Federal Award Findings and Questioned Costs – Year ending December 31, 2024 Finding 2024-001 – Internal control deficiency and noncompliance over activities allowed or unallowed, allowable costs/cost principles, reporting, and special tests and provisions related to amounts reimbursed for the projec...
Federal Award Findings and Questioned Costs – Year ending December 31, 2024 Finding 2024-001 – Internal control deficiency and noncompliance over activities allowed or unallowed, allowable costs/cost principles, reporting, and special tests and provisions related to amounts reimbursed for the project worksheets. Identification of the federal program: Assistance Listing Number 97.036: • COVID-19 – Disaster Grants – Public Assistance (Presidentially Declared Disasters) • U.S. Department of Homeland Security • Federal award identification number: o Project number 699651 – CV-727 2020 Q2 PPE and Screening Thermometers • Federal award year – January 20, 2020 to May 11, 2023 • Pass-through entity – Arizona Department of Emergency and Military Affairs (Arizona DEMA) Condition: During the testing over the expenditures included in the project worksheets, management did not have effective internal controls in place to ensure expenditures reported for reimbursement in the FEMA project worksheets were actual paid expenditures. This resulted in an overstatement of the amount reimbursed by FEMA. Management performed an analysis of all expenditures submitted to FEMA and determined there were 4 expenditures reported for reimbursement in the FEMA project worksheets that were not based on actual paid expenditures resulting in an overstatement of the amount reimbursed by FEMA in the amount of $1,406,446. Cause: Management did not have effective internal controls in place over the compliance requirements as stated in the criteria or specific requirement section of the report. Effect or potential effect: Management was reimbursed by FEMA for expenditures that were not based on actual paid expenditures which resulted in an overstatement of the amount reimbursed by FEMA. Without sufficient internal controls, other compliance matters could occur in the future. Questioned costs: $1,406,446 – Assistance Listing Number 97.036 – Federal award identification number – Project number 699651 – CV-727 2020 Q2 PPE and Screening Thermometers Questioned costs were computed by calculating the difference between the expenditures submitted for reimbursement in the FEMA project worksheets and the actual paid expenditures. Context: During the testing over the expenditures included in the project worksheets, the auditors obtained a listing of expenditures submitted for reimbursement to FEMA and selected a sample of 67 for testing the compliance requirements. There was 1 out of 67 selections where the expenditure reported for reimbursement was not based on actual paid expenditure. The sampling was a statistically valid sample. Management performed an analysis of all expenditures submitted to FEMA and determined there were 4 expenditures reported for reimbursement in the FEMA project worksheets that were not based on actual paid expenditures resulting in an overstatement of the amount reimbursed by FEMA in the amount of $1,406,446. Management’s control regarding the review of the project worksheet expenditures did not identify this matter when submitting the project worksheet for reimbursement to FEMA. Identification as a repeat finding, if applicable: No. Recommendation: Management should develop and implement effective internal controls to ensure expenditures reported for reimbursement in the FEMA project worksheets are actual paid expenditures. Management should refund the questioned costs to FEMA and work with FEMA to determine the extent of additional courses of action. Views of responsible officials: Management concurs with the audit finding and has implemented a corrective action plan to address the identified issue. Management has notified Arizona DEMA of the identified expenditures and has begun the process of reimbursing the $1,406,446 to FEMA. For all future FEMA project applications, Management will conduct a comprehensive reconciliation process prior to submission. This process will include a detailed review of invoice documentation and verification of payment to ensure compliance with applicable federal requirements. Responsible Parties: Heather Mahoney, Network Controller Anticipated Date of Completion: September 30, 2025