Audit 361704

The Cumberland County Fiscal Court failed to implement adequate internal controls over the Disaster Grants – Public Assistance (Presidentially Declared Disaster) (FEMA) program to ensure all compliance requirements are being met and that record keeping was being done correctly. The fiscal court relied on a third-party administrator for the recording of all FEMA project activity. The fiscal court also relied on the third-party to satisfy compliance requirements and failed to establish any review process or independent internal controls that verified that activities performed, and amounts charged to the program were allowable under all applicable compliance requirements. By relying on a third-party administrator’s controls, without enacting any internal controls, the county increased the risk of misappropriation of funds, and noncompliance with federal grant guidelines. This could have potentially led to questioned costs that would have to be repaid, and less federal funding in the future. This also resulted in the county’s Schedule of Federal Awards and Expenditures (SEFA) being misstated and duplication of benefits noted. The county realized they had applied for assistance from FEMA and also from Kentucky Transportation Cabinet for the same projects. This was brought to the state’s attention by the county judge/executive when noted and corrected with repayment by the county on May 14, 2024 for $100,000 to the Kentucky Transportation Cabinet. Strong internal controls dictate that the fiscal court should review all federal expenditure documentation and reports to ensure compliance requirements are being met, and activities are being completed accurately. 2 CFR 200.303 states “The non-Federal entity must (a): Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with the guidance in ‘Standards for Internal Control in the Federal Government’ issued by the Comptroller General of the United States [Green Book] or the ‘Internal Control Integrated Framework’, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” We recommend the Cumberland County Fiscal Court strengthen internal controls over the federal expenditure process by ensuring all activity related to federal expenditures is reviewed for accuracy and compliance.

The Cumberland County Fiscal Court failed to implement adequate internal controls over the Disaster Grants – Public Assistance (Presidentially Declared Disaster) (FEMA) program to ensure all compliance requirements are being met and that record keeping was being done correctly. The fiscal court relied on a third-party administrator for the recording of all FEMA project activity. The fiscal court also relied on the third-party to satisfy compliance requirements and failed to establish any review process or independent internal controls that verified that activities performed, and amounts charged to the program were allowable under all applicable compliance requirements. By relying on a third-party administrator’s controls, without enacting any internal controls, the county increased the risk of misappropriation of funds, and noncompliance with federal grant guidelines. This could have potentially led to questioned costs that would have to be repaid, and less federal funding in the future. This also resulted in the county’s Schedule of Federal Awards and Expenditures (SEFA) being misstated and duplication of benefits noted. The county realized they had applied for assistance from FEMA and also from Kentucky Transportation Cabinet for the same projects. This was brought to the state’s attention by the county judge/executive when noted and corrected with repayment by the county on May 14, 2024 for $100,000 to the Kentucky Transportation Cabinet. Strong internal controls dictate that the fiscal court should review all federal expenditure documentation and reports to ensure compliance requirements are being met, and activities are being completed accurately. 2 CFR 200.303 states “The non-Federal entity must (a): Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with the guidance in ‘Standards for Internal Control in the Federal Government’ issued by the Comptroller General of the United States [Green Book] or the ‘Internal Control Integrated Framework’, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” We recommend the Cumberland County Fiscal Court strengthen internal controls over the federal expenditure process by ensuring all activity related to federal expenditures is reviewed for accuracy and compliance.