Audit 375333

Finding Type. Material Noncompliance; Material Weakness in Internal Control over Compliance (Period of Performance). Federal Program(s) U.S. Environmental Protection Agency Congressionally Mandated Projects (ALN 66.202); Direct; All project numbers. Criteria. A non-Federal entity may charge to a Federal award only allowable costs incurred during the approved period of performance, except where authorized by the Federal awarding agency. Condition. During our testing, we identified costs that were incurred prior to the approved grant period. Of the$1,553,273 of costs charged to the program during the year ended June 30, 2025, which included a local match requirement of $464,118, $300,576 were incurred prior to the period of performance stated in the grant agreement. Cause. The condition resulted from inadequate review controls to verify that expenditures charged to the Federal program occurred within the allowable grant period. Program staff did not consistently compare transaction dates to the authorized period of performance before approving charges. Effect. As a result of this condition, unallowable costs totaling $300,576 were charged to the grant. Questioned Costs. $300,576 Recommendation. We recommend that management strengthen procedures to ensure all expenditures are reviewed for compliance with the award’s period of performance before costs are charged to the grant. This should include implementing system controls or secondary reviews to prevent unallowable charges. View of Responsible Officials. Funds were drawn outside of the approved grant period because construction began before the grant start date. A reimbursement request was submitted and approved erroneously by the Environmental Protection Agency (EPA) for work completed prior to the eligible period. To correct this, the City is working with the EPA and has submitted a corrective request for reimbursement that will apply the funds already received to eligible work performed within the grant period. No additional funds will be transferred, as the total eligible amount in the corrective request will equal the amount previously received, ensuring all reimbursements align with allowable costs. To prevent recurrence, the City will avoid beginning construction before the official grant period begins and will ensure future grant budget periods include adequate contingencies for early project start dates. Additionally, all future reimbursement requests will undergo a thorough internal review to verify that costs were incurred within the approved grant period, rather than relying solely on federal approval.