Audit 377830

Finding 2025-001 Program Name – Capitalization Grants for State Revolving Funds (Assistance Listing #66.468) Federal Award Agency – Environmental Protection Agency (EPA) Criteria Title 31 U.S. Code of Federal Regulations (CFR) Part 205.11(a) provides that a state must minimize the time elapsing between the transfer of funds from the United States Treasury and the state's payout of funds for federal assistance program purposes, whether the transfer occurs before or after the payout of funds. Title 2 CFR Part 200.303 requires the non-federal entity to establish and maintain effective internal control over federal awards that provides reasonable assurance that it is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition The Connecticut Department of Public Health (DPH) has not drawn down approximately $13,600,000 of federal assistance for set-aside expenditures incurred during the last two fiscal years. Context DPH incurred expenditures related to the Drinking Water Fund program for set-aside activity during the year. Cause There were delays in establishing award-specific State Identification Numbers (SIDs) to track new EPA grants awarded under the Infrastructure Investment and Jobs Act (IIJA). Upon subsequent review, reclassification of expenditures to proper SIDs were required. A pause was taken to ensure that drawdown requests and payments reflect properly reconciled and allowable charges and to avoid the risk of requesting reimbursement (improper payment) for incorrectly coded expenditures. Effect Federal drawdowns have not occurred in accordance with DPH’s immediate cash requirements to administer the program. Recommendation DPH should continue its efforts to timely review transactions initially recorded to base grant SIDs, reclassify those expenditures and initiate the drawdown request. DPH should ensure that federal drawdowns align with the immediate cash needs to administer the program. Views of Responsible Officials The Department agrees with the finding. Upon notification of the significant Bipartisan Infrastructure Law (BIL)/Infrastructure Investment and Jobs Act (IIJA) funds to be awarded, the Department proactively established positions necessary to support the implementation of the Drinking Water State Revolving Fund (DWSRF). These newly proposed positions were created under the existing Base Set-Aside chart of accounts to ensure staffing was in place at the onset of the grant period and to allow timely utilization of the anticipated funding. A delay in establishing these positions would have hindered the State’s ability to meet program obligations under the funding agreements. Once the positions were filled and staff began charging time and effort, expenditures were temporarily recorded under the existing chart of accounts with the intent to reallocate them to the appropriate BIL/IIJA accounts once the Notices of Award and corresponding accounts were formally established. Because many of these reallocations affect set-aside and program accounting, the Department placed a temporary hold on drawdowns of set-aside funds. This measure was taken to ensure that drawdown requests reflect properly reconciled and allowable charges and to prevent the risk of requesting reimbursement for incorrectly coded expenditures (improper payment). The Department has since initiated reconciliation of the accounts to ensure that all expenditures are aligned with their proper set-aside awards as well as beginning to drawdown from respective set-aside accounts. Completion of this reconciliation, along with the processing of all d eligible drawdowns, is anticipated on or before June 30, 2026.