sistance Listings number and name: 21.027 COVID-19—Coronavirus State and Local Fiscal Recovery Funds Award numbers and years: SLFRP1179, May 31, 2021 through December 31, 2026; 221100CB02, January 1, 2022 through June 30, 2024; 221100CB01, January 5, 2023 through December 31, 2026 Federal agency: U.S. Department of the Treasury Compliance requirement: Cost principles Questioned costs: None Compliance requirement: Reporting Questioned costs: Not applicable Condition—The County’s Finance Department (Department) reported inaccurate cumulative and quarterly program expenditures as of June 30, 2024, to the federal agency as compared to the County’s records. Specifically, our test of the annual report found a cumulative understatement of $1.2 million, or 3.7% of the $32 million the County reported it spent on the program since May 2021 as shown in Table 1 below. In addition, our tests of all 4 quarterly reports found a net total overstatement of program expenditures of $71,109, or 0.4% of the $20 million in expenditures the County reported spending during fiscal year 2024, including quarterly reported expenditures ranging from a $10.1 million overstatement to a $10 million understatement as compared to the County’s records as shown in Table 2 below. Further, our test of 1 of 20 expenditure transactions found that the Department inappropriately recorded $594,380 of program expenditures in the wrong fiscal year. Specifically, the Department posted an adjusting journal entry on October 4, 2024, for expenditures that occurred between July 1, 2024 and August 25, 2024, and backdated the transactions to June 30, 2024. We are not questioning the cost as the expenditure was for an allowable activity and within the allowed overall period of performance; however, it was inappropriately recorded. Effect—The Department’s reporting inaccurate program information results in the federal agency being unable to rely on the reports to monitor the Department’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success. Additionally, there is a risk that the County may be required to return excess monies reported as spent to the federal agency if the expenditures have not been fully reconciled at the end of the program, which occurs during fiscal year 2027. Further, the Department’s recording expenditures in the wrong fiscal year resulted in a $594,380 error on its Schedule of Expenditures of Federal Awards (SEFA) and an increased risk of additional SEFA reporting errors. The County subsequently corrected the error from the original draft. Finally, the County is at risk that this finding applies to other federal programs it administers. Cause—The Department did not have year-end closeout procedures to ensure the County’s federal expenditures were recorded in the proper fiscal year and did not train individuals responsible for preparing the federal program reports and related adjusting journal entries on U.S. generally accepted accounting principles (GAAP) requirements to record expenditures when liabilities are incurred. Also, the employee responsible for preparing the reports did not reconcile expenditure amounts to the County’s accounting records or investigate and resolve any differences prior to submitting the report to the federal agency. In addition, the Department did not require an independent review and approval of federal program reports before submitting the reports to the federal agency to ensure reports are accurate, agree to County records, and contain only allowable expenditures for the applicable fiscal year. Also, the employee responsible for reviewing and approving adjusting journal entries did not detect the $594,380 error. Further, the Department’s management reported that it lacked policies and procedures for reporting program information to the federal agency as it was not aware that internal controls should include a review and approval and a reconciliation process. Criteria—Federal law, regulation, and guidance requires the Department to accurately report its current and cumulative obligations and expenditures on a quarterly and annual basis by type, such as contracts, grants, loans, direct payments, and transfers to other governmental entities, beginning December 2020.1 Further, the Governmental Accounting Standards Board sets the accounting and financial reporting standards that require the County to prepare its financial statements in accordance with GAAP, which requires expenditures to be reported when the related liability is incurred. Also, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms and conditions (2 CFR §200.303). Recommendations to the County 1. Report accurate and complete program information to the federal agency. 2. Record program expenditures in the proper fiscal year. 3. Perform and document a reconciliation for reports that the Department has already submitted to the federal agency to identify those that contain errors, and revise and resubmit those reports if practicable or notify the federal agency of these reporting errors. Develop, document, and implement policies and procedures, and designate and train responsible employees, to monitor compliance with the program’s reporting requirements including step-by-step procedures to: 4. Perform year-end closeout procedures to ensure the County’s federal expenditures are recorded in the proper fiscal year and in accordance with GAAP. Specifically, the Department should ensure all federal expenditures are properly documented and recognized and then lock the fiscal period in the accounting system after final adjusting entries are posted to prevent recording expenditures in the wrong fiscal year. 5. Reconcile expenditure amounts to the County’s accounting records and investigate and resolve any differences prior to submitting the report to the federal agency. 6. Perform and document an independent review and approval of federal program reports before submitting the reports to the federal agency and related adjusting journal entries to ensure reports are accurate, agree to County records, and contain only allowable expenditures for the applicable fiscal year. The County’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.