Program: Community Development Block Grant (CDBG) ALN #: 14.218 Pass-through Entity: N/A- Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Year: July 1, 2023–June 30, 2024 Compliance Requirement: Performance Reporting Type of finding: Material weakness and noncompliance Criteria Special Reporting for Federal Funding Accountability and Transparency Act Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No.109-282), as amended by Section 6202 of Public Law 110-252, herein referred to as the “Transparency Act” that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Aspects of the Transparency Act that relate to subaward reporting (1) under grants and cooperative agreements were implemented in OMB in 2 CFR Part 170 and (2) under contracts, by the regulatory agencies responsible for the Federal Acquisition Regulation (FAR at 5 FR 39414 et seq., July 8, 2010). The requirements pertain to recipients (i.e., direct recipients) of grants or cooperative agreements who make first-tier subawards and contractors (i.e., prime contractors) that award first-tier subcontracts. Title 2 US Code of Federal Regulations Part 200 (2 CFR 200), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, section 200.1 defines subaward as an award provided by a pass-through entity to a subrecipient for the subrecipient to carry out part of a federal award received by the pass through entity. It does not include payments to a contractor or payments to an individual that is a beneficiary of a federal program. A subaward may be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract. Further, 2 CFR 200.1 defines subrecipient as a nonfederal entity that receives a subaward from a passthrough entity to carry out part of a federal program but does not include an individual that is a beneficiary of such program. A subrecipient may also be a recipient of other federal awards directly from a federal awarding agency. Lastly, 2 CFR 200.303(a) states, the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal 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). Condition The City’s Community Development Department (CDBG) did not report awards granted to subrecipients for the CDBG program by the end of the month following the month in which the City awarded the subrecipient award. FFATA requires the City to report certain identifying information related to awards made to subrecipients in amounts greater than or equal to $30,000. Of the information to be reported, the following key data elements are required to be audited: 1. Subawardee name 2. Subawardee DUNS/UEI number 3. Amount of subaward 4. Subaward obligation/action date 5. Date of report submission 6. Subaward number 7. Subaward project description 8. Subawardee names and compensation of highly compensated officers During our testing, we noted that the City did not establish control procedures to submit FFATA reports for all subawards as required by federal regulations. Cause The condition found was due to the City not reporting amounts passed through to subrecipients for the period from July 2023 to June 2024, as the City typically reports these on a one-year lag due to the timing of when the contract starts and its final execution. Proper perspective During our testing of the three selected subawards, we noted reporting exceptions as subawards were not reported within the one month following the month that the City awarded the subrecipient contract. Additionally, there was a control exception to ensure that the data submitted is complete and accurate. Possible asserted effect Failure to submit subaward amounts passed through to subrecipients and subcontractors under subawards as defined by 2 CFR 200.1 in the City’s FFATA reporting could result in the City reporting inaccurate and incomplete amounts to the federal government. Questioned costs None noted Statistical sampling The sample was not intended to be, and was not, a statistically valid sample. Repeat finding A similar finding was not reported in the prior year. Recommendation We recommend that the City review and enhance its policies, procedures, and internal controls to ensure that all amounts passed through to subrecipients under subawards, as defined in 2 CFR 200.1 are reported in accordance with the FFATA federal regulations. In addition, we recommend that the City use obligation date for FFATA reporting. Views of responsible officials and corrective actions The City has taken several steps to strengthen its FFATA compliance. Historically, FFATA reporting posed challenges for many recipients, including the City, due to legacy reporting systems that did not fully align with the requirements of SAM.gov. As part of its compliance improvement efforts, the City has transitioned to directly reporting subaward data in SAM.gov. This shift necessitated a thorough review of internal processes, particularly because many of the City's subrecipient contracts are designed to begin on July 1 of each fiscal year but are not fully executed until months later, after the HUD-signed grant agreement is received, which generally occurs between late September and November. These timing discrepancies previously made it difficult to consistently identify and use the correct obligation date for FFATA reporting. The Federal Grants team initially used a manual Excel-based system to compile FFATA data from fully executed contracts. Each contract contains the essential elements required for FFATA reporting, including the Assistance Listing (CFDA) number, the City's and subrecipient's UEI numbers, agency name and address, award amount, and a brief program description. This spreadsheet served as the foundation for reporting subawards in SAM.gov. To address these issues, the City has established an updated standardized data collection and tracking mechanism. In response to this audit finding, the City has implemented the following corrective actions: 1.Standardized Data Collection: An updated subrecipient data collection form has been developed to ensure consistent and complete capture of all required FFATA elements prior to contract execution. 2.Formal Tracking System: The City created a FFATA Tracking Spreadsheet to systematically document and monitor all required reporting elements, including the correct obligation date, which is now tied to the legal execution date of the subaward. 3.Policy and Procedure Development: FFATA reporting policy and procedures have been developed to codify roles, timelines, and compliance responsibilities. This includes guidance on identifying the proper obligation date, data verification steps, and the timeline for submission to SAM.gov (within 30 days of obligation). 4.Staff Training and Oversight: Relevant staff will be trained on FFATA compliance requirements, and the Grants Management Division will conduct quarterly spot checks to ensure accuracy and timeliness of reporting. These corrective actions reflect the City's commitment to strengthening its federal grant oversight and ensuring full compliance with FFATA regulations.
Finding Number: 2024-004 Program: Housing Opportunities for Persons with AIDS (HOPWA) ALN #: 14.241 Pass-through Entity: N/A- Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Year: July 1, 2023–June 30, 2024 Compliance Requirement: Reporting Type of finding: Material weakness and noncompliance Criteria Special Reporting for Federal Funding Accountability and Transparency Act Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No.109-282), as amended by Section 6202 of Public Law 110-252, herein referred to as the “Transparency Act” that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Aspects of the Transparency Act that relate to subaward reporting (1) under grants and cooperative agreements were implemented in OMB in 2 CFR Part 170 and (2) under contracts, by the regulatory agencies responsible for the Federal Acquisition Regulation (FAR at 5 FR 39414 et seq., July 8, 2010). The requirements pertain to recipients (i.e., direct recipients) of grants or cooperative agreements who make first-tier subawards and contractors (i.e., prime contractors) that award first-tier subcontracts. Title 2 US Code of Federal Regulations Part 200 (2 CFR 200), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, section 200.1 defines subaward as an award provided by a pass-through entity to a subrecipient for the subrecipient to carry out part of a federal award received by the pass-through entity. It does not include payments to a contractor or payments to an individual that is a beneficiary of a federal program. A subaward may be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract. Further, 2 CFR 200.1 defines subrecipient as a nonfederal entity that receives a subaward from a passthrough entity to carry out part of a federal program but does not include an individual that is a beneficiary of such program. A subrecipient may also be a recipient of other federal awards directly from a federal awarding agency. Lastly, 2 CFR 200.303(a) states, the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal 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). Condition The City’s Community Development Department did not report awards granted to subrecipients for the HOPWA program by the end of the month following the month in which the City awarded the subrecipient award. FFATA requires the City to report certain identifying information related to awards made to subrecipients in amounts greater than or equal to $30,000. Of the information to be reported, the following key data elements are required to be audited: 1. Subawardee name 2. Subawardee DUNS/UEI number 3. Amount of subaward 4. Subaward obligation/action date 5. Date of report submission 6. Subaward number 7. Subaward project description 8. Subawardee names and compensation of highly compensated officers During our testing, we noted that the City did not establish control procedures to submit FFATA reports for all subawards as required by federal regulations. Cause The condition found was due to the City not reporting amounts passed through to subrecipients for the period from July 2023 to June 2024, as the City typically reports these on a one-year lag due to the timing of when the contract starts and its final execution. Proper perspective During our testing of four selected subawards, we noted reporting exceptions as subawards were not reported within the one month following the month that the City awarded the subrecipient contract. Additionally, there was a control exception to ensure that the data submitted is complete and accurate. Possible asserted effect Failure to submit subaward amounts passed through to subrecipients and subcontractors under subawards as defined by 2 CFR 200.1 in the City’s FFATA reporting could result in the City reporting inaccurate and incomplete amounts to the federal government. Questioned costs None Statistical sampling The sample was not intended to be, and was not, a statistically valid sample. Repeat finding Yes, 2023-006 Recommendation We recommend that the City review and enhance its policies, procedures, and internal controls to ensure that all amounts passed through to subrecipients under subawards, as defined in 2 CFR 200.1 are reported in accordance with the FFATA federal regulations. In addition, we recommend that the City use obligation date for FFATA reporting. Views of responsible officials and corrective actions The City has taken several steps to strengthen its FFATA compliance. Historically, FFATA reporting posed challenges for many recipients, including the City, due to legacy reporting systems that did not fully align with the requirements of SAM.gov. As part of its compliance improvement efforts, the City has transitioned to directly reporting subaward data in SAM.gov. This shift necessitated a thorough review of internal processes, particularly because many of the City's subrecipient contracts are designed to begin on July 1 of each fiscal year but are not fully executed until months later, after the HUD-signed grant agreement is received, which generally occurs between late September and November. These timing discrepancies previously made it difficult to consistently identify and use the correct obligation date for FFATA reporting. The Federal Grants team initially used a manual Excel-based system to compile FFATA data from fully executed contracts. Each contract contains the essential elements required for FFATA reporting, including the Assistance Listing (CFDA) number, the City's and subrecipient's UEI numbers, agency name and address, award amount, and a brief program description. This spreadsheet served as the foundation for reporting subawards in SAM.gov. In response to this audit finding, the City has implemented the following corrective actions: 1.Standardized Data Collection: A subrecipient data collection form has been developed to ensure consistent and complete capture of all required FFATA elements prior to contract execution. 2.Formal Tracking System: The City created a FFATA Tracking Spreadsheet to systematically document and monitor all required reporting elements, including the correct obligation date, which is now tied to the legal execution date of the subaward.
Condition: During the test of 100 % of projects, sixteen (16) projects, for the Coronavirus State and Local Fiscal Recovery Funds, the following noncompliance with the Reporting compliance requirement was noted: • The third quarter report was not submitted. • The fourth quarter report was not timely submitted. • Four (4) projects were coded as revenue loss and should have been coded to an administrative expense code. • Four (4) projects were coded as revenue loss and should have been coded as a subrecipient. • Two (2) projects were coded as a subrecipient and were not a subrecipient relationship. After the review of the quarterly reports, the following exceptions were noted: • The second quarter report was understated by $257,160. • Health Department reported cumulative total of $1,090,483 in expenditures; however, disbursements totaled $1,089,725. • Emergency Management reported cumulative total of $276,279 in expenditures; however, disbursements totaled $333,169. • Rogers County Sheriff reported cumulative total of $300,000 in expenditures; however, disbursements totaled $233,344. • The consultant hired by the county to administer the grant reported cumulative total of $251,427 in expenditures; however, disbursements totaled was $287,346. Jail Remodel had expenditures of $231,765; however, it was no expenditures were listed on the report. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are properly reported in accordance with federal compliance requirements. Effect of Condition: This condition resulted in noncompliance with federal grant guidelines. Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements Management Response: Board of County Commissioners: The Board of County Commissioners is responsible for the overall fiscal concerns of the county. See OKLA. STAT. Title 19, § 345. The Board of County Commissioners, with the cooperation and participation of all elected officials, reviews, develops and implements policies and procedures to create a strong internal control environment. The Board of County Commissioners will work with all elected officials, the third-party administrator, and federal, state and local partners to develop policies, procedures, and internal controls designed to accurately track grants, including the application process, verification, oversight, and reporting of grant requirements. These policies and procedures will be designed to identify requirements for recipients and sub-recipients of grants, ensure accurate equipment and real property management, procurement, recipient and subrecipient monitoring and reporting. Further, policies will ensure a proper understanding of all grant requirements and compliance of the same. To assist in this process, the Board of County Commissioners engaged a third-party administrator to oversee the grant process, including application, eligibility, review, requirements, contracting, recipient tracking and oversight, and documentation and reporting. The Board of County Commissioners will work with the third-party administrator to ensure proper grant administration. Criteria: Accountability and stewardship should be overall goals in management’s accounting of federal funds. Internal controls should be designed to monitor compliance with laws and regulations pertaining to grant contracts. Title 2 CFR § 200.303(a) Internal Controls, reads as follows: The non-federal entity must: 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 (10. Reporting) reads as follows: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlines in Part 2 of this guidance. Expenditures may be reported on a cash of 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. In addition, where appropriate, your organization needs to establish internal controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Further, 2 CFR 200.329-Monitoring and reporting Program Performance (c)(1) reads as follows: (c)(1) The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar gays after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also §200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.
