listing No. 21.019
Criteria: The City’s funding was passed through by DeKalb County (the “prime recipient”) and the
County required certain reporting from the City via its Contractor. The City, through its contracted
employee services, did not have proper internal controls in place to verify that all information was
reported accurately and in compliance with the grant requirements.
Cause/Condition: During our consideration and testing of reporting requirements, it was noted
that the City’s funding was passed through from DeKalb County and thus the City was not
determined to be a prime recipient of its CRF funding and therefore reporting requirements under
Uniform Guidance did not apply. However, in December 2020 and through March 2021 the
County requested reporting and supporting documentation for each of its municipalities’ use of
allotted funds. We noted that the City submitted report(s) initially in December 2021, then
additional data was transmitted in May 2024 and thus report(s) were not timely submitted to the
County. Reports submitted provided neither adequate support nor accounting records for the
expenditures reported to the County.
Effects or Potential Effects: Delay in filing and not filing reports resulted in noncompliance with
reporting requirements as stipulated by the County. Inadequate and incomplete reported data
also resulted in noncompliance with reporting requirements.
Questioned Costs: See 2021-004.
Recommendation: We recommend that the City strength controls surrounding its grants report
tracking and submission process and procedures to ensure all required (or requested) reports are
properly reviewed and approved and submitted timely. The City should also review each grant for
reporting requirements and perform reconciliations to amounts reported within the City’s general
ledger. Auditee’s Response: Grant funding related to the Coronavirus Relief Fund (CRF) was controlled
by the City contractor engaged by the City to provide management and related services to the
City. The consultant organized a committee to have oversite over the CRF after the Mayor and
City Council adopted a resolution for the contractor staff to set up protocols to manage the
program. The contractor staff was tasked with developing an educational component and to
create a committee to vet and select a program administrator. The committee met four times
between November 4, 2020, and December 22, 2020, however there is no evidence that the
program management plan, as outlined the resolution, was executed in accordance with the
resolution.
Significantly, on October 30, 2020, a contract was signed by a City contractor staff with a recently
organized not-for-profit organization to prepare disbursements to organizations using CARES Act
funds based on notifications by the City contractor staff. There were duties related to records and
accounting but no other performance and reporting requirements in the agreement. There were
no references in the City contractor approved agreement with the not-for-profit to grant
compliance requirements in the DeKalb County intergovernmental agreement that provided the
CRF amount to the City. In addition, the City contractor did not perform tasks as provided in
Exhibit A-Services of the Professional Services Agreement dated June 15, 2017, relating to
maintaining financial records and preparing routine reports on the status of City accounts.
The committee organized by the City contractor, nor the City contractor staff assigned with
financial management tasks provided information that could be used to comply with reporting
requirements in the DeKalb County intergovernmental agreement. The reports. submitted in
December 2021 and later in May 2024 were prepared using information obtained through a
subpoena issued to the not-for-product for accounting and bank information. The questioned
costs relate to the absence of records relating to program operations and support for
expenditures using those records provided by the not-for-profit.
The City agrees with the recommendations, and now that the contractor contract was terminated
December 31, 2021, City employed staff are monitoring grant program requirements and
preparing reports as required as more fully discussed in the Auditee’s Response to Finding 2021-
004