Criteria: According to 2 CFR Part 200.317, the City must adhere to its established policies and procedures for both federal and non-federal funds. The City’s procurement policies require that purchase orders must properly authorized and documented. Additionally, the City is required to use competitive procurement methods, including an informal bidding process for purchases under specified thresholds, to ensure fairness and transparency. Condition: The audit revealed that several purchase orders related to ARPA-funded expenditures were processed without the necessary approvals, and the informal bidding process was not followed for purchases. Cause of Condition: The City’s procurement policies and procedures were not adequately followed, possibly due to insufficient enforcement of internal controls related to procurement processes for ARPA funds. Effect: The lack of proper authorization and competitive bidding could lead to unauthorized transactions, higher costs, and potential conflicts of interest. This undermines the control over ARPA-funded expenditures and increases the risk of non-compliance with federal regulations. Recommendation: Enforce procurement procedures to ensure all purchase orders for ARPA funded projects are signed and approved by authorized personnel. Additionally, implement and adhere to an informal bidding process for applicable procurements to ensure compliance with competitive procurement requirements. Questioned Cost: $ 76,914.75 Views of Responsible Official: The City acknowledges and agrees with the finding regarding procurement deficiencies during the administration of ARPA funds. Since the time period covered by the audit, the City has taken significant steps to strengthen internal controls over procurement. A full-time Purchasing Manager has been appointed to oversee and enforce compliance with both City and federal procurement standards. In addition, the City is currently updating its procurement policy to ensure clearer thresholds,
detailed procedures for informal bidding, and approval workflows aligned with 2 CFR Part 200.
All procurement staff are being trained on the revised procedures and control mechanisms. These
updates are being documented, and we have introduced internal review checkpoints prior to
purchase order execution.
We are also developing a procurement checklist and digital authorization process to ensure
documentation is complete before funds are obligated. This will prevent similar deficiencies
from recurring.
Criteria: Based on 2 CFR Part 200 Subpart F which governs Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, stipulates that recipients must maintain accurate financial records and ensure proper accounting of federal funds. Entities should implement control activities to ensure the complete, accurate and timely recording of financial transactions in their accounting records. Condition: After examining the records of the City, it was identified that that a receipt of American Rescue Plan Act (ARPA) funds amounting $18,189,922 was not recorded in the City’s general ledger at the time of receipt. Although the Treasurer’s office tracked the receipt in its subsystem and provided supporting documentation, the amount was not properly interfaced into the general ledger due to accounting system upgrade issues. As a result, the general ledger initially did not reflect this significant transaction until it was subsequently corrected. Cause of Condition: The interruption in proper recording resulted from technical upgrade challenges within the City’s accounting system, specifically a failure of the data interface linking the Treasurer’s subsystem to the general ledger. Additionally, the absence of effective reconciliation procedures delayed detection and correction of the unrecorded transaction. Effect: This can result in improper financial reporting, difficulties in tracking and managing ARPA funds, and potential non-compliance with federal regulations. Recommendation: Implement controls to ensure all ARPA fund receipts are accurately and
promptly recorded in the general ledger upon receipt, regardless of subsystem or accounting
software changes. Establish formal reconciliation procedures between the Treasurer’s subsystem
(or any other sub-ledgers) and the general ledger on a monthly or quarterly basis to promptly
identify and resolve any discrepancies.
Questioned Cost: $ 0
Views of Responsible Official: The City partially agrees with this finding. The ARPA funds in
question were received and recorded by the Treasurer’s Office, and documentation of the receipt
was submitted to the auditors. However, due to technical limitations stemming from a system
upgrade during the fiscal year, the transaction was not interfaced properly with the general ledger
side of the City’s accounting system.
To address this issue, the City is:
Working with the current software provider to resolve the integration problem;
Performing a full reconciliation of Treasurer records and general ledger entries for all
ARPA funds;
Exploring the implementation of a more robust and user-friendly financial system to
ensure proper recording and reporting in the future.
Additionally, we are developing standard operating procedures to ensure manual entries are
logged and reconciled during system outages or migration periods.
Criteria: The Compliance Supplement for Federal Awards and 2 CFR Part 200 Subpart F require that recipients accurately report federal expenditures in the Schedule of Expenditures of Federal Awards (SEFA). The SEFA must present federal award information in accordance with the prescribed format and include all relevant details for accurate reporting and compliance verification. Additionally, the Uniform Guidance, along with the ARPA grant award terms, requires that all federal funds and related expenditures be accurately recorded in the general ledger. Condition: The City expended $1,087,839 in premium pay to employees. However, this
expenditure was not initially recorded in the ARPA designated general ledger fund; instead it was
charged to other funding sources. As a result, the ARPA expenditures reported on the Schedule of
Expenditures of Federal Awards (SEFA) could not be reconciled to the City's general ledger
records at the time of testing. Additionally, a $5,300,000 cash transfer between bank accounts
associated with ARPA was not recorded in the City’s general ledger, further impairing the
completeness and accuracy of ARPA fund activity reported in the City’s financial system. These
discrepancies were subsequently identified and corrected by the City.