Criteria or specific requirement: 2 CFR 200.414(f) states that recipients may elect to charge a de minimis rate of up to 10 percent of modified total direct costs (MTDC). 2 CFR 200.1 “Modified Total Direct Cost (MTDC)” excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs, and the portion of each subaward in excess of $50,000. Condition: During testing of indirect costs, 4 of the 4 samples tested erroneously included rental costs in the calculation of Modified Total Direct Costs, resulting in an overcharge of indirect costs to the program. Questioned costs: None. Context: For allowable costs (indirect), a sample of 4 was made from a population of 12 reimbursement requests for the major program. Of the 4 sampled, all rental costs included in the calculation of Modified Total Direct Costs, resulting in a slightly higher indirect cost calculation. Cause: There is a misunderstanding of which costs should be excluded from the MTDC for this specific contract. Occupancy / Space Rental costs are identified but are not removed during the calculation of indirect costs. Effect: Inadequate allocation of indirect costs to federal programs may result in noncompliance with grant regulations, which could result in penalties or repayment obligations. Repeat Finding: 2023-002 Recommendation: CLA recommends that CCS work with the USCCB to update the Reimbursement Request form to include a section that removes items of selected cost from the calculation of indirect costs. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: 2 CFR 200.414(f) states that recipients may elect to charge a de minimis rate of up to 10 percent of modified total direct costs (MTDC). 2 CFR 200.1 “Modified Total Direct Cost (MTDC)” excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs, and the portion of each subaward in excess of $50,000. Condition: During testing of indirect costs, 4 of the 4 samples tested erroneously included rental costs in the calculation of Modified Total Direct Costs, resulting in an overcharge of indirect costs to the program. Questioned costs: None. Context: For allowable costs (indirect), a sample of 4 was made from a population of 12 reimbursement requests for the major program. Of the 4 sampled, all rental costs included in the calculation of Modified Total Direct Costs, resulting in a slightly higher indirect cost calculation. Cause: There is a misunderstanding of which costs should be excluded from the MTDC for this specific contract. Occupancy / Space Rental costs are identified but are not removed during the calculation of indirect costs. Effect: Inadequate allocation of indirect costs to federal programs may result in noncompliance with grant regulations, which could result in penalties or repayment obligations. Repeat Finding: 2023-002 Recommendation: CLA recommends that CCS work with the USCCB to update the Reimbursement Request form to include a section that removes items of selected cost from the calculation of indirect costs. Views of responsible officials: There is no disagreement with the audit finding.
Condition: Expenditures for federal programs were not adequately reported on the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) Compliance Reports. Federal expenditures were understated by $1,227,550. The actual expenditures to vendors were $1,272,002, the County reported $44,452. Cause of Condition: Policies and procedures have not been designed and implemented to ensure compliance with reporting compliance requirements. Effect of Condition: This condition could result in noncompliance to grant requirements and could result in unrecorded transactions, undetected errors, and misappropriation of assets and funds.Recommendation: OSAI recommends the County gain an understanding of the grant requirements for this program and implement internal controls to ensure compliance with these grant requirements. Management Response: Chairman of the Board of County Commissioners: I plan to communicate with the Budget Board regarding this finding and have already introduced to the Budget Board, a form guideline called “Payne County Grant Administration Plan” to aid in proper documentation, reporting and proper spending of all grant awards. I plan to discuss all findings with the Budget Board throughout the year during our Budget Board meetings to get updates on how the findings are actively being addressed by each department and get input on how to best combat future findings. I request that responses by the various departments be forwarded to me to ensure action is taken and for discussion during the meetings. Criteria: 2 CFR § 200.303 Internal Controls (a) reads as follows: The non-Federal entity must: 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 (10. Reporting.) reads as follows: 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. In addition, where appropriate, you organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Further, 2 CFR § 200.329 Monitoring and Reporting Program Performance (c)(1) reads as follows: The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.
Finding - Due to District control deficiencies, the District made a duplicate payment totaling $120,918 for construction services from ES Fund proceeds, resulting in questioned costs of that amount. Criteria -The ES Fund provides funding to prevent, prepare for, and respond to the COVID-19 pandemic, and the District must comply with the Uniform Guidance in Title 2, Code of Federal Regulations (CFR), Part 200 in their operation of the program. Title 2, Section 200.1, CFR, defines improper payments as a payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements, including any duplicate payment. Condition - During our audit of construction services discussed in Finding No. 2024-005, we identified a duplicate payment of $120,918 charged to the ES Fund. Our audit procedures determined that both the original payment of $120,918, made in January 2024 and the subsequent duplicate payment made in March 2024 were based on the same invoice for construction services. Since the latter payment was improper, $120,918 represents questioned costs to the program. Although we requested, District records were not provided to demonstrate that the District was aware of the duplicate payment, any District efforts to obtain reimbursement for the duplicate payment, or that the vendor had contacted the District about the duplicate payment. Cause - District personnel indicated that turnover and reassignments of duties during the year contributed to inadvertently processing two accounts payable checks for the same invoice. Also, District controls had not been established to require knowledgeable staff to independently review and approve invoices for payment of ES Fund expenditures to ensure payments are reasonable and necessary. Further, District controls were not sufficient to detect duplicate payments. Effect - The duplicate payment of $120,918 resulted in an unnecessary expenditure of ES Fund moneys and the District did not comply with Federal regulations that require all Federal expenditures to represent reasonable and necessary charges. Consequently, the ES Fund incurred questioned costs totaling $120,918. We expanded our audit procedures to determine whether other significant duplicate payments occurred from ES Fund resources and did not identify similar payments. Recommendation - District procedures should be enhanced to prevent duplicate payments from Federal programs. Such procedures should require knowledgeable staff to independently review and approve invoices for payment of ES Fund expenditures to ensure payments are reasonable and necessary. District procedures should also be enhanced to detect and promptly resolve duplicate payments when they do occur. In addition, the District should seek reimbursement of the duplicate payment from the construction service provider and consult with the grantor agency to remedy the questioned costs of $120,918. District Response - The District is in the process of reviewing and updating controls to ensure payments for construction services are made timely and consistently. The District is requesting a refund from the vendor.
Finding 2024-014 – Noncompliance with Reporting Requirements Over Federal Grant – Coronavirus State and Local Fiscal Recovery Fund (Repeat Finding – 2022-0014, 2023-0014) PASS THROUGH GRANTOR: Direct Grant FEDERAL AGENCY: U.S. Department of Treasury ASSISTANCE LISTING: 21.027 FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Reporting QUESTIONED COSTS: $0 Condition: In the review of forty-seven (47) expenditures for federal programs, eleven (11) instances were noted where the expenditures were not correctly reported on the Coronavirus State and Local Fiscal Recovery Funds compliance reports. The expenditures were not reported in the correct quarter. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are properly reported in accordance with federal compliance requirements. Effect of Condition: This condition resulted in noncompliance with grant requirements. Recommendation: OSAI recommends the County design and implement a system of internal controls to ensure the accuracy and completeness of information submitted. Management Response: Chairman of the Board of County Commissioners: The Board of County Commissioners have hired a grant administrator to assist with the reporting process. We will ensure that the reports are accurate and reported in the proper period. Criteria: GAO Standards – Section 2 – Establishing an Effective Internal Control System – OV2.23 states in part: Objectives of an Entity – Compliance Objectives Management conducts activities in accordance with applicable laws and regulations. As part of specifying compliance objectives, the entity determines which laws and regulations apply to the entity. Management is expected to set objectives that incorporate these requirements. 2 CFR § 200.303(a) Internal Controls reads as follows: The non-Federal entity must: 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). Additionally, Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting.) reads as follows: 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. In addition, where appropriate, you organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Further, 2 CFR § 200.329 Monitoring and Reporting Program Performance (c)(1) reads as follows: The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.
