Audit 409628

Assistance Listing Number: 14.269 Program Title: CDBG - Disaster Recovery Grants - Pub L. No. 113-2 Cluster Federal Award Identification Number / Year: 2013-DR-IN-R4-10 Pass-Through Entity: Cook County Criteria: Per 2 CFR §200.303, non-Federal entities are required to establish and maintain effective internal control over Federal awards to provide reasonable assurance that those awards are managed in compliance with applicable Federal statutes, regulations, and terms and conditions. Such internal controls should align with guidance in the Standards for Internal Control in the Federal Government or the COSO Internal Control – Integrated Framework. Condition: The Village utilizes an external engineering firm to assist with oversight of grant-related activities, including elements of financial and performance reporting and overall compliance at the individual grant level. However, the Village does not have adequate internal controls in place to identify, track, and classify federal grant activity within its accounting records. During the audit, a grant initially identified by the Village as locally funded was determined to be federally funded through a pass-through entity, indicating deficiencies in the Village’s process for identifying federal awards. Cause: The Village had turnover within its finance department in the role that historically prepared the Village’s Schedule of Federal Awards. During this time period, the Village has not established a comprehensive internal control framework for grant management, including procedures for identifying federal awards and monitoring federally funded activity within its financial system. Effect: The lack of adequate internal controls increases the risk that federal grants may not be properly identified, tracked, or reported, which could result in noncompliance with grant requirements and incomplete or inaccurate reporting, including the Schedule of Expenditures of Federal Awards (SEFA). Questioned Costs: None noted Context: This issue appears to be systemic due to the absence of formalized internal controls and procedures over grant identification and tracking due to staff turnover. Recommendation: The Village should develop and implement formal grant management policies and procedures. These should include processes to identify federal awards (including pass-through funding), track related expenditures within the accounting system, and ensure completeness and accuracy in federal reporting, including the preparation of the SEFA. Management Response: The Village acknowledges the recommendation and will continue to strengthen its procedures for identifying and tracking grant activity. Management plans to implement additional review procedures over grant funding sources and related expenditures for purposes of SEFA reporting. The Village will also consider providing the SEFA and supporting expenditure information to its external engineering consultants for review to help ensure all grant activity administered on behalf of the Village is properly identified and reported.