Audit 400405

Type of finding: Federal Award Situation: Significant deficiency; compliance with federal regulations. Federal Program: All Programs Compliance Requirements: Reporting Prior-Year(s) Audit Finding(s): 2024-006, 2023-005, 2022-007, 2021-006 Questioned Costs: None Condition: The Single Audit reporting package, as defined and required in 2 CRF 200.512 for fiscal year ended June 30, 2025, was not submitted before the deadline established by the federal government. Context: The Municipality is required by law to design and implement procedures that support the preparation of its financial statements. The Municipality could not provide, on a timely basis, the information needed to complete the audit of their financial statements before the due date established by the federal government. Criteria: As per 2 CRF 200.12, the audit, data collection form, and reporting package must be submitted within the earlier of 30 calendar days after receipt of the auditor’s report, or nine months after the end of the audit period. 2 CRF 200.508 states that it is the auditee's responsibility to (1) prepare financial statements, including the schedule of expenditures of federal awards in accordance with 2 CFR 200.510, (2) promptly follow up and take corrective action on audit findings, including preparing a summary schedule of prior audit findings and a corrective plan, and (3) provide the auditor access to personnel, accounts, books, records, supporting documentation, and any other information needed for the auditor to perform the audit required by this part, among other things. Cause: The Municipality’s accounting system does not provide the necessary information for the compilation of their financial statements. In order to address this situation, the Municipality has engaged a consultant to assist with the preparation, analysis, and necessary adjustments to prepare the Municipality’s financial statements. However, this procedure involves the participation of various municipal employees at different levels in the Municipality’s organizational structure which adds time to an already time-consuming task. The financial statements are finally available for audit after being approved by the Municipality. The Municipality issued their June 30, 2024 on July 2, 2025 and submitted their data collection form on July 21, 2025. This situation prevented the timely submission of the current fiscal year Single Audit reporting package. Effect: Because of the situation described above, the financial records needed for the preparation and subsequent audit of the financial statements were not obtained timely. The Municipality did not comply with the report submission requirement since the audit was not submitted within nine months after their fiscal period end date. Auditor’s recommendation: Management should continue to fulfill their auditee responsibilities as stated in 2 CRF 200.508, which among other things, require management to prepare appropriate financial statements and provide the auditor with access to personnel, accounts, books, records, supporting documentation, and other information as needed for the auditor to perform the audit to ensure that subsequent financial reporting packages are submitted timely. Views of Responsible officials and Corrective Actions: The Municipality shall establish procedures, training programs, and internal controls to ensure compliance with the preparation and timely submission of the Single Audit Report to the Federal Audit Clearinghouse, as required by the OMB Super Circular Uniform Guidance and in accordance with the nine-month deadline established therein. In addition, the Department of Finance will monitor the progress of the work, including the preparation of financial statements, as well as the external audit and the single audit, so that for the fiscal year ending June 30, 2026, the reports are submitted by the established deadline of no later than March 31, 2027. Audit Status: Unresolved