FINDING REFERENCE NUMBER 2024-004 FEDERAL PROGRAMS (ALN – 84.027) SPECIAL EDUCATION – GRANTS TO STATES (IDEA, PART B) (ALN – 84.196A) EDUCATION FOR HOMELESS CHILDREN AND YOUTH (ALN – 84.425D) COVID-19 EDUCATION STABILIZATION FUND: ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND (ALN – 84.425R) COVID-19 EDUCATION STABILIZATION FUND: CORONAVIRUS RESPONSE AND RELIEF SUPPLEMENTAL APPROPRIATIONS ACT, 2021 – EMERGENCY ASSISTANCE TO NON-PUBLIC SCHOOLS (CRRSA EANS) (ALN – 84.425U) COVID-19 EDUCATION STABILIZATION FUND: AMERICAN RESCUE PLAN – ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF (ARP ESSER) (ALN – 84.425V) COVID-19 EDUCATION STABILIZATION FUND: AMERICAN RESCUE PLAN – EMERGENCY ASSISTANCE FOR NON-PUBLIC SCHOOLS (ARP EANS) (ALN – 84.425W) COVID-19 EDUCATION STABILIZATION FUND: AMERICAN RESCUE PLAN – ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF – HOMELESS CHILDREN AND YOUTH (ARP HCY) (ALN – 84.938A) HURRICANE EDUCATION RECOVERY – INMMEDIATE AID TO RESTART SCHOOL OPERATIONS (RESTART) U.S. DEPARTMENT OF EDUCATION AWARD NUMBERS H027A220003 (0701/2022 – 09/30/2023); S196A220040 (0701/2022 – 09/30/2023); S196A230040 (0701/2023 – 09/30/2024); S425D210029 (01/05/2021 – 03/31/2025); S425R210053 (06/28/2021 – 03/31/2025); S425U210029 (03/24/2021 – 03/28/2026); S425V210053 (09/24/2021 – 03/28/2026); S425W210040 (04/23/2021 – 03/28/2026); S938A180002 (04/26/2018 – 09/30/2025); S938A180009 (09/29/2022 – 04/30/2026); CONSOLIDATED FUNDS COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Subpart E establish the requirements for Cost Principles – Allowable Costs under Federal awards. This Section at § 200.403 discloses factors affecting allowability of costs – states that costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; and (g) Be adequately documented. Section § 200.404 Reasonable costs add: A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost including (c) Market prices for comparable goods or services for the geographic area. Also, § 200.405 Allocable Costs include that: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received; including (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods. STATEMENT OF CONDITION During our internal control and compliance tests of disbursements for Federal programs, we selected four (4) payments of professional services of Third-Party Fiduciary Agent Services ("TPFA") as part of our samples of the different Federal major programs. During our tests, we noted the following conditions: 1. Reasonableness of costs: The payment made to the vendor is a "flat fee" monthly payment agreed to in the professional service contract. Although the vendor invoice includes a detail of hours of service and expense summary, this information is solely for "information purposes" and not to be taken into account for the actual invoice payment process. The monthly payment amount only consideration is the agreed upon "flat fee". In the invoices evaluated (see detail below), the vendor includes a total hours incurred for each invoice with a price per hour range from $195 to $695. Also, the invoices include an expense summary for the period. When we compared the actual payment to the hours incurred and related expenditures, we noted an unreasonable charge to the PRDE and its Federal funds based upon the payment being made versus the actual service hours/expenses included on the invoice; when it is compared to price estimates made during the RFP process when the per hour price ranges were from $65 to $352. VOUCHER NUMBER VOUCHER DATE VOUCHER AMOUNT INVOICE NUMBER INVOICE DATE SERVICE PERIOD TOTAL HOURS INVOICED INVOICE AMOUNT TOTAL RELATED EXPENSES AVERAGE HOURLY RATE CALCULATED 24AP7166 8/14/2023 $ 2,333,333.33 830311-2023-27 7/5/2023 June 2023 7,335.00 $ 2,333,333.33 $ 699,296.00 $ 222.77 01180123 9/6/2023 2,333,333.33 830311-2023-28 8/1/2023 July 2023 6,756.00 2,333,333.33 127,620.42 326.48 01184263 9/19/2023 2,333,333.33 830311-2023-29 9/1/2023 August 2023 7,633.30 2,333,333.33 104,084.01 292.04 01188131 10/19/2023 2,333,333.33 830311-2023-30 10/1/2023 September 2023 6,884.00 2,333,333.33 103,238.55 323.95 01195137 11/28/2023 2,333,333.33 830311-2023-31 11/1/2023 October 2023 6,929.00 2,333,333.33 137,665.35 316.88 01201906 1/10/2024 2,333,333.33 830311-2023-32 12/1/2023 November 2023 5,913.00 2,333,333.33 91,491.21 379.14 01210539 1/30/2024 476,208.71 830311-2023-33A 1/1/2024 December 2023 1,130.00 476,208.71 - 421.42 01210542 2/6/2024 1,857,124.62 830311-2023-33B 1/1/2024 December 2023 4,408.00 1,857,124.62 73,628.57 404.60 01221775 3/12/2024 2,333,333.33 830311-2024-34 2/1/2024 January 2024 6,018.00 2,333,333.33 86,982.26 373.27 01226705 4/9/2024 2,333,333.33 830311-2024-35 3/1/2024 February 2024 5,725.00 2,333,333.33 75,861.61 394.32 01235153 4/16/2024 2,333,333.33 830311-2024-36 4/1/2024 March 2024 6,200.00 2,333,333.33 109,583.33 358.67 01251041 5/23/2024 2,500,000.00 830311-2024-37 5/8/2024 April 2024 6,420.00 2,500,000.00 302,908.85 - 01261194 6/24/2024 53,700.00 830311-2024-38A 6/1/2024 May 2024 126.74 53,700.00 - 423.70 01261196 6/24/2024 1,678,208.00 830311-2024-38B 6/1/2024 May 2024 4,245.79 1,678,208.00 180,197.40 352.82 01261198 6/24/2024 768,092.00 830311-2024-38C 6/1/2024 May 2024 1,964.47 768,092.00 - 390.99 $ 28,333,333.30 $ 28,333,333.30 $ 2,092,557.56 2. Allocability – the payment made was distributed among several Federal programs and state funds as follows: CONSOLIDATED FUNDS (SEA/LEA) ALN 84.027 NON-MAJOR ALN 84.196A ALN 84.425D ALN 84.425R ALN 84.425U ALN 84.425V ALN 84.425W ALN 84.938A TOTAL ALLOCATED AMOUNT $ - $ 2,333,333.33 $ - $ - $ - $ - $ - $ - $ - $ - $ 2,333,333.33 - 2,333,333.33 - - - - - - - - 2,333,333.33 - 2,233,379.03 - 24,483.39 - - - - 75,470.91 - 2,333,333.33 2,333,333.33 - - - - - - - - - 2,333,333.33 2,333,333.33 - - - - - - - - - 2,333,333.33 - - 35,000.00 19,542.04 300,000.00 100,000.00 1,523,791.29 55,000.00 - 300,000.00 2,333,333.33 - - - - - - 476,208.71 - - - 476,208.71 1,857,124.62 - - - - - - - - - 1,857,124.62 2,333,333.33 - - - - - - - - - 2,333,333.33 2,333,333.33 - - - - - - - - - 2,333,333.33 2,333,333.33 - - - - - - - - - 2,333,333.33 2,500,000.00 - - - - - - - - - 2,500,000.00 53,700.00 - - - - - - - - - 53,700.00 1,678,208.00 - - - - - - - - - 1,678,208.00 - 65,031.74 - 63,309.25 - - 500,000.00 - 139,751.01 - 768,092.00 $ 17,755,699.27 $ 6,965,077.43 $ 35,000.00 $ 107,334.68 $ 300,000.00 $ 100,000.00 $ 2,500,000.00 $ 55,000.00 $ 215,221.92 $ 300,000.00 $ 28,333,333.30 62.67% 24.58% 0.12% 0.38% 1.06% 0.35% 8.82% 0.19% 0.76% 1.06% Based on the payment documentation of the evaluated invoices, the allocations were made based on available budget of administrative allocation of Federal awards, the invoices didn't include any basis for the allocation of costs between Federal and non-Federal funds. For example, on invoice number 830311-2023-32 the amount of $1,978,791 (85% of total invoice amount) was charged to several programs of ALN 84.425, although the services described in the invoice were not related only to these programs; therefore, the cost objective is not chargeable in accordance with the relative benefit received. In addition, several invoices for a total amount for the year of $6,965,077 or 24.58% of total payments were charged to Consolidated Funds which includes several Federal programs that could be incurred in unallowed costs. QUESTIONED COSTS Based on the Criterias established on Part II, § 200.403 and § 200.404 for Cost Principles – Allowable Costs under Federal awards, the based used for the costs distribution without specific services rendered to Federal Programs, as described in the Statement of Condition, we estimate as minimum the amount of $3,612,556.60 (including $107,334.68 on a Non-Major Program ALN 84.196A) as questioned costs for not supported documentation. This amount should increase if an evaluation of costs charged to Federal Programs included in Consolidated Funds. See also Perspective Information for more support. PERSPECTIVE INFORMATION The total contract amount awarded for the services over the two-year period is $79,675,000, with a flat fee of $3,143,750 for the first twelve months, and $3,495,833 for the next twelve months. In the fiscal year 2023 there were 3 amendments to the original contract where it was agreed to pay a total fee of $2,995,833 for the months of April and May 2023 and the total amount of $23,333,333 for 10 additional months or $2,333,333 monthly from June 2023 to March 2024. During fiscal year 2024 there were two (2) amendments to the original contract where it was agreed to pay a total monthly fee of $2,500,000 for the months of April 2024 to March 2025, and a total monthly fee of $2,375,000 for the months of April 2025 to October 2025. From the first year of the contract up to the last amendment the total contract amount is approximately $155,625,000. Based on the inconsistent cost allocation method and the lack of a requirement for the payments being made for actual works performed, we considered this a systematic problem in the contract management and payment. Based on the information provided and evaluated the allocation between Federal and non-Federal funds is not applied consistently, other eleven (11) invoices for a total amount of $17,755,699 were paid from non-Federal funds, during the fiscal year. In accordance with the documentation provided the allocation used is based on the budget amounts available from state and Federal funds; during this fiscal year the total amount paid to the supplier was $28,333,333. Of this amount 62.67% were covered with state funds, 24.58% with consolidated activities funds, and 12.75% with Federal programs funds. STATEMENT OF CAUSE The PRDE did not include on the RFP process and the contract negotiation a clause that requires that the payment of services will be made upon actual hours incurred or that a final reconciliation process will be made during the contract period of performance based on actual service hours and expense incurred. The PRDE agreed upon a "flat fee" contract based on an estimate / budget of hours presented by the vendor on its proposal without considering the requirement of adjusting the payment for actual workhours incurred as part of its contract negotiation. The PRDE staff could not provide the basis used to distribute the cost between the different programs and state funds in accordance with the benefit obtained from the costs incurred. There is no consistent treatment or basis for the allocation of the payment costs between Federal programs and state funds. The contract includes the accounting codes that can be charged for the contract costs; however, no amounts, limitations, or basis for the cost’s distributions were included on the contract or in the payment documentation. POSSIBLE ASSERTED EFFECT Unreasonable costs may be charged to the PRDE's Federal programs that may result in questionable or unallowable costs by the Federal grantors. IDENTIFICATION OF REPEAT FINDING This is a repeat finding (Finding Reference Numbers 2021-006; 2022-008; and 2023-004). RECOMMENDATIONS We recommend to the PRDE to establish an adequate and consistent allocation method of each invoice amount that reflects the relative benefits that the Federal program received from the services provided by the supplier during the invoice period, so the Federal program can be charged for the costs of that period. In addition, we recommend that the PRDE revised the contract terms to include a reconciliation of total hours and rates to adjust the payments made to the vendor before the contract expiration. Also, we recommend that the PRDE should request that adequate supporting evidence from the vendors be presented for any expenses to be reimbursed by the PRDE. VIEWS OF RESPONSIBLE OFFICIALS The PRDE does not agree with the Recommendation to establish an allocation method for TPFA invoices because TPFA services are overhead costs paid from administrative funds and are not tied to any specific federal grant. In addition, the PRDE does not agree that contract terms should be revised before the contract expiration to require a reconciliation of total hours and rates because again, payments to the TPFA are overhead costs not directly tied to any specific program. Finally, the PRDE does not agree with the recommendation that the TPFA submit supporting evidence for the reimbursement of expenses because (i) the TPFA contract is a fixed fee that is inclusive of all professional service fees and expenses and (ii) the TPFA provides an explanation of major expenses incurred within each monthly invoice. Auditor Comment on Management Response for Finding No. 2024-004 As stated in CONDITION 2., “…on invoice 830311-2023-32 the amount of $1,978,791 (85% of total invoice amount) was charged to several programs of ALN 84.425, although the services described in the invoice were not related only to these programs; therefore, the cost objective is not chargeable in accordance with the relative benefit received.” Further, the 2 CFR 200.1, establishes that: “Indirect [facilities & administrative (F&A)] costs mean those costs incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. To facilitate equitable distribution of indirect expenses to the cost objectives served, it may be necessary to establish a number of pools of indirect (F&A) costs. Indirect (F&A) cost pools must be distributed to benefitted cost objectives on bases that will produce an equitable result in consideration of relative benefits derived.” This information was not provided for our evaluation. Also, we made reference to the Program Determination Email for ALNs. 84.938 and 84.425 dated September 18, 2024 (Audit Control Number 02-21-39634), received from Ms. Catherine Miers of the Office of Elementary and Secondary Education of the US Department of Education (USDE), in which they required that the PRDE provide documentation for the following corrective actions: “revised the contract terms to include a reconciliation of total hours and rates to adjust the payments made to the vendor before the contract expiration; requested that adequate supporting evidence from the vendors be presented for any expenses to be reimbursed by the PRDE; and develop an adequate review of the vendors invoice to properly identify the actual hours of services that benefited the Federal programs so a correct allocation of the costs incurred can be made within Federal programs and state funds”. IMPLEMENTATION DATE None RESPONSIBLE PERSON Jullymar Octtaviani Vega Sub-Secretary of Administration María de los Angeles Lizardi Valdés Office of Federal Affairs Director
