Audit 404165

2025-002 – FEMA Public Assistance – Allowable Costs/Cost Principles – Questioned Costs U.S. Department of Homeland Security Federal Emergency Management Agency Passed through State of Iowa Department of Homeland Security & Emergency Management Federal Assistance Listing Number (ALN): 97.036 Federal Award Year: 2024 Repeat Finding: No Criteria - Under FEMA Public Assistance program requirements and applicable federal cost principles, only eligible costs incurred by the applicant, and supported by appropriate documentation, may be claimed for reimbursement. Donated services are subject to specific eligibility criteria and documentation standards and, in certain circumstances, are not allowable as reimbursable project costs. Condition - During our testing of allowable costs, we noted that the City claimed reimbursement from FEMA for donated services that did not meet the eligibility requirements for reimbursement under the Public Assistance Program. Cause - The condition resulted from a miscommunication between the Public Works Director and payables processing clerks to process payment for an invoice that indicated donated services. Effect – As a result, ineligible costs were submitted to FEMA for reimbursement. Although the amount is not material to the federal program as a whole, it represents noncompliance with federal program requirements. Recommendation - We recommend that the City enhance its procedures over the review of costs included in FEMA reimbursement requests to ensure that donated services are evaluated in accordance with FEMA Public Assistance program requirements and are excluded from reimbursement claims when not eligible. The City should correspond with the Iowa Department of Homeland Security and Emergency Management and FEMA to discuss the proper resolution for the solution. Views of Responsible Officials - The City will immediately be in contact with the governing authorities and work quickly and effectively to resolve the issue and will strive to obtain and understanding of the grant requirements and strengthen controls to ensure it is communicated well.

2025-003 Material Weakness in Internal Control over Compliance – Review of Project Costs U.S. Department of Homeland Security Federal Emergency Management Agency Passed through State of Iowa Department of Homeland Security & Emergency Management Federal Assistance Listing Number (ALN): 97.036 Federal Award Year: 2024 Repeat Finding: No Compliance Requirement: Allowable costs/Cost Principles; Internal Control over Compliance Criteria - The Uniform Guidance requires the City to establish and maintain effective internal control over compliance for federal awards, including controls to reasonably ensure that costs charged to federal programs are allowable, properly supported, and comply with applicable federal requirements and the terms and conditions of the award. Condition - The City did not have adequately designed and implemented review controls over certain project costs, including some costs that were material to the grant. Our testing identified that key review procedures intended to verify the eligibility, accuracy, and supporting documentation of project costs were not consistently performed or evidenced before requesting reimbursement from the award. In addition, one invoice included donated services that were submitted for reimbursement under the grant. As a result, the City charged unallowable costs to the program. Cause - The condition resulted from insufficient formalization and documentation of review procedures, as well as inadequate segregation of duties and oversight for the review of project costs, including donated services, prior to submission to FEMA. Effect – The absence of effective review controls over project costs increases the risk that ineligible, unsupported, or incorrectly calculated costs could be included in reimbursement requests without timely detection and correction. This deficiency is considered a material weakness in internal control over compliance for the FEMA Public Assistance program. Recommendation - We recommend that the City design and implement formal, documented review procedures over project costs included in FEMA reimbursement requests. These procedures should include defined review responsibilities, documentation of the review performed, and supervisory oversight to ensure that unusual transactions are reviewed for eligibility, accuracy, and adequate supporting documentation before submission. Views of Responsible Officials – The City agrees with the finding and will strengthen review procedures over grant expenditures, require documented approval of invoices prior to reimbursement requests, and provide additional training to personnel responsible for grant administration.