Type of finding: Federal Award Situation: Material weakness; compliance with federal regulations. Program: ALN: 97.036 Program: Disaster Grants – Public Assistance Disaster Grants – Public Assistance Compliance Requirements: Reporting Prior-Year(s) Audit Finding(s): 2024-005, 2023-004, 2022-006 Questioned Costs: Not determined. Condition: The Municipality’s staff was unable to provide officially prepared and certified reports supporting compliance with the filing and submission requirements for reports and financial information, as established by federal award and regulatory agreements. Similarly, reconciliations were not provided between the information used to prepare the required and submitted reports and the formal data recorded in the Municipality’s official accounting system. Due to these conditions, compliance with the reporting requirements established by the federal grantor and effectiveness of related internal controls could not be verified. Context: The Municipality is required to submit quarterly progress reports to the state for each individual approved project worksheet. These progress reports consist of 10 questions that among other things report on the total amount of expenses incurred up to the reporting period, the estimated final cost of the project, percentage of completion, scope of work completion date, period of performance and the name and user category of the person that completed the report. As of June 30, 2025, the Municipality had 154 projects that were required to submit quarterly progress reports. Although the Municipality submitted to us the summary of these submitted reports, in excel, as they were extracted from the reporting platform, the Municipality did not submit for our review the individual reports, nor the accounting records that reconcile to these reports. Criteria: The state is required to make an accounting of eligible costs. Similarly, the subrecipient must make an accounting to the state. In submitting the accounting, the entity is required to certify that reported costs were incurred in performance of eligible work, that the approved work was completed, that the project in in compliance with the provisions of the State Agreement, all grants conditions were met, and the provisions for that project were made in accordance with the applicable payment provisions. Also, as established in the 2 CFR Section 200.302 (a) of the Uniform Guidance, the non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, 2 CFR Section 200.403, states that otherwise authorized by statue, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity and be adequately documented. Cause: There is a lack of adequate knowledge and training among personnel assigned to the management and preparation of reports required by this federal award. Additionally, the Municipality did not demonstrate, nor did it provide evidence, that it has designed and implemented an adequate system of procedures and internal controls to monitor the activity, filing, and custody of reports, as required by the federal award and the pass-through entity. These deficiencies limit the Municipality’s ability to document and support compliance with the reporting requirements. Effect: These conditions expose the program to noncompliance with the reporting requirements established in the grant agreement. Furthermore, the Municipality may be at risk of the grantor questioning the allowability and use of federal funds. Auditor’s recommendation: The personnel or Department responsible should identify, compile, and retain all reports required under the grant agreement, including reconciliation with the Municipality’s official accounting records and subsidiary ledgers. Additionally, it is essential for the Municipality to develop, document, and implement a comprehensive training program, along with written guidelines and procedures, for all personnel involved, directly or indirectly, in the management of these federal funds. Views of Responsible officials and Corrective Actions: In response to the Auditor’s recommendations and as corrective action, the staff responsible or department will locate and document all required reports that were filed in accordance with the grant agreement requirements, including reconciliations with the Municipality’s official accounting subsidiary ledgers. Furthermore, the Municipality will design, document, establish, and provide the necessary training, along with written guidelines and procedures, to all personnel who work directly or indirectly with the management of these federal funds. In addition, the Municipality will implement periodic reviews and monitoring mechanisms to ensure ongoing compliance with reporting requirements and the accuracy of financial information related to federal funds. Audit Status: Unresolved

Type of finding: Federal Award Situation: Significant deficiency; compliance with federal regulations. Program: Disaster Grants – Public Assistance Disaster Grants – Public Assistance Compliance Requirements: Period of Performance Prior-Year(s) Audit Finding(s): None Questioned Costs: Not determined. Condition Form 90-91 for each approved project was not submitted for our evaluation; therefore we could not verify the period of performance for selected current year expenses. Context: As stated in finding 2025-004, the Municipality is required to submit quarterly progress reports to the state for each individual approved project worksheet. For the quarter ended on June 30, 2025, the Municipality had 154 projects that were required to submit quarterly progress reports, therefore, the Municipality has 154 forms 90-91 which were not submitted for our evaluation. Criteria: Federal regulations in 44 CFR 206.202 state that as part of the application procedures, the applicant, assisted by the State as appropriate, will prepare a project worksheet (FEMA Form 90-91) for each project. The project worksheet must identify the eligible scope of work and must include a quantitative estimate for the eligible work. The 2025 Compliance Supplement for the ALN 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) state that period of performance of a specific subaward can be confirmed by verifying the period of performance at the top of the Subgrant Applicant Application – FEMA Form 90-91. Cause: There is a lack of adequate knowledge and training among personnel assigned to the management of this federal award. Effect: These conditions expose the program to noncompliance with the period of performance requirements established in the grant agreement. Furthermore, the Municipality may be at risk of the grantor questioning the allowability and use of federal funds. Auditor’s recommendation: The personnel or Department responsible should identify, compile, and retain all documentation required under the grant agreement. Additionally, it is essential for the Municipality to develop, document, and implement a comprehensive training program, along with written guidelines and procedures, for all personnel involved, directly or indirectly, in the management of these federal funds. Views of Responsible officials and Corrective Actions: In response to the Auditor’s recommendations, the Municipality will establish formal procedures to ensure that all required forms, including Form 90-91, are properly completed, maintained, and submitted in accordance with applicable grant requirements. Additionally, all supporting documentation related to the period of performance for each project will be identified, organized, and maintained, including approved project worksheets, grant award documentation, and related financial records. Furthermore, monitoring mechanisms and periodic reviews will be implemented to ensure ongoing compliance with applicable requirements and the timely availability of required documentation for audit and monitoring purposes. Audit Status: Unresolved