FINDING REFERENCE NUMBER 2024-005 FEDERAL PROGRAMS (ALN – 10.553) SCHOOL BREAKFAST PROGRAM (SBP) – CHILD NUTRITION CLUSTER (ALN – 10.555) NATIONAL SCHOOL LUNCH PROGRAM (NSLP) – CHILD NUTRITION CLUSTER (ALN – 10.559) SUMMER FOOD SERVICE PROGRAM FOR CHILDREN (SFSP) – CHILD NUTRITION CLUSTER (ALN – 10.582) FRESH FRUIT AND VEGETABLE PROGRAM (FFVP) – CHILD NUTRITION CLUSTER (ALN – 10.558) CHILD AND ADULT CARE FOOD PROGRAM (CACFP) U.S. DEPARTMENT OF AGRICULTURE (ALN – 84.010A) TITLE I GRANTS TO LOCAL EDUCATIONAL AGENCIES (TITLE I, PART A OF THE ESSEA) (ALN – 84.027) SPECIAL EDUCATION – GRANTS TO STATES (IDEA, PART B) (ALN – 84.048A) CAREER AND TECHNICAL EDUCATION – BASIC GRANTS TO STATES (PERKINS V) (ALN – 84.367A) SUPPORTING EFFECTIVE INSTRUCTION STATE GRANTS (formerly IMPROVING TEACHER QUALITY STATE GRANTS) (ALN – 84.425D) COVID-19 EDUCATION STABILIZATION FUND: ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND (ALN – 84.425U) COVID-19 EDUCATION STABILIZATION FUND: AMERICAN RESCUE PLAN – ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF (ARP ESSER) U.S. DEPARTMENT OF EDUCATION AWARD NUMBERS 1PRAEA18SCESUBA (10/01/2018 – 09/30/2019); 1PRAEA19SCESUBA (10/01/2019 – 09/30/2020); 1PRAEA20SCESUBA (10/01/2020 – 09/30/2021); 1PRAEA21SCESUBA (10/01/2021 – 09/30/2022); 1PRAEA22SCESUBA (10/01/2022 – 09/30/2023); 221PR300336E_A (10/01/2022 – 10/30/2024); S010A130052 (07/01/2013 – 09/30/2014); S010A140052 (07/01/2014 – 09/30/2015); S010A160052 (07/01/2015 – 09/30/2016); S010A160052 (07/01/2016 – 09/30/2017); H027A12003 (07/01/2012 – 09/30/2013); H027A14003 (07/01/2014 – 09/30/2015); H027A15003 (07/01/2015 – 09/30/2016); H027A18003 (07/01/2018 – 09/30/2019); H027A19003 (07/01/2019 – 09/30/2020); H027A20003 (07/01/2020 – 09/30/2021); H027A21003 (07/01/2021 – 09/30/2022); V048A180052 (07/01/2018 – 09/30/2019); S367A160052E (07/01/2016 – 09/30/2017); S425D200029 (06/16/2020 – 09/30/2021); S425D210029 (01/05/2021 – 03/31/2025); S425U210029 (03/24/2021 – 03/28/2026) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR Section 200.403 (g) establishes that except where otherwise authorized by statute, costs must be adequately documented in order to be allowable under Federal awards. In addition 2 CFR Section 200.1, defines improper payments as a payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. The term improper payment includes any payment to an ineligible recipient, any payment for ineligible goods or service, any duplicate payment, any payment for a good or service not received (except for those payments where authorized by law), any payment that is not authorized by law, and any payment that does not account for credit for applicable discounts. STATEMENT OF CONDITION As part of our audit procedures and interviews over financial reporting, we obtained a detail of accounts receivable related to duplicate or incorrect payments made for payroll transactions in the amount of $4,659,739. Invoices issued during the fiscal year ended June 30, 2024, balance, were distributed as federal and state, as follows: ALN Number Transaction Balance 10.553/ 10.555/ 10.559/ 10.582 $ 167,694 10.558 1,240 84.010A 64,517 84.027A 228,284 84.041 546 84.048A 4,802 84.367A 1,027 84.425D 35,165 84.425U 27,501 Not Determined 2,357,671 Not Determined 25,907 Not Applicable 1,745,385 $ 4,659,739 Title I Grants to Local Educational Agencies (Title I, Part A of the ESEA) Special Education - Grants to States (IDEA, Part B) Impact Aid (Title VII of ESEA) Program Description Child Nutrition Cluster Child and Adult Care Food Program (CACFP) Supporting Effective Instruction State Grants (formerly Improving Teacher Quality State Grants) COVID-19 Education Stabilizatiopn Fund: Elementary and Secondary School Emergency Relief Fund (ESSER) Total Invoices Issued Balance at 06/30/2024 Career and Technical Education - Basic Grants to States (Perkins V) Schoolwide Program (State and Federal Funds) Consolidated Funds (State and Federal Funds) State Funds COVID-19 Education Stabilizatiopn Fund: American Rescue Plan – Elementary and Secondary School Emergency (ARP ESSER) QUESTIONED COSTS Identified questioned costs are $530,776, which were identified as employees that didn't work for the Federal program. Other amount may be unallowed, if the PRDE can identify the portion of Federal funding incurred in Schoolwide and Consolidated activities. PERSPECTIVE INFORMATION The amount of $4,659,739, corresponds to incorrect payroll payments made from current and prior years, for which during fiscal year 2023-2024, the PRDE determined that an invoice for excess payroll payments proceeds. The PRDE was unable to indicate which amount of Schoolwide or Consolidated funds corresponds to Federal funding, because these funds close at year end. STATEMENT OF CAUSE The PRDE sends the Treasury Department of Puerto Rico a balance of the payroll, before the end of the fortnight, to speed up the payment process. By sending this information without balancing the hours worked, it causes errors in the payroll computations. POSSIBLE ASSERTED EFFECT The PRDE incurred payments to employees for hours not worked, and for which specific grants were received. IDENTIFICATION OF REPEAT FINDING This is a repeat finding (Finding Reference Number 2023-005). RECOMMENDATIONS We recommend PRDE design and implement adequate internal controls and payroll processes that will identify in real – time or sooner any incorrect payroll payment made. FINDING REFERENCE NUMBER 2024-005 – continuation VIEWS OF RESPONSIBLE OFFICIALS Management agrees with the audit finding and has implemented a comprehensive corrective action plan to address payroll processing errors, strengthen internal controls, and ensure accurate and timely payments. As part of PRDE’s Fiscal Plan of 2020–2021, the Department launched the official integration project between the Time, Attendance, and Leave (TAL) system and the Payroll (RHUM) system. This integration ensures that payroll disbursements are made only after the employee’s attendance has been validated through the TAL system. Employees are required to record their attendance using biometric verification or have an authorized leave properly documented and approved by their supervisor before receiving payment. If attendance is not validated, the system automatically issues a notification and applies the necessary adjustment. This project, initiated in November 2020 with the collaboration of the Puerto Rico Fiscal Oversight and Management Board (FOMB), MS Consulting, the Department of the Treasury (Hacienda), the Financial Advisory Authority (AAFAF), and the Puerto Rico Innovation and Technology Service (PRITS), was fully integrated by February 2021. As a result, PRDE has significantly reduced overpayments, duplicate payments, and other payroll inconsistencies. To reinforce this effort, PRDE issued a new Time and Attendance Policy on December 7, 2021, later updated on April 11, 2022, which clearly defines employee responsibilities, authorized leaves, disciplinary procedures, and supervisor accountability. Under this policy, employees and supervisors are required to follow strict timekeeping procedures, and noncompliance triggers automatic system notifications and salary adjustments. The PRDE’s Time and Attendance staff continues to monitor and maintain compliance through: i. Ongoing training sessions for PRDE personnel; ii. System dashboards tracking attendance behaviors; iii. Issuance of notifications and payroll adjustments as required; and iv. Regular follow-up and evaluation activities. Additionally, PRDE’s Finance Office implemented a reconciliation process that integrates data from TAL, RHUM, and SIFDE, ensuring that payroll expenditures align with validated attendance records. The system now performs cross-checks before submission to the Treasury Department, preventing disbursements for unverified time. These combined measures—technological integration, policy enforcement, staff training, and reconciliation controls—have strengthened payroll accuracy, reduced the risk of overpayments, and improved financial accountability across the Department. IMPLEMENTATION DATE Done RESPONSIBLE PERSON Evelyn Rodríguez Cardé Finance Office Director Jullymar Octtaviani Vega Sub-Secretary of Administration
Finding 2024-013 – Noncompliance with Reporting Requirements Over Federal Grant Coronavirus State and Local Fiscal Recovery Funds (Repeat Finding – 2022-013, 2023-013) PASS-THROUGH GRANTOR: Direct Grant FEDERAL AGENCY: U.S. Department of Treasury ASSISTANCE LISTING: 21.027 FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Reporting QUESTIONED COSTS: $-0- Condition: The County has not established internal controls to ensure the correct expenditure category is used for reporting payments to the grant administrative contractor. The quarterly reports improperly classified payments totaling $29,578 to a contractor as a ‘Revenue Replacement’ expense instead of using the ‘Administrative’ expense category. Also, the quarterly reports improperly classified payments totaling $513,944 for the Resurrection House as a ‘Revenue Replacement’ expense instead of using the ‘Negative Economic Impact’ expense category as stated in the agreement with the Board of County Commissioners. This entity was also not reflected as a Beneficiary in the quarterly reports. Further, subrecipient agreements for the following pass-through entities were signed and approved by the Board of County Commissioners; however, the entities were not reported as subrecipients in the quarterly reports: • Town of Rush Springs • Grady County Rural Water #6 • Grady County Rural Water #7 • City of Chickasha • City of Minco Additionally, the expense category listed in the quarterly reports differs from the expense category listed in the subrecipient agreements for the following entities: • City of Chickasha • City of Minco Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition could result in noncompliance to grant requirements. Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements. Management Response: Chairman of the Board of County Commissioners: The Board of County Commissioners will take measures to ensure future compliance with all requirements of federal grants. Criteria: Accountability and stewardship should be overall goals in management’s accounting of federal funds. Internal controls should be designed to monitor compliance with laws and regulations pertaining to grant contracts. Title 2 CFR § 200.303(a) Internal Controls reads (a) reads as follows: The non-Federal entity must: 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 Controls Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting.) reads as follows: 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. In addition, where appropriate, your organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Further, 2 CFR § 200.329 Monitoring and Reporting Program Performance (c)(1) reads as follows: The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.
