FINDING 2025-002 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Reporting Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): 2021 Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context The County elected to receive the standard revenue loss allowance, allowing the County to claim a total COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) allocation of $8,300,967 as revenue loss to use for government services. As such, all SLFRF program funds expended from January 1, 2025 to December 31, 2025, were under the revenue loss eligible use category. The U.S. Department of the Treasury (Treasury) determined that there are no subawards under this eligible use category and that recipients' use of revenue loss funds would not give rise to subrecipient relationships, as there is no federal program or purpose to carry out in the case of the revenue loss portion of the award. Recipients are required to quarterly or annually submit Project and Expenditure (P&E) reports to the Treasury. The reporting periods, as well as the respective due dates, are based on the type of recipient and the recipient's population as well as the recipient's allocation amount. Information to be reported includes projects funded, expenditures, and contracts for the appropriate reporting period. The County submitted the required annual P&E reports during the audit period, which were obtained from the County Auditor's office. Although one employee prepared the P&E report and another reviewed the entries, the system of internal controls was not effective in preventing, or detecting and correcting, errors. The data submitted included amounts which were not supported by the County's records. Errors identified included the following: The County did not have any current obligations during calendar year 2025. However, the County reported the County's total cumulative obligations as current obligations in the County's 2025 Annual P&E report, which resulted in an overstatement of current obligations in the amount of $8,300,967. The lack of effective internal controls and noncompliance was a systemic issue throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 16 DUBOIS COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds, page 13, states in part: ". . . 10. Reporting. All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. . . ." 31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds, . . ." Cause A proper system of internal controls, including policies and procedures, was not designed or implemented by management of the County to prevent, or detect and correct, errors on the P&E report prior to submission. The errors occurred due to the officials not understanding the Treasury's reporting requirements. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. The lack of internal controls enabled noncompliance with the 2025 P&E report to remain undetected and uncorrected. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the County. Additionally, reporting inaccurate data reduces the transparency and reliability of information available to the public and to the Treasury. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the County's management establish an effective system of internal controls and develop policies and procedures over the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight take place and to ensure that submitted reports contain complete and accurate information. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. INDIANA STATE BOARD OF ACCOUNTS 17 DUBOIS COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Auditor's Response It is the County's responsibility to comply with applicable federal regulations and guidelines when accepting and managing a federal award. The County had designed and implemented a system of internal controls over the P&E report; however, these internal controls were not effective in ensuring accurate reporting of current period obligations. On November 20, 2023, the Treasury published an interim final rule to clarify the definition of "obligation." The term "obligation" continues to mean an order placed for property and services and entry into contracts, subawards, and similar transactions that require payment. 2 CFR 200.1 states in part: ". . . Financial obligations, when referencing a recipient's or subrecipient's use of funds under a Federal award, means orders placed for property and services, contracts and subawards made, and similar transactions that require payment." The County filed the required P&E report. However, the amount reported for current period obligations was the same amount as the cumulative obligations. We determined the current period for obligations was the current audit period of January 1, 2025 to December 31, 2025. The County did not incur any new obligations during that period. The cumulative obligation was $8,300,967, which covers the entire award period of the grant. The County's stated reason for disagreement is that this is how the report has been filed in the past, alluding to the fact that the program has been audited previously without a noncompliance finding over this compliance requirement in previous audits. While true, as stated in the Independent Auditor's Report on Compliance for Each Major Federal Program, audits are designed only to provide reasonable assurance, not absolute assurance, that the County materially complied with the compliance requirements, so instances of noncompliance may not always be identified. Additionally, while the County acted in good faith, this does not absolve the County of the responsibility to review and appropriately apply the stated requirements in order to file accurate reports in accordance with the terms and conditions of the federal award. We reaffirm our finding and will review the status of the finding during our next audit.