Audit 366827

Department of Homeland Security, State of South Dakota Office of Emergency Management, Federal Financial Assistance Listing #97.039, DR‐4469‐0015 & DR‐4469‐0016, 2024 Hazard Mitigation Grant Program Preparation of Schedule of Expenditures of Federal Awards Material Weakness in Internal Control over Compliance Criteria: Proper controls over financial reporting include a system designed to prepare the schedule of expenditures of federal awards (the schedule) and the accompanying notes to the schedule. Condition: The Association does not have an internal control system designed to provide for a complete and accurate schedule of federal expenditures of federal awards being audited. As auditors, we were requested to assist with the preparation of the schedule and accompanying notes to the schedule. Cause: Auditor assistance with preparation of the schedule is not unusual as the schedule has unique and specialized requirements and preparation is only required when the Association meets a specified threshold of federal expenditures. Effect: There is a reasonable possibility that the Association would not be able to draft a complete and accurate schedule. Questioned Costs: None reported. Context/Sampling: Sampling was not used. Repeat Finding form Prior Year: No Recommendation: While we recognize that this condition is not unusual for an organization with limited staffing, it is important that the Association is aware of this condition for financial reporting requirements relating to the Association’s schedule of expenditures of federal awards and the internal controls that impact financial reporting. Views of Responsible Officials: Management agrees with the finding.

Department of Homeland Security, State of South Dakota Office of Emergency Management, Federal Financial Assistance Listing #97.039, DR‐4469‐0015 & DR‐4469‐0016, 2024 Hazard Mitigation Grant Program Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Period of Performance, and Cash Management Material Weakness in Internal Control over Compliance Criteria: 2 CFR 200.303(a) states that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: Material expenditures were claimed for reimbursement with no documented formal review and approval. Cause: The Association did not have formal documented review and approval over bar‐code material charge‐outs that were claimed for reimbursement and correction entries for unused materials returned to inventory. Effect: Without a formal documentation of review of expenses, demonstrating the expenditures comply with federal regulations is difficult. Questioned Costs: No questioned costs over $25,000. Context/Sampling: Nonstatistical sampling was used for activities allowed or unallowed, allowable costs/cost principles and period of performance. Sample size was 60 transactions which accounted for $1,965,908 out of $2,435,532 of federal program expenditures of which $1,114,700 was submitted for reimbursement. For cash management, sampling was not used due to a single submission for reimbursement. Repeat Finding form Prior Year: No Recommendation: We recommend the Association review the process for documenting the review and approval over material charge‐outs and correction entries for unused materials returned to inventory prior to the amounts being submitted for reimbursement. Views of Responsible Officials: Management agrees with the finding.

Department of Homeland Security, State of South Dakota Office of Emergency Management, Federal Financial Assistance Listing #97.039, DR‐4469‐0015 & DR‐4469‐0016, 2024 Hazard Mitigation Grant Program Reporting Material Weakness in Internal Control over Compliance and Noncompliance Criteria: 2 CFR 200.303(a) states that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: In two of three quarterly performance reports tested, we noted the Association improperly overstated expenditures incurred to date. Cause: The Association’s independent review process over the quarterly performance reports did not identify the overstatement. Effect: Lack of compliance with designed internal controls over reporting could result in the Association reporting incorrect or incomplete information. Questioned Costs: None reported. Context/Sampling: A nonstatistical sample of 3 reports out of 8 quarterly performance reports. Repeat Finding form Prior Year: No Recommendation: We recommend the Association review internal control procedures over reporting to ensure reported amounts agree to supporting documentation and also that supporting documentation is retained. Views of Responsible Officials: Management agrees with the finding.