CORRECTIVE ACTION PLAN 7/7/2023 U.S Department of the Treasury ...
CORRECTIVE ACTION PLAN 7/7/2023 U.S Department of the Treasury The City of Columbia Heights respectfully submits the following corrective action plan for the year ended December 31, 2022. Name and address of independent public accounting firm: Redpath and Company 55 5th Street E #1400 St. Paul, MN 55101 The findings from the December 31, 2022, schedule of findings and questioned costs are discussed below. FINDINGS_FINANCIAL STATEMENT AUDIT 2022-001 Financial Statement Corrections MATERIAL WEAKNESS Criteria: A material audit adjustment is considered to be a deficiency in internal control as defined by auditing standards. Condition: Audit procedures identified one material adjustment to the financial statements related to an overstatement of construction in progress and retainage payable in the Sewer Utility fund for approximately $84,000. Cause: The City's year-end closing processes did not identify the misstatement prior to the audit. We understand that staff turn-over within the finance department may have been a contributing factor. Effect: There is an increased risk that financial statement misstatements may occur and not be detected and corrected in a timely manner. Recommendation: We recommend the City continue efforts to assure that all adjustments are identified during the year-end closing process. Corrective Action Plan: The City concurs with the finding and the recommendation; and adds the following additional context: The initial error was a vendor payment misclassified as an expense rather than as a release of contract retainage. The internal control that will be improved to detect such misclassifications is a timely review of outstanding contract retainage payable, construction escrows, etc. The City notes that the related internal control to limit vendor payments to the total amount of the contract was carried out timely, effectively limiting the misclassification to a timing difference. FINDINGS-FEDERAL AWARD PROGRAMS AUDITS US Department of the Treasury 2022-002 Significant Deficiency in Internal Controls over Compliance and Noncompliance with Reporting Requirements; U.S. Department of Treasury; COVID-19 Coronavirus State and Local Fiscal Recovery Funds-Assistance Listing No. 27.027; Grant period-Year ended December 31, 2022 SIGNIFICANT DEFICIENCY Criteria: The major program requires the City of Columbia Heights, Minnesota to provide a Project and Expenditure Report on an annual basis, reporting on financial data, projects funded, expenditures, and other information. Condition: During our audit, we noted that the City did not have sufficient controls in place to ensure proper reporting of total expenditures incurred by project through December 31, 2022. Questioned Costs: $0 Context: One of the projects using ARPA funding (Manhole Replacement, Pipe Repairs; pipe upsizing on TH 65) was overstated by approximately $84,000 and the other project using ARPA funding (Structural lining of 4,000 lineal feet of water main) was understated by the same amount. Repeat Finding: No Cause: This reporting error was caused by the significant deficiency in financial reporting described in Finding 2022-001 above. Effect: The amounts reported by project were incorrect for the year ending December 31, 2022. Recommendation: Refer to the recommendation in Finding No. 2022-001 above. Additionally, we recommend that the City continue efforts to thoroughly review the ARPA reporting before submission. Corrective Action Plan: The City concurs with the finding and the recommendation. The City notes that the misclassification between water project costs and sewer project costs in the interim grant progress report referred to above will be corrected in the next interim grant progress report filed by the City. Refer also to the City's related response in 2022-001 above. If the Department of the Treasury has questions regarding this plan, please call Joseph Kloiber at 763-706-3627. Sincerely yours, Joseph Kloiber, Finance Director