Audit 405111

Failure to File Required Federal Financial Reports (SF-425) Finding Type. Material Noncompliance/Material Weakness in Internal Control over Compliance (Reporting). Federal program(s) U.S. Environmental Protection Agency - Congressionally Mandated Projects (ALN 66.202); Direct award; All project numbers. Criteria. Recipients of federal awards are required to report periodically on financial information, as specified by the 2 CFR 200 Compliance Supplement or grant agreement. Reported information should be supported by the entity’s accounting records and subjected to an independent review and approval prior to submission in order to detect and correct any errors or omissions. Condition. The Township failed to file the semi-annual SF-425 reports as required by the Township's grant agreement with the U.S. Environmental Protection Agency. Cause. This condition was caused by the lack of understanding by program staff of the specific requirements of reporting on form SF-425. Effect. As a result of this condition, the Township did not comply fully with the reporting requirements under this federal award. Questioned Costs. No costs are required to be questioned as a result of this finding, inasmuch as no unallowable expenditures were noted. Recommendation. We recommend that the Township review its procedures for compiling financial data for external reporting purposes and develop a calendar by which grant managers and Township administration are notified of pending due dates. Financial reports should be supported by general ledger reports (which should be retained internally along with a copy of the report) and subjected to review and approval by an independent employee or administrator prior to submission. View of Responsible Officials. We have notified the Department of Public Services, who has since had the SF-425’s that were not submitted filed with the EPA. Additionally, the Township’s finance department will produce a grant management calendar as recommended with all Township federal and state external reporting deadlines.

Noncompliance with Grant Reporting Frequency Requirements Finding Type. Immaterial Noncompliance/Significant Deficiency in Internal Control over Compliance (Reporting). Federal program(s) U.S. Department of Treasury - Coronavirus State & Local Fiscal Recovery Funds (ALN 21.027); Amounts passed through the Michigan Department of Environment, Great Lake, and Energy; All project numbers. Criteria. Per the grant agreement for funds received from the Michigan Department of Environment, Great Lake, and Energy ("EGLE") the Township is required to submit financial status reports on a monthly basis, but instead submitted their reports on a quarterly basis. Condition. The Township failed to file financial status reports as required by the Township's grant agreement with EGLE. Cause. This condition was caused by the lack of understanding by program staff of the specific requirements and also by staffing turnover at the Township in key financial positions. Effect. As a result of this condition, the Township did not comply fully with the reporting requirements under this federal award. Questioned Costs. No costs are required to be questioned as a result of this finding, inasmuch as no unallowable expenditures were noted. Recommendation. We recommend that the Township review its procedures for compiling financial data for external reporting purposes and develop a calendar by which grant managers and Township administration are notified of pending due dates. Financial reports should be supported by general ledger reports (which should be retained internally along with a copy of the report) and subjected to review and approval by an independent employee or administrator prior to submission. View of Responsible Officials. The Township will strive to submit required reports to EGLE on a monthly basis as required. Expectation will be established via the grant calendar for this grant to be established as noted in finding 2025-001.

Written Policies Required by the Uniform Grant Guidance Finding Type. Immaterial noncompliance Federal program(s) U.S. Department of Treasury - Coronavirus State & Local Fiscal Recovery Funds (ALN 21.027); Direct award and amounts passed through the Michigan Department of Environment, Great Lake, and Energy; All project numbers. U.S. Environmental Protection Agency - Congressionally Mandated Projects (ALN 66.202); Direct award; All project numbers. Criteria. The Uniform Guidance requires a non-federal entity that has expended federal awards for a grant awarded on or after December 26, 2014, to have written policies pertaining to: 1) Payments (draws of federal funds and how to minimize the time lapsing between the receipt of federal funds and the disbursement to contractors/employees/subrecipients) (§200.302(6)); 2) Allowability of costs charged to federal programs (§200.302(7)); and 3) Compensation (personnel and benefits policy) (§200.430 and §200.431). Condition. Although the Township has processes in place to cover these areas, there are no formal written policies covering payments, allowability of costs, and compensation. Cause. This condition appears to be the result of a time lag in identifying the requirement and developing a plan for compliance. Effect. As a result of this condition, the Township did not fully comply with the Uniform Guidance applicable to the above noted grants. Questioned Costs. No costs are required to be questioned as a result of this finding, inasmuch as no unallowable expenditures were noted. Recommendation. We are aware that the Township is evaluating options using internal and external resources to take corrective action. We recommend that the Township proceed with its selected option as soon as practical, but no later than the end of the next fiscal year. View of Responsible Officials. View of Responsible Officials. As noted in the auditor recommendation, the Township is in the process of evaluating a draft grant administration policy, which will address items #1 and #2 (payments and allowability of costs charged to federal programs). Item #3 (compensation) will be addressed via review and modification as needed of the Township’s personnel manual to ensure compliance.