Cause of Condition: Discrepancies in the reports and incorrect allocation of expenditures to the
appropriate fund appear to result from inadequate accounting procedures or regular process to
reconcile the general ledger to the SEFA. This lack of periodic reconciliation and review allowed
misclassifications and omissions of ARPA transactions to go unnoticed, resulting in incomplete
and inaccurate accounting records.
Effect: The SEFA does not accurately reflect the federal expenditures of the City and this may
lead to non-compliance with federal regulations and could impact the City’s eligibility for further
federal funding. It also impairs the ability to ensure that ARPA funds are used appropriately and
reported accurately.
Recommendation: It is recommended that the City implement or strengthen procedures for
preparing and reviewing the SEFA to ensure accuracy and completeness. Furthermore, verify that
all federal expenditures are reported in the appropriate funds and implement regular reconciliations
between the SEFA and general ledger to promptly identify and address discrepancies..
Additionally, training should be provided to staff on proper federal fund accounting and reporting
practices.
Questioned Cost: $ 0
Views of Responsible Official: The City partially disagrees with the finding. The classification
approach used by the City was based on guidance provided by the U.S. Department of the
Treasury under SLFRF. Specifically, the City elected to treat up to $10 million in ARPA funds as
revenue replacement and allocated these across two fiscal years to track usage of restricted vs.
unrestricted portions.
However, we acknowledge that SEFA preparation should reflect expenditures as reported under
Uniform Guidance regardless of internal fund classifications. In response, we are:
Updating our SEFA preparation procedures to ensure full alignment with 2 CFR §200
Subpart F; Implementing a review and sign-off process by both Finance and Grants Management
prior to submission;
Providing training to our accounting team on federal expenditure classification and SEFA
reporting standards.
We will also consult with our external auditors during the next reporting cycle to validate fund
treatment and ensure that reporting is accurate and consistent with federal expectations.
Criteria: According to 2 CFR Part 200.317, the City must adhere to its established policies and procedures for both federal and non-federal funds. The City’s procurement policies require that purchase orders must properly authorized and documented. Additionally, the City is required to use competitive procurement methods, including an informal bidding process for purchases under specified thresholds, to ensure fairness and transparency. Condition: The audit revealed that several purchase orders related to ARPA-funded expenditures were processed without the necessary approvals, and the informal bidding process was not followed for purchases. Cause of Condition: The City’s procurement policies and procedures were not adequately followed, possibly due to insufficient enforcement of internal controls related to procurement processes for ARPA funds. Effect: The lack of proper authorization and competitive bidding could lead to unauthorized transactions, higher costs, and potential conflicts of interest. This undermines the control over ARPA-funded expenditures and increases the risk of non-compliance with federal regulations. Recommendation: Enforce procurement procedures to ensure all purchase orders for ARPA funded projects are signed and approved by authorized personnel. Additionally, implement and adhere to an informal bidding process for applicable procurements to ensure compliance with competitive procurement requirements. Questioned Cost: $ 76,914.75 Views of Responsible Official: The City acknowledges and agrees with the finding regarding procurement deficiencies during the administration of ARPA funds. Since the time period covered by the audit, the City has taken significant steps to strengthen internal controls over procurement. A full-time Purchasing Manager has been appointed to oversee and enforce compliance with both City and federal procurement standards. In addition, the City is currently updating its procurement policy to ensure clearer thresholds,
detailed procedures for informal bidding, and approval workflows aligned with 2 CFR Part 200.
All procurement staff are being trained on the revised procedures and control mechanisms. These
updates are being documented, and we have introduced internal review checkpoints prior to
purchase order execution.
We are also developing a procurement checklist and digital authorization process to ensure
documentation is complete before funds are obligated. This will prevent similar deficiencies
from recurring.