Criteria or specific requirement: Per 2 CFR section 200.303(a), the Department must: 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). Title 2 – Grants and Agreements. Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. §200.332 Requirements for pass-through entities (2 CFR 200.332): All pass-through entities must: (a) Verify that the subrecipient is not excluded or disqualified in accordance with §180.300. Verification methods are provided in §180.300, which include confirming in SAM.gov that a potential subrecipient is not suspended, debarred, or otherwise excluded from receiving Federal funds. (b) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. 1) Federal award identification. a) Subrecipient name (which must match the name associated with its unique entity identifier); b) Subrecipient’s unique entity identifier; c) Federal Award Identification Number (FAIN); d) Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency; e) Subaward Period of Performance Start and End Date; f) Subaward Budget Period Start and End Date; g) Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; h) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; i) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; j) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); k) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; l) Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; m) Identification of whether the award is R&D; and n) Indirect cost rate for the Federal award (including if the de minimis rate is charged) per §200.414. (c) Evaluate each subrecipient’s fraud risk and risk of noncompliance with a subaward to determine the appropriate subrecipient monitoring described in paragraphs (f) of this section. When evaluating a subrecipient’s risk, a passthrough entity should consider the following: 1) The subrecipient’s prior experience with the same or similar subawards: 2) The results of previous audits. This includes considering whether or not the subrecipient receives a Single Audit in accordance with Subpart F and the extent to which the same or similar subawards have been audited as a major program; 3) Whether the subrecipient has new personnel or new or substantially changed systems; and 4) The extent and results of Federal agency monitoring (for example, if the subrecipient also receives Federal awards directly from the Federal agency). Condition: Public Health established a formal risk assessment process over its subrecipients of federal awards by which to determine the frequency and extent of subrecipient monitoring to be performed, however the process was established after the period under audit and applied prospectively. In addition, Public Health used a Department Allocation Letter (DAL) for the COVID-19 program instead of an agreement or contract for the subaward to subrecipients. Certain required information for the subaward federal award information such as Assistance Listings number and Title and Federal Award Identification Number (FAIN) were not clearly identified in the DAL. Questioned costs: None Context: See “Condition.” Cause: Procedures to ensure that all relevant information is included in the grant agreements and risk assessments are performed were not in place at the time of the agreements which resulted in the oversight. Effect: By not properly evaluating the risk of noncompliance, Public Health may inadvertently award grant funds to subrecipients who lack the necessary mechanisms or understanding to comply with federal statutes. This increases the likelihood of noncompliance arising during the performance of the grant-funded activities. Furthermore, failure to provide the necessary documentation to subrecipients may result in misuse or misreporting of funding. Repeat Finding: This was reported in the previous year as finding 2023-009. Recommendation: Public Health should ensure every subaward includes all requirements imposed on the subrecipient so that the federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the federal award. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Finding: Failure to adequately document adherence to procurement compliance requirements Criteria: Per the Office of Management and Budget Compliance Supplement (2 CFR Part 200, Appendix XI), procurement is a relevant compliance requirement for recipients of federal funding under the Unaccompanied Children Program. The recipient must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award, and administration of contracts. Further, they must follow proper procurement procedures. • Procurement records. The recipient or subrecipient must maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract price. • Formal procurement methods. Formal procurement methods are required when the value of the procurement transaction under a Federal award exceeds the simplified acquisition threshold of the recipient or subrecipient. Formal procurement methods are competitive and require public notice. • Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT) ($250,000), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include micro-purchases (generally, the acquisition of supplies or services whose aggregate amount does not exceed $10,000) and small purchases (the acquisition of property or services where the aggregate dollar amount is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity.Condition and Context: During our audit, we identified significant expenditures categorized as Cleaning Expense and Repairs and Maintenance charged to the Unaccompanied Minor Programs paid to one vendor (“the Contractor”). Review of the Cayuga Centers website shows that a member of the Board of Directors during the period under audit was also the owner of the Contractor. We inquired with management if the Organization went out to bid on the renovations charged to repairs and maintenance in the current year. Management noted that at the start of the UC Transitional Contract, the President at that time met with several vendors regarding work to be done on the building. As the Contractor was already doing other work for the building, the President made the decision to continue using the Contractor. The President has since separated from the Organization and management was unable to provide any official documentation regarding bid/price comparisons made. The Organization provided emails dated throughout 2014 which included fragmented information regarding management contacting contractors at that time. The information provided was not sufficient to support the assertion that management followed proper procedures with respect to obtaining bids for significant procurement activities in fiscal year ended June 30, 2024. In addition to the renovations, the total amounts paid for repairs, security, and maintenance exceeded the micro-purchase threshold and therefore should have documentation regarding the procurement decisions. Amounts charged to the grant are listed below. Cause: The Organization was unable to provide proof of proper procurement procedures being followed for expenditures paid to the Contractor due to the former President separating from the Organization and not maintaining relevant documentation. Result: Amounts paid to the Contactor for renovations are included in the Summary of Unallowable Costs. See finding 2024-011. Amounts paid to the contractor for repairs, security, and maintenance are included in the Summary of Questioned Costs for failure to adequately document the use of proper procurement procedures. In several instances, these expenses also resulted in the Organization going over the total approved budget by cost category. See the Summary of Questioned Costs for detail. Recommendation: We recommend the Organization establish procedures to review significant recurring expenditures to ensure they are following the procurement procedures as required under the Code of Federal Regulations and Compliance Supplement.
2024-001 Reporting (Significant Deficiency in Internal Controls over Compliance) Assistance Listing Number(s): 21.027 Name of Federal Program: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award Number: N/A Award Year: 2021 Criteria: Federal reporting requirements mandate that all recipients of federal funds submit financial, performance, and compliance reports as specified in Part 2 of the Uniform Guidance. Expenditures may be reported on either a cash or accrual basis, provided that the chosen method is clearly disclosed and applied consistently. All reported expenditures must align with the definition set forth in 2 CFR 200.1. Additionally, organizations are required to maintain accurate and complete accounting records to support the preparation and submission of compliant financial data, in accordance with applicable accounting standards and principles. Condition: During fiscal year 2024, the City submitted a Coronavirus State and Local Fiscal Recovery Fund Annual Project and Expenditure report with the incorrect current period expenditures amount and total cumulative obligations and expenditures. Context: During our testing we noted that the expenditures reported on the Annual Project and Expenditure report did not agree to the accounting records by a difference of $41,127 for the current period and accumulated expenditures. Cause: The City did not properly reconcile expenditures between internal records and amounts reported and no review was performed prior to submission. Effect: The Annual Project and Expenditure report was filed with incorrect current period and accumulated expenditures. Questioned Costs: None Repeat finding: No Recommendation: We recommend City management reconcile internal records with reports prior to submission. We also recommend City management submit corrected reports as needed, and corrected reports should be submitted by no later than the final report due date. Views of Responsible Officials: Management agrees with this finding.
FINDING 2024-009 Subject: Special Education Cluster (IDEA) - Period of Performance Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 21611-045-PN01, 22611-045-PN01, 22611-045-ARP, 21619-045-PN01, 22619-045-PN01, 22619-045-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Period of Performance Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-009. Condition and Context The School Corporation had not properly designed or implemented a system of internal controls to ensure transactions made with the Special Education Grant funding occurred within the appropriate period of performance. Claims for the Special Education programs were paid without an appropriate level of review or oversight to ensure the expenditures charged to each grant were within the allowed time frame. Although the reimbursement requests submitted to the Indiana Department of Education were prepared by the Director of Business and approved by the Director of Special Education, the School Corporation was unable to provide tangible audit evidence of this review and approval process, which may have included a review of the costs included on each request to verify they were within the correct period of performance. The lack of effective internal controls resulted in the following errors: • A total of 21 of the 60 items tested were incurred after the period of performance for a total of $22,845. • A total of 11 of the 60 items tested were liquidated after the allowed time period for a total of $2,817. • Of the 23 adjustments tested, there were 6 adjustments that were for an expense that was incurred after the period of performance for a total of $23,430. The lack of 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 34 NORTH LAWRENCE COMMUNITY SCHOOLS 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). . . ." 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. . . . Period of performance means the total estimated time interval between the start of an initial Federal award and the planned end date, which may include one or more funded portions, or budget periods. Identification of the period of performance in the Federal award per § 200.211(b)(5) does not commit the awarding agency to fund the award beyond the currently approved budget period. . . . Unliquidated financial obligations means, for financial reports prepared on a cash basis, financial obligations incurred by the non-Federal entity that have not been paid (liquidated) . . ." Cause Due to turnover of staffing in both the Special Education personnel and the School Corporation's administrative office, the School Corporation's management had not developed nor implemented a system of internal controls that would have ensured compliance with the grant agreement and the Period of Performance compliance requirement. The School Corporation had not filed reimbursement requests in a timely manner. Effect The failure to establish an effective system of internal controls placed the School Corporation at risk of noncompliance with the grant agreement and the Period of Performance compliance requirement. This resulted in grant expenditures being obligated and liquidated outside of the period of performance. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs We identified $49,092 in known questioned costs as noted above in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls, which includes ensuring grant expenditures are obligated and liquidated timely to ensure compliance with the grant agreement and the Period of Performance compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-010 Subject: Special Education Cluster (IDEA) - Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 21611-045-PN01, 22611-045-PN01, 22611-045-ARP, 21619-045-PN01, 22619-045-PN01, 22619-045-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the Procurement and Suspension and Debarment compliance requirement. Procurement - Small Purchases Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a nonfederal entity. As Indiana Code has set a more restrictive threshold of $150,000, the informal procurement method is permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds: micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The population for those procurements that fell within the small purchase range consisted of three vendors with a total purchased amount from those vendors of $75,284. The School Corporation did not provide adequate documentation detailing the history of procurement, which must include the reason for the procurement method used, for all three vendors. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAM exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. One vendor provided contracted services paid with Special Education Grant funds during the audit period totaling $44,827. Upon inquiry of the School Corporation, it was determined that the School Corporation did not verify that the contractor was not suspended, debarred, or otherwise excluded. INDIANA STATE BOARD OF ACCOUNTS 36 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of effective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 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. 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). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use document procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases— (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." INDIANA STATE BOARD OF ACCOUNTS 37 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Indiana Code 5-22-8-3 states in part: "(a) . . . if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). . . . (d) . . . the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to affect internal controls, and procedures should consist of actions that would implement these policies. 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. As a result, procurement procedures for goods and services were not adhered to, and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure there are appropriate procurement procedures for goods and services and contractors and subrecipients, as appropriate, are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. INDIANA STATE BOARD OF ACCOUNTS 38 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FA 2024-002 Strengthen Controls over Journal Entries Compliance Requirements: Activities Allowed or Unallowed Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Agriculture Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: 10.553 – School Breakfast Program 10.555 – National School Lunch Program COVID-19 – 10.555 – National School Lunch Program Federal Award Numbers: 245GA32N1199 (Year: 2024), 225GA324N1099 (Year: 2024) Questioned Costs: Unknown Description: The policies and procedures of the School District were insufficient to ensure that journal entries made for the Child Nutrition Cluster were properly documented. Background Information: The Child Nutrition Cluster (CNC) is comprised of various programs that are intended to assist states in administering and overseeing food service program operators that provide healthful, nutritious meals to eligible children in public and non-profit private schools, residential childcare institutions, and summer programs. This Cluster of programs also fosters healthy eating habits in children by providing fresh fruits and fresh vegetables to children attending elementary and secondary schools and encourages the domestic consumption of nutritious agricultural commodities. CNC funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Agriculture. GaDOE is responsible for distributing funds to local educational agencies (LEAs) and overseeing the various CNC programs. CNC funds totaling $2,692,854.62 were expended and reported on the Monroe County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” In addition, provisions included in the Uniform Guidance, Section 200.404 – Reasonable Costs state that “a cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: (a) Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award. (b) The restraints or requirements imposed by such factors as: sound business practices; arm’s-length bargaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award… (d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal Government. (e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award’s cost.” Furthermore, provisions included in the Uniform Guidance, Section 200.1 state “Improper payment means: (1) Any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. (v) The term ‘‘payment’’ in this definition means any disbursement or transfer of Federal funds (including a commitment for future payment, such as cash, securities, loans, loan guarantees, and insurance subsidies) to any non-Federal person, non-Federal entity, or Federal employee, that is made by a Federal agency, a Federal contractor, a Federal grantee, or a governmental or other organization administering a Federal program or activity.” Lastly, provisions included in Title 34 CFR Section 210.14(a) state that “school food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved… FNS, or to construct buildings.” Condition: Auditors performed a review of transfer activity associated with CNC to determine if appropriate internal controls were implemented and applicable compliance requirements were met. This testing revealed that journal entries utilized to transfer cash totaling $6,000,000 from the School Nutrition Fund to the General Fund were not properly supported by adequate documentation. Questioned Costs: Though questioned costs may exist, these amounts are unknown as adequate documentation to support the transfer of $6,000,000 in cash was not maintained. Cause: The School District transferred funds from the School Nutrition Fund to the General Fund in an attempt to reimburse the General Fund for several years’ worth of salary payments made on behalf of the School Food Service program; however, adequate documentation was not maintained due to oversight. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance or GaDOE guidance related to the CNC programs. Failure to ensure that appropriate policies and procedures are followed when managing federal funds may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unallowable transfers. Recommendation: The School District should review current internal control procedures related to School Nutrition Fund journal entries. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all journal entries, including transfers, are supported by adequate documentation. In addition, the transfer of cash associated with salary reimbursements should be made on a more timely basis and supported by payroll data. Furthermore, the School District should implement a monitoring process to ensure that all journal entry activity is compliant with the School District’s policies and procedures. Views of Responsible Officials: We concur with this finding.
