Audit 407087

Finding Reference: 2025-004 (cross-referenced as 2025-001) Type of Finding: Material Weakness in Internal Control Over Compliance and Material Noncompliance • Federal Agency: U.S. Department of Housing and Urban Development / Department of Health and Human Services / Department of Treasury / Department of Homeland Security / Department of Agriculture / U.S. Federal Transportation Administration and U.S. Environmental Protection Agency • Federal Program Name: Housing Choice Voucher / Community Service Block Grant Program Recovery Grant / Housing Opportunities for People with Aids / State Block Grant Program / Community Service Block Grant Program / Title III, Part C, Nutrition Services / Coronavirus State and Local Recovery Funds / Coronavirus Relief Funds / Community Disaster Loan / Public Assistance Grant / Rural Housing Preservation Grant / Formula Grants for Rural Areas and Cleanup Cooperative Agreements. • Assistance Listing Number (ALN): 93.569 / 93.045 / 21.027 / 21.019 / 97.030 / 97.036 / 10.433 / 20.509 and 66.818 • Federal Award Number and Year: 21.019 – CRF-AFFAF Pass-Through Entity: 93.569 – Families and Children Administration and 20.509 – Department of Transportation and Public Works Criteria or Specific Requirement: Pursuant to Uniform Guidance (2 CFR 200.510(b)), the auditee must prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the auditee's financial statements which must be accurate and reconciled. Furthermore, 2 CFR 200.302 requires non-federal entities to establish financial management systems that provide accurate, current, and complete disclosure of the financial results of each federally- sponsored project or program, and to maintain effective control over and accountability for all funds, property, and other assets. Condition (Cross-Reference): The Municipality’s core accounting system lacked the technical and functional capacity to accurately aggregate transactions and produce reliable financial records or balanced reports due to an un-reconciled migration of historical opening balances. (Cross-Reference): The complete details regarding the operational failure of the financial software system, the database corruption, and the timeline are fully described in Finding 2025-001 under Section II – Financial Statement Findings of this schedule. Effect or Potential Effect: Because the core accounting database cannot output accurate balances, the Municipality is unable to verify the completeness or accuracy of its Trial Balances by Funds or Accounts. Questioned Costs: $0.00 (None). Although the accounting system failed to produce reports, no specific unallowable transactions or questioned costs were identified during our compliance testing. Cause: See Finding 2025-001 for the root cause regarding inadequate data-validation protocols and poor system-migration oversight by management. Recommendation: We recommend that management implement the exact corrective action plan detailed in Finding 2025- 001. In addition, management must establish an interim manual ledger or spreadsheet tracking matrix to ensure that all federal expenditures for this major program are manually reconciled with federal drawdowns and physical invoices until the core accounting system