Criteria: Based on 2 CFR Part 200 Subpart F which governs Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, stipulates that recipients must maintain accurate financial records and ensure proper accounting of federal funds. Entities should implement control activities to ensure the complete, accurate and timely recording of financial transactions in their accounting records. Condition: After examining the records of the City, it was identified that that a receipt of American Rescue Plan Act (ARPA) funds amounting $18,189,922 was not recorded in the City’s general ledger at the time of receipt. Although the Treasurer’s office tracked the receipt in its subsystem and provided supporting documentation, the amount was not properly interfaced into the general ledger due to accounting system upgrade issues. As a result, the general ledger initially did not reflect this significant transaction until it was subsequently corrected. Cause of Condition: The interruption in proper recording resulted from technical upgrade challenges within the City’s accounting system, specifically a failure of the data interface linking the Treasurer’s subsystem to the general ledger. Additionally, the absence of effective reconciliation procedures delayed detection and correction of the unrecorded transaction. Effect: This can result in improper financial reporting, difficulties in tracking and managing ARPA funds, and potential non-compliance with federal regulations. Recommendation: Implement controls to ensure all ARPA fund receipts are accurately and
promptly recorded in the general ledger upon receipt, regardless of subsystem or accounting
software changes. Establish formal reconciliation procedures between the Treasurer’s subsystem
(or any other sub-ledgers) and the general ledger on a monthly or quarterly basis to promptly
identify and resolve any discrepancies.
Questioned Cost: $ 0
Views of Responsible Official: The City partially agrees with this finding. The ARPA funds in
question were received and recorded by the Treasurer’s Office, and documentation of the receipt
was submitted to the auditors. However, due to technical limitations stemming from a system
upgrade during the fiscal year, the transaction was not interfaced properly with the general ledger
side of the City’s accounting system.
To address this issue, the City is:
Working with the current software provider to resolve the integration problem;
Performing a full reconciliation of Treasurer records and general ledger entries for all
ARPA funds;
Exploring the implementation of a more robust and user-friendly financial system to
ensure proper recording and reporting in the future.
Additionally, we are developing standard operating procedures to ensure manual entries are
logged and reconciled during system outages or migration periods.
Criteria: The Compliance Supplement for Federal Awards and 2 CFR Part 200 Subpart F require that recipients accurately report federal expenditures in the Schedule of Expenditures of Federal Awards (SEFA). The SEFA must present federal award information in accordance with the prescribed format and include all relevant details for accurate reporting and compliance verification. Additionally, the Uniform Guidance, along with the ARPA grant award terms, requires that all federal funds and related expenditures be accurately recorded in the general ledger. Condition: The City expended $1,087,839 in premium pay to employees. However, this
expenditure was not initially recorded in the ARPA designated general ledger fund; instead it was
charged to other funding sources. As a result, the ARPA expenditures reported on the Schedule of
Expenditures of Federal Awards (SEFA) could not be reconciled to the City's general ledger
records at the time of testing. Additionally, a $5,300,000 cash transfer between bank accounts
associated with ARPA was not recorded in the City’s general ledger, further impairing the
completeness and accuracy of ARPA fund activity reported in the City’s financial system. These
discrepancies were subsequently identified and corrected by the City.
Cause of Condition: Discrepancies in the reports and incorrect allocation of expenditures to the
appropriate fund appear to result from inadequate accounting procedures or regular process to
reconcile the general ledger to the SEFA. This lack of periodic reconciliation and review allowed
misclassifications and omissions of ARPA transactions to go unnoticed, resulting in incomplete
and inaccurate accounting records.
Effect: The SEFA does not accurately reflect the federal expenditures of the City and this may
lead to non-compliance with federal regulations and could impact the City’s eligibility for further
federal funding. It also impairs the ability to ensure that ARPA funds are used appropriately and
reported accurately.
Recommendation: It is recommended that the City implement or strengthen procedures for
preparing and reviewing the SEFA to ensure accuracy and completeness. Furthermore, verify that
all federal expenditures are reported in the appropriate funds and implement regular reconciliations
between the SEFA and general ledger to promptly identify and address discrepancies..
Additionally, training should be provided to staff on proper federal fund accounting and reporting
practices.
Questioned Cost: $ 0
Views of Responsible Official: The City partially disagrees with the finding. The classification
approach used by the City was based on guidance provided by the U.S. Department of the
Treasury under SLFRF. Specifically, the City elected to treat up to $10 million in ARPA funds as
revenue replacement and allocated these across two fiscal years to track usage of restricted vs.
unrestricted portions.
However, we acknowledge that SEFA preparation should reflect expenditures as reported under
Uniform Guidance regardless of internal fund classifications. In response, we are:
Updating our SEFA preparation procedures to ensure full alignment with 2 CFR §200
Subpart F; Implementing a review and sign-off process by both Finance and Grants Management
prior to submission;
Providing training to our accounting team on federal expenditure classification and SEFA
reporting standards.
We will also consult with our external auditors during the next reporting cycle to validate fund
treatment and ensure that reporting is accurate and consistent with federal expectations.