Condition: Expenditures for federal program, Coronavirus State and Local Fiscal Recovery Funds were not accurately reported on the Compliance Report. Federal expenditures were underreported by $753,744. The County reported $0, resulting in an understatement of $753,744 This was due to the County failing to report expenditures on a cash basis. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition could result in noncompliance with grant requirements. Recommendation: OSAI recommends the County gain an understanding of the grant requirements for this program and implement internal controls to ensure compliance with these grant requirements. Management Response: Chairman of the Board of County Commissioners: This issue originated under the prior County Clerk’s administration where key reporting processes were not followed. The Board of County Commissioners and the other elected officials have made correcting this a top priority. Together, we are: • developing a comprehensive SOP to ensure accurate and timely tracking and reporting of federal funds, • improving communication and oversight between all county offices to ensure consistent reporting standards, • and ensuring annual compliance with federal reporting requirements. Our collective goal is to implement the policies and structures that will keep Osage County operating with the highest standard of accountability and excellence. County Clerk: I was not the County Clerk in office at this time. To correct this issue. the County plans to develop a SOP to timely and accurately track and report on federal funds. The SOP will be reviewed, adopted, and monitored by the Board of County Commissioners. County Treasurer: The County was under the understanding that once we established we were reporting as Loss Revenue, we would not have to submit the report annually. The final reporting was submitted prior to deadline. Criteria: Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting.) reads as follows: 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. In addition, where appropriate, you organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Further, 2 CFR § 200.329 Monitoring and Reporting Program Performance (c)(1) reads as follows: The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.
Federal Agency: United States Department of Education Federal Program: Rehabilitation Services Vocational Rehabilitation Grants to States (84.126) Federal Award Number: H126A220047(SED) Federal Award Year: 2024 State Agency: State Education Department Reference: 2024-003 Criteria Period of Performance Under section 111(a)(1) of the Rehabilitation Act, the Department pays to each state each federal fiscal year an amount equal to the federal share of the cost of providing VR services and administering the VR program. Consistent with the definition of “period of performance” at 2 CFR section 200.1 and the requirements governing information that must be contained in a GAN at 2 CFR section 200.211, the VR GAN specifies the beginning and end dates for each VR grant award. Therefore, state VR agencies may incur obligations or make expenditures under a grant award if they are incurred during the period of performance for that award. Any obligations or expenditures incurred outside of that period of performance would need to be paid with funds available from a different VR grant award. Internal controls Lastly, 2 CFR 200.303(a) states the non-federal entity must 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). Condition The New York State Education Department (SED) did not maintain complete data along with the supporting documentation to ensure compliance over the period of performance requirements for the VR program. A sample of 40 transactions was selected from SED records. For each case, an invoice, pay period, and/or manual journal entries were tested to verify the data reported in the NYGR0302 report. It was also checked to ensure that the disbursement was properly reviewed, approved, and that the selected amount met the requirement of an allowable activity incurred during the period of performance and liquidated within the required time period. During our review of fiscal year 2024 transactions, we identified that 5 out of the 40 sampled transactions occurred outside the designated period of performance. The grant award period ended on September 30, 2023, with a liquidation period extending 120 days beyond that date, until January 28, 2024. Specifically, for grant number H126A220047, these 5 transactions were incurred in either October or December 2023, which is after the designated period of performance. The review process performed by SED did not detect these transactions were outside the period of performance. Cause The condition related to a deficiency in the operation of the review process not occurring at a precision necessary to identify missing information during the review that is required to be in compliance with the grant’s period of performance. Possible Asserted Effect The identified issue of a transaction occurring outside the period of performance and being liquidated beyond the required liquidation period results in questioned costs of the VR program administered by SED, may result in financial penalties, reduced future federal funding, and potential repayment of misused federal funds. Questioned Costs $12,332 (representing the 5 transactions found to have occurred outside the specified period of performance. The population amounted to $4,448,032, of which forty, totaling $2,081,429, were selected for test work.) Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend SED implement a new control mechanism for reviewing funds before distribution. This control should include a pre-distribution review process with a dedicated team or staff verifying the period of performance for each VR grant award, ensuring all obligations and expenditures fall within the specified dates. Additionally, an automated system or manual control is recommended to be developed or enhanced to flag any transactions outside the period of performance or liquidation period.
Federal Agency: United States Department of Education Federal Program: Rehabilitation Services Vocational Rehabilitation Grants to States (84.126) Federal Award Number: H126A220047(SED) Federal Award Year: 2024 State Agency: State Education Department Reference: 2024-003 Criteria Period of Performance Under section 111(a)(1) of the Rehabilitation Act, the Department pays to each state each federal fiscal year an amount equal to the federal share of the cost of providing VR services and administering the VR program. Consistent with the definition of “period of performance” at 2 CFR section 200.1 and the requirements governing information that must be contained in a GAN at 2 CFR section 200.211, the VR GAN specifies the beginning and end dates for each VR grant award. Therefore, state VR agencies may incur obligations or make expenditures under a grant award if they are incurred during the period of performance for that award. Any obligations or expenditures incurred outside of that period of performance would need to be paid with funds available from a different VR grant award. Internal controls Lastly, 2 CFR 200.303(a) states the non-federal entity must 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). Condition The New York State Education Department (SED) did not maintain complete data along with the supporting documentation to ensure compliance over the period of performance requirements for the VR program. A sample of 40 transactions was selected from SED records. For each case, an invoice, pay period, and/or manual journal entries were tested to verify the data reported in the NYGR0302 report. It was also checked to ensure that the disbursement was properly reviewed, approved, and that the selected amount met the requirement of an allowable activity incurred during the period of performance and liquidated within the required time period. During our review of fiscal year 2024 transactions, we identified that 5 out of the 40 sampled transactions occurred outside the designated period of performance. The grant award period ended on September 30, 2023, with a liquidation period extending 120 days beyond that date, until January 28, 2024. Specifically, for grant number H126A220047, these 5 transactions were incurred in either October or December 2023, which is after the designated period of performance. The review process performed by SED did not detect these transactions were outside the period of performance. Cause The condition related to a deficiency in the operation of the review process not occurring at a precision necessary to identify missing information during the review that is required to be in compliance with the grant’s period of performance. Possible Asserted Effect The identified issue of a transaction occurring outside the period of performance and being liquidated beyond the required liquidation period results in questioned costs of the VR program administered by SED, may result in financial penalties, reduced future federal funding, and potential repayment of misused federal funds. Questioned Costs $12,332 (representing the 5 transactions found to have occurred outside the specified period of performance. The population amounted to $4,448,032, of which forty, totaling $2,081,429, were selected for test work.) Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend SED implement a new control mechanism for reviewing funds before distribution. This control should include a pre-distribution review process with a dedicated team or staff verifying the period of performance for each VR grant award, ensuring all obligations and expenditures fall within the specified dates. Additionally, an automated system or manual control is recommended to be developed or enhanced to flag any transactions outside the period of performance or liquidation period.
FINDING 2023-002 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): SLFRP2971 Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates are based upon type of recipient and its 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 was classified as a county with a population below 250,000 residents that was allocated less than $10 million in State and Local Fiscal Recovery Funds funding. As such, the P&E report, covering the period April 1, 2022 to March 31, 2023, was required to be submitted to the Treasury by April 30, 2023. The subsequent annual reports are to cover one year from April 1 to March 31 and must be submitted to the Treasury by April 30 of each year. INDIANA STATE BOARD OF ACCOUNTS 15 RIPLEY COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The County submitted the P&E report by April 30, 2023, as required; however, a single employee prepared and submitted the P&E report without a review or oversight process in place to prevent, or detect and correct, errors. As a result, the report included projects with current period obligations and cumulative obligations totaling $3,319,955 that had not yet been obligated by the end of the reporting period. The lack of 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: (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). . . ." 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. . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10 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. . . ." Cause A proper system of internal controls, including policies and procedures, was not designed or implemented by management of the County to prevent and detect errors on the P&E report prior to submission. Effect Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, the County did not accurately report current period obligations and cumulative obligations when filing the P&E report for the period April 1, 2022 to March 31, 2023. Noncompliance with the provisions of federal regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the County. INDIANA STATE BOARD OF ACCOUNTS 16 RIPLEY COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight of federal reports are taking place. We also recommended the development of policies and procedures to ensure the County provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 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): FY2023 Compliance Requirement: Reporting Audit Finding: Significant Deficiency Condition and Context Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its 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 Town was classified as a metropolitan town with a population below 250,000 residents that received an allocation of less than $10 million in COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF). As such, the initial P&E report, covering the period from March 3, 2021 to March 31, 2022, was required to be submitted to the Treasury by April 30, 2022. The subsequent annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year. The Town submitted one P&E report during the audit period as required; however, there were no internal controls in place that would likely be effective in preventing, or detecting and correcting, noncompliance related to the P&E report. The Clerk-Treasurer prepared and submitted the report without an oversight or review process. The lack of internal controls and noncompliance were systematic issues throughout the audit period. Criteria 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. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 TOWN OF BROWNSBURG SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, 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 The Town did not implement an effectively designed system of internal controls over reporting. There was no indication of internal controls in place over Reporting. Effect Without the proper implementation of an effectively designed system of internal controls over Reporting, the Town cannot ensure that the reports submitted are materially accurate and correct. If there was a proper implementation of an effectively designed system of internal controls over Reporting, the Town would be able to detect any errors prior to submission. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the Town design and implement a proper system of internal controls, including policies and procedures to ensure that the Town provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-002 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): FY 2023 Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-004. Condition and Context The County had not properly designated or implemented a system of internal controls, which would include appropriate segregation of duties that would likely be effective in preventing, or detecting and correcting, noncompliance. A single employee prepared and submitted reports without a documented review or oversight process in place to prevent, or detect and correct, errors. Recipients are required to submit quarterly or annual Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon the type of recipient and its 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 was classified as a metropolitan county with a population below 250,000 residents that received an allocation of more than $10 million in State and Local Fiscal Recovery Funds (SLFRF). As such, the initial P&E report covering three calendar quarters from March 3, 2021 to December 31, 2021, was required to be submitted to the Treasury by January 31, 2022. The subsequent quarterly reports are to cover one calendar quarter and must be submitted to the Treasury by the last day of the month following the end of the period covered. INDIANA STATE BOARD OF ACCOUNTS 18 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The County submitted three P&E reports during the audit period. No report was submitted for the period of October 1, 2022 to December 31, 2022, although there was activity during this time period. For the three reports submitted, all activity for the reporting period was not included, and the reports were not fairly presented. Errors identified included the following: Quarter 1 report (January 1, 2023 to March 31, 2023) Total Cumulative Obligations and Total Cumulative Expenditures were understated by $399,741. Current Period Obligations and Current Period Expenditures were understated by $58,730. Quarter 2 report (April 1, 2023 to June 30, 2023) Total Cumulative Obligations and Current Period Expenditures were understated by $968,137. Current Period Obligations and Current Period Expenditures were understated by $558,396. Quarter 3 report (July 1, 2023 to September 30, 2023) Total Cumulative Obligations and Total Cumulative Expenditures were understated by $1,325,566. Current Period Obligations and Current Period Expenditures were understated by $357,429. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 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. 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). . . ." 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, . . ." INDIANA STATE BOARD OF ACCOUNTS 19 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, 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. . . ." Cause A proper system of internal controls over the P&E reports was not designed by management of the County. The County was unable to provide documentation that a proper review of the P&E reports showing a reconciliation between amounts reported and amounts expended from federal funds was done prior to submission of the report. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the County's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the County cannot ensure reports are filed and that filed reports accurately report their SLFRF activity. As such, the County's SLFRF obligations and expenditures were not appropriately reported to the Treasury. In addition to not meeting the SLFRF reporting requirements, this increases the likelihood that the public will not have access to transparent and accurate information regarding expenditures of federal awards. 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. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County design and implement a proper system of internal controls to ensure that all reports are filed with the Treasury. Additionally, management should develop policies and procedures to ensure that information provided to the Treasury is complete and accurate. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Subrecipient Monitoring 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): FY 2023 Compliance Requirement: Subrecipient Monitoring Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-005. Condition and Context The County received a total State and Local Fiscal Recovery Funds (SLFRF) allocation of $13,177,707. During the audit period, the County provided subawards of SLFRF funds to other entities. As a pass-through entity, the County must: Identify the award and the applicable requirements to each subrecipient. Evaluate each subrecipient's risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward. Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for an authorized purpose, complies with the terms and conditions of the subaward, and achieves performance goals. Subawards, totaling $290,000, were provided to two different entities. Both subrecipient agreements associated with the subawards were selected for testing. For the two agreements tested, the following information was incomplete or missing: The federal award identification number (FAIN). The federal award date of award to the recipient by the federal agency. The name of the federal awarding agency, pass-through entity (auditee), and contact information for awarding official of the pass-through entity (auditee). The Assistance Listings Number and Title; the pass-through entity must identify the dollar amount made available under each federal award and the Assistance Listings Number at time of disbursement. Furthermore, the County did not have an evaluation of the subrecipients' risk of noncompliance or monitoring activities demonstrating compliance with the subrecipient monitoring requirement. The County did not request any financial or audit documentation from the subrecipients. The lack of internal controls and noncompliance were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 21 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 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. 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). . . ." 2 CFR 200.331(a) states: "Subrecipients. A subaward is for the purpose of carrying out a portion of a Federal award and creates a Federal assistance relationship with the subrecipient. See definition for Subaward in § 200.1 of this part. Characteristics which support the classification of the non-Federal entity as a subrecipient include when the non-Federal entity: (1) Determines who is eligible to receive what Federal assistance; (2) Has its performance measured in relation to whether objectives of a Federal program were met; (3) Has responsibility for programmatic decision-making; (4) Is responsible for adherence to applicable Federal program requirements specified in the Federal award; and (5) In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity." 2 CFR 200.332 states in part: "All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward . . . (1) Federal award identification. (i) Subrecipient name (which must match the name associated with its unique entity identifier); (ii) Subrecipient's unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency; INDIANA STATE BOARD OF ACCOUNTS 22 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (v) Subaward Period of Performance Start and End Date; (vi) Subaward Budget Period Start and End Date; (vii) Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the passthrough entity including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the passthrough entity; (x) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; (xii) Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; (xiii) Identification of whether the award is R&D; and (xiv) Indirect cost rate for the Federal award (including if the de minimis rate is charged) per § 200.414. (2) All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award; (3) Any additional requirements that the pass-through entity imposes on the subrecipient in order for the pass-through entity to meet its own responsibility to the Federal awarding agency including identification of any required financial and performance reports; (4) (i) An approved federally recognized indirect cost rate negotiated between the subrecipient and the Federal Government. If no approved rate exists, the passthrough entity must determine the appropriate rate in collaboration with the subrecipient, which is either: (A) The negotiated indirect cost rate between the pass-through entity and the subrecipient; which can be based on a prior negotiated rate between a different PTE and the same subrecipient. If basing the rate on a previously negotiated rate, the pass-through entity is not required to collect information justifying this rate, but may elect to do so; (B) The de minimis indirect cost rate. INDIANA STATE BOARD OF ACCOUNTS 23 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (ii) The pass-through entity must not require use of a de minimis indirect cost rate if the subrecipient has a Federally approved rate. Subrecipients can elect to use the cost allocation method to account for indirect costs in accordance with § 200.405(d). (5) A requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient's records and financial statements as necessary for the pass-through entity to meet the requirements of this part; and (6) Appropriate terms and conditions concerning closeout of the subaward. (b) Evaluate each subrecipient's risk of noncompliance with Federal statues, regulations, and the terms and conditions of the subaward for purposes of determined the appropriate subrecipient monitoring . . . (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) Reviewing financial and performance reports required by the pass-through entity. (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. . . ." Cause The system of internal controls as established by the management of the County was not properly designed nor implemented. The County was unable to provide documentation that monitoring procedures were in place over subrecipients. Effect Without the proper implementation of an effectively designed system of internal controls, the County cannot be sure subrecipients are provided an adequate subaward agreement, with all required elements and are adequately monitored. As such, subaward agreements entered into by the County did not include all the required elements. In addition, the County did not properly monitor the non-profit to ensure proper spending of the federal funds. 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. INDIANA STATE BOARD OF ACCOUNTS 24 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County design and implement a proper system of internal controls and develop policies and procedures to ensure subrecipients are provided with an adequate subaward agreement and monitored as appropriate. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Procurement and Suspension and Debarment 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): FY2023 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report for suspension and debarment. The prior audit finding number was 2022-003. Condition and Context Procurement - Policy The County did not have a County Council approved procurement policy that would reflect applicable state laws and regulations, including procedures to avoid acquisition of unnecessary or duplicative items and procedures to ensure that all solicitations incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. Procurement - Small Purchases Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a nonfederal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $50,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. INDIANA STATE BOARD OF ACCOUNTS 25 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The County had five vendors that qualified for testing under small purchase procurement requirements (vendors paid $10,000-$150,000). Of the two chosen for testing, one was awarded a contract without the County obtaining quotes. The contract awarded was $31,000 for engineering services related to drain construction. The lack of effective internal controls and noncompliance was isolated to the small purchase identified above. Suspension and Debarment Prior to entering into subawards and covered transactions with State and Local Fiscal Recovery Funds (SLFRF), recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the Excluded Parties List System (EPLS), collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. Due to the U.S. Department of the Treasury's (Treasury) determination that the revenue loss eligible use category does not give rise to subawards, the County was only required to comply with suspension and debarment requirements related to covered transactions. Upon inquiry of the County, in order to review the procedures in place for verifying that an entity with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the County explained they were aware of the suspension and debarment requirements related to the SLFRF awards; however, the County did not retain documentation of SAMs.gov checks nor was a clause always included in a contract. A population of ten covered transactions for goods or services, totaling $2,371,047, that equaled or exceeded $25,000 paid from SLFRF funds during the audit period was identified. A sample of three transactions, totaling $1,473,295, was selected for testing. For each of the three transactions, the County did not verify the vendors' suspension and debarment status prior to payment. Due to the number and magnitude of exceptions identified, per auditor judgment, we concluded it would not be appropriate to expand the sample size or perform any additional audit procedures. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 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. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 26 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.318 states: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." 2 CFR 200.214 states: "Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2 CFR part 180 restrict awards, subawards, and contracts with certain parties that are de-barred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities." 31 CFR 19.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the EPLS; or (b) Collecting a certification from that person if allowed by this rule; or INDIANA STATE BOARD OF ACCOUNTS 27 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (c) Adding a clause or condition to the covered transaction with that person." Part 4 of the Treasury's Compliance and Reporting Guidance states in part: ". . . recipients are expected to have procurement policies and procedures in place that comply with the procurement standards outlined in the Uniform Guidance . . ." Cause A proper system of internal controls was not designed by the management of the County. The County was unable to provide documentation to demonstrate it checked SAM.gov to verify that contractors and vendors were not suspended or debarred. The County was also unable to provide documentation explaining the rationale behind decisions to offer contracts without obtaining an adequate number of bids or quotes. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the County's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. 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. As a result, one small purchase did not have an adequate number of quotes. In addition, vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. 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. Questioned Costs There were no questioned costs identified. Recommendation We recommended the County establish documented procurement procedures consistent with state and local laws for the acquisition of property or services required under a federal award or subaward as outlined in the code of federal regulations. In addition, we recommended the County adhere to the procurement policies and obtain required quotes and bids or adequately document a sole source situation. Finally, we recommended that the County strengthen its system of internal controls to ensure that all vendors that are paid $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before entering into any covered transactions. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-002 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): IN0387 Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context Recipients are required quarterly or annually to submit Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its 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 City was classified as a city with a population below 250,000 residents that received an allocation of less than $10 million in State and Local Fiscal Recovery Funds. As such, the P&E report, covering the period from March 3, 2022 to March 31, 2023, was required to be submitted to the Treasury by April 30, 2023. The P&E report was prepared by one employee without an oversight or review process in place to ensure accuracy. The P&E report submitted was not mathematically accurate or complete. Per Resolution 2022-1028, approved on December 12, 2022, the City obligated funds for six separate projects, totaling $2,257,927. However, the P&E report submitted on April 18, 2023, only included one project, resulting in an understatement of total obligations of $1,807,927. Additionally, for the one project submitted, the key line items of "Current Period Expenditures," "Total Cumulative Expenditures," and "Current Period Obligations" as reported on the P&E report did not agree to the City's financial ledger. Errors were as follows: The "Current Period Expenditures" and "Total Cumulative Expenditures" were overstated by $68,609. "Current Period Obligations" were understated by $381,391. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 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. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 16 CITY OF PLYMOUTH SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, 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 The City did not have procedures in place to verify that the information contained within the P&E report accurately reflected the City's expenditures and obligations prior to, or in a timely manner following, submission. Effect Without the proper implementation of an effectively designed system of internal controls, the City cannot ensure that P&E reports are materially accurate and correct. The P&E reports contained the errors identified in the Condition and Context. In addition, not meeting the reporting requirements increases the likelihood that the public will not have access to transparent and accurate information regarding expenditures of federal awards. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the City's management establish a system of internal controls to ensure that the City provides the Clerk-Treasurer with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-001 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): CY2021 Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 13 CITY OF NEW ALBANY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context Recipients are required quarterly or annually to submit Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its 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 City was classified as a metropolitan city with a population below 250,000 residents that received an allocation of more than $10 million in Coronavirus State and Local Fiscal Recovery Funds (SLFRF). As such, the initial P&E report, covering the period from March 3, 2021 to March 31, 2022, was required to be submitted to the Treasury by April 30, 2022. The subsequent quarterly reports were to cover one calendar quarter and must be submitted to the Treasury by the last day of the month following the end of the period covered. The City submitted four P&E reports during the audit period; however, the internal controls in place were not effective to prevent, or detect and correct, errors. As a result, errors in reporting were identified. The current period and cumulative expenditures reported consisted of the amounts expended by the beneficiaries who were awarded funds from the City rather than total amounts expended to the beneficiaries, resulting in current period expenditures and cumulative expenditures being incorrectly reported on all four reports as follows: Quarterly Report: October 1, 2022 to December 31, 2022 Current period expenditures were overstated by $40,350. Cumulative expenditures were understated by $262,057. Quarterly Report: January 1, 2023 to March 31, 2023 Current period expenditures were understated by $2,338,864. Cumulative expenditures were understated by $2,499,656. Quarterly Report: April 1, 2023 to June 30, 2023 Current period expenditures were understated by $1,200,000. Cumulative expenditures were understated by $3,699,656. Quarterly Report: July 1, 2023 to September 30, 2023 Current period expenditures were overstated by $2,126,306. Cumulative expenditures were understated by $1,573,349. The lack of effective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 14 CITY OF NEW ALBANY 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). . . ." 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, . . ." 2 CFR 200.1 states in part: ". . . Expenditures means charges made by a non-Federal entity to a project or program for which a Federal award was received. . . . (2) For reports prepared on a cash basis, expenditures are the sum of: (i) Cash disbursements for direct charges for property and services; (ii) The amount of indirect expense charged; (iii) The value of third-party in-kind contribution applied; and (iv) The amount of cash advance payments and payments made to subrecipients . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, 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. . . ." Cause The City's oversight process for filing the P&E reports for the period of October 1, 2022 to September 30, 2023, did not detect errors in the P&E reports. The City's understanding was that the expenditures in its report should be based on when the beneficiaries expended the funds and not when the City disbursed the funds to the beneficiaries. 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. As such, the City did not report cumulative expenditures and current period expenditures properly when filing the P&E reports for periods from October 1, 2022 to September 30, 2023. INDIANA STATE BOARD OF ACCOUNTS 15 CITY OF NEW ALBANY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 City. In addition, not meeting the SLFRF reporting requirements increases the likelihood that the public will not have access to transparent and accurate information regarding expenditures of federal awards. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the City develop policies and procedures to ensure the City provides the Treasury with complete and accurate information as it relates to the City in its P&E reports. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Drinking Water State Revolving Fund (DWSRF) Cluster - Procurement Federal Agency: Environmental Protection Agency Federal Program: Drinking Water State Revolving Fund Assistance Listings Number: 66.468 Federal Award Number (or Other Identifying Number): DW22168902 Pass-Through Entity: Indiana Finance Authority Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a nonfederal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micropurchase threshold but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The Town did not obtain price or rate quotes for the two vendors identified and tested that were less than the simplified acquisition threshold of $150,000 but exceeded the $10,000 micro-purchase threshold. The micro-purchase threshold may be increased, but the Town did not provide documentation that the threshold had been increased. Documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 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. 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). . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. INDIANA STATE BOARD OF ACCOUNTS 18 TOWN OF CAMBRIDGE CITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." Cause The Town was unable to provide documentation to demonstrate it had properly procured services. The Town noted they were unaware professional services agreements for consultants were required to follow small purchase procurement guidelines. Effect Without the proper implementation of an effectively designed system of internal controls, the Town could not demonstrate it had obtained an adequate number of price or rate quotations prior to selecting a vendor. Therefore, the Town could have overpaid for the services obtained. Questioned Costs There were no questioned costs identified. Recommendation We recommend that management of the Town strengthen its system of internal controls to ensure that an adequate number of price or rate quotations are obtained for small purchases. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. INDIANA STATE
FINDING 2023-005 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): FY 2023 Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-003. Condition and Context Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its population, as well as recipient's allocation amount. Information to be reported includes projects funded, expenditures, and contracts for the appropriate reporting period. The County was classified as a county with a population below 250,000 residents that received an allocation of less than $10 million in COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF). As such, the initial P&E report, covering the period from March 3, 2021 to March 31, 2022, was required to be submitted to the Treasury by April 30, 2022. The subsequent annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year. The County submitted one annual P&E report during the audit period; however, the internal controls in place were not effective to prevent, or detect and correct, errors. As a result, errors in reporting were identified. The current period obligations and cumulative obligations were incorrectly reported. The County was unable to provide supporting documentation for current period and cumulative obligations as reported. The lack of effective internal controls and noncompliance were isolated to the one P&E report due during the audit period. INDIANA STATE BOARD OF ACCOUNTS 23 HARRISON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 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. 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). . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, 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 The County's oversight process for filing the P&E report for the period of April 1, 2022 to March 31, 2023, did not detect errors. Due to the timing of the P&E report submission and prior audit completion, corrective actions from the previous year's finding, finding number 2022-003, could not be implemented to correct noncompliance. Effect Without the proper implementation of an effectively designed system of internal controls, including policies and procedures the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, the County did not report cumulative obligations and current period obligations properly when filing the P&E report for the period April 1, 2022 to March 31, 2023. 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. In addition, not meeting the SLFRF reporting requirements increases the likelihood that the public and the Treasury will not have access to transparent and accurate information regarding expenditures of federal awards. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 24 HARRISON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the County design and implement a proper system of internal controls to provide for a segregation of duties in the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight are taking place. We also recommended the development of policies and procedures to ensure the County provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 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): CY2021 Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context Recipients of State and Local Fiscal Recovery Funds (SLFRF) grants are required to submit quarterly or annually Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its 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 Town was classified as a Tier 5 auditee - a metropolitan city with a population below 250,000 residents which received less than $10 million in SLFRF funding. Tier 5 auditees are required to submit an annual P&E report due in April of each year. INDIANA STATE BOARD OF ACCOUNTS 22 TOWN OF DALEVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The Town was required to file one annual P&E report on April 30, 2023. The report was to cover the period of April 1, 2022 to March 31, 2023. The Town submitted this report for audit. However, there was no documented internal control in place over the report to ensure it was complete and accurate. The lack of internal controls allowed the Town to submit incorrect amounts in the P&E report for March 2023: For revenue replacement, cumulative expenditures/obligations were understated by $45,298. For revenue replacement, current expenditures/obligations were overstated by $61,703. For essential pay, cumulative expenditures/obligations were understated by $24,189. For essential pay, current expenditures/obligations were understated by $1,885. For the solar project, cumulative expenditures/obligations were overstated by $1,560. For the solar project, current expenditures/obligations were overstated by $22,981. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 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. 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). . . ." 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 . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, Page 10, 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. . . ." INDIANA STATE BOARD OF ACCOUNTS 23 TOWN OF DALEVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed or implemented by management of the Town to ensure that policies and procedures were in place related to reporting. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the Town's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. 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, noncompliance. As such, the P&E report contained the errors, and accurate information was not provided to the Treasury. 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 Town. In addition, not meeting the SLFRF reporting requirements increases the likelihood that the public will not have access to transparent and accurate information regarding expenditures of federal awards. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the Town's management establish a proper system of internal controls and develop policies and procedures over the preparation and review of federal reports. Additionally, management should develop policies and procedures to ensure that the Town provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 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): FY 2022 Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context Recipients are required to submit quarterly or annual Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its 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 was classified as a county with a population below 250,000 residents that received an allocation of less than $10 million in State and Local Fiscal Recovery Funds (SLFRF). As such, the initial P&E report, covering the period from March 3, 2021 to March 31, 2022, was required to be submitted to the Treasury by April 30, 2022. The subsequent annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year. Upon inquiry of the County's policies and procedures related to the reporting requirements, the County stated that the County Auditor and a financial consultant prepared the P&E report based on reports from the County's financial system. The County Auditor then submitted the report. There was no evidence of an oversight or review process prior to submission. The County submitted the P&E report by April 30, 2023, as required; however, the report was not supported by the County's records. The annual report submitted in April 2023 did not include an expenditure of $64,999 as the County Auditor used the incorrect period of January 1, 2022 to December 31, 2022, to complete the report. The omitted expenditure was incurred on March 23, 2023. The lack of internal controls and noncompliance were systemic issues throughout the audit period for the FY 2022 grant. Criteria 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. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 19 SHELBY COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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, . . ." Coronavirus State and Local Fiscal Recover Funds Compliance and Reporting Guidance, page 10, 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 com-piling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. . . ." Cause A proper system of internal controls which would include segregation of key functions was not designed by management of the County. The lack of review or approval process by someone other than the preparers allowed the error in the P&E report to go undetected. The error was a result of expenditures from the incorrect reporting period being used to complete the report. 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, noncompliance. As such, the P&E report submitted understated expenditures. 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. In addition, not meeting the SLFRF reporting requirements increases the likelihood that the public will not have access to transparent and accurate information regarding expenditures of federal awards. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County design and implement a proper system of internal controls, including policies and procedures to ensure that the County abstracts the correct reporting period, to provide the Treasury with complete and accurate information for the P&E reports. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Procurement and Suspension and Debarment 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): FY 2023 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-005. Condition and Context Procurement - Policy The City had not established a purchasing policy that reflected applicable state laws and regulations, including procedures to avoid the acquisition of unnecessary or duplicative items and procedures to ensure that all solicitations incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. Additionally, the City did not maintain written standards of conduct covering conflicts of interest and governing actions of its employees engaged in the selection, award, and administration of contracts. Procurement - Small Purchases Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The City did not obtain price or rate quotes for the one vendor tested that was less than the simplified acquisition threshold of $150,000 but exceeded the $10,000 micro-purchase threshold. The micro-purchase threshold may be increased, but the City did not provide documentation that the threshold had been increased. Documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. INDIANA STATE BOARD OF ACCOUNTS 19 CITY OF MUNCIE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Suspension and Debarment Prior to entering into subawards and covered transactions with COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF), recipients are required to verify that such contracts and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the Excluded Parties List System (EPLS), collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. Due to the U.S. Department of the Treasury's determination that the revenue loss eligible use category does not give rise to subawards, the City was only required to comply with suspension and debarