Audit 4792

The Muhlenberg County Fiscal Court Did Not Establish And Maintain Effective Internal Controls Over Compliance With Coronavirus State and Local Fiscal Recovery Fund (SLFRF) Requirements Federal Program: 21.027 COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Award Number and Year: 2022 Name of Federal Agency: U.S. Department of the Treasury Compliance Requirements Activities Allowed or Unallowed; Allowable Costs/Cost Principles Type of Finding: Significant Deficiency Amount of Questioned Costs: $9,425 COVID Related: Yes The Muhlenberg County Fiscal Court transferred Coronavirus State and Local Fiscal Recovery Funds (SLFRF) from the economic assistance fund (where SLFRF funds were maintained) to the general fund without sufficient supporting documentation of allowable expenditures. Once the list of reimbursed expenditures supporting the transfer was created, auditors foundun allowable costs had been reimbursed. In June 2022, the county transferred $1,346,255 from the economic assistance fund into the general fund for “lost revenue”. At the time of the transfer, and until auditors inquired about the supporting documentation, the county did not maintain a list of expenditures that reconciled to the transfer total. Instead, the treasurer, with help from an outside company, used estimates for fourth quarter expenditures to arrive at this total. After this inquiry, the county gathered documentation and provided auditors a reconciliation of expenditures of eligible costs that supported the amount transferred into the general fund. However, during testing we noted the following issues: • A portion of the deputy judge/executive’s salary in the amount of $4,967 was included in the reimbursement total, however, this portion of the salary had been reimbursed by another federal grant. One employee had two timesheets that had no time documented as worked but was signed by the employee. Unsupported time charges applied to the SLFRF grant were $3,280. One employee’s timesheet did not calculate properly to support the charge of $1,178. The Muhlenberg County Fiscal Court failed to implement an adequate system of internal controls due to a lack of understanding of the requirements provided by the U.S. Department of the Treasury. An effective internal control system was not established to ensure compliance with requirements related to the SLFRF funds and the Allowable Costs/Cost Principles compliance requirements. According to the treasurer the unallowable and unsupported charges were due to an oversight by the department heads and the treasurer. He attempted to remove all unallowable or unsupported costs but missed these. Failure to establish and maintain effective internal controls over compliance with federal program requirements could subject the county to the risk of using federal funds for unallowable purposes. These funds could be requested back from the federal government and could cause increased scrutiny for any federal awards in the future. 2 CFR 200.303 states in part: “The non-Federal entity must: (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.” We recommend the county establish and maintain internal controls over compliance for all federal program expenditures to ensure accurate use and reporting of federal awards, including maintaining sufficient supporting documentation of expenditures that reconciles to any transfer from a federal program fund into another county fund. Additionally, documentation used to support federal expenditures should be reviewed by someone who is knowledgeable about the federal program requirements and should verify the supporting documentation is adequate.

The Muhlenberg County Fiscal Court Did Not Establish And Maintain Effective Internal Controls Over Compliance With Coronavirus State and Local Fiscal Recovery Fund (SLFRF) Requirements Federal Program: 21.027 COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Award Number and Year: 2022 Name of Federal Agency: U.S. Department of the Treasury Compliance Requirements Activities Allowed or Unallowed; Allowable Costs/Cost Principles Type of Finding: Significant Deficiency Amount of Questioned Costs: $9,425 COVID Related: Yes The Muhlenberg County Fiscal Court transferred Coronavirus State and Local Fiscal Recovery Funds (SLFRF) from the economic assistance fund (where SLFRF funds were maintained) to the general fund without sufficient supporting documentation of allowable expenditures. Once the list of reimbursed expenditures supporting the transfer was created, auditors foundun allowable costs had been reimbursed. In June 2022, the county transferred $1,346,255 from the economic assistance fund into the general fund for “lost revenue”. At the time of the transfer, and until auditors inquired about the supporting documentation, the county did not maintain a list of expenditures that reconciled to the transfer total. Instead, the treasurer, with help from an outside company, used estimates for fourth quarter expenditures to arrive at this total. After this inquiry, the county gathered documentation and provided auditors a reconciliation of expenditures of eligible costs that supported the amount transferred into the general fund. However, during testing we noted the following issues: • A portion of the deputy judge/executive’s salary in the amount of $4,967 was included in the reimbursement total, however, this portion of the salary had been reimbursed by another federal grant. One employee had two timesheets that had no time documented as worked but was signed by the employee. Unsupported time charges applied to the SLFRF grant were $3,280. One employee’s timesheet did not calculate properly to support the charge of $1,178. The Muhlenberg County Fiscal Court failed to implement an adequate system of internal controls due to a lack of understanding of the requirements provided by the U.S. Department of the Treasury. An effective internal control system was not established to ensure compliance with requirements related to the SLFRF funds and the Allowable Costs/Cost Principles compliance requirements. According to the treasurer the unallowable and unsupported charges were due to an oversight by the department heads and the treasurer. He attempted to remove all unallowable or unsupported costs but missed these. Failure to establish and maintain effective internal controls over compliance with federal program requirements could subject the county to the risk of using federal funds for unallowable purposes. These funds could be requested back from the federal government and could cause increased scrutiny for any federal awards in the future. 2 CFR 200.303 states in part: “The non-Federal entity must: (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.” We recommend the county establish and maintain internal controls over compliance for all federal program expenditures to ensure accurate use and reporting of federal awards, including maintaining sufficient supporting documentation of expenditures that reconciles to any transfer from a federal program fund into another county fund. Additionally, documentation used to support federal expenditures should be reviewed by someone who is knowledgeable about the federal program requirements and should verify the supporting documentation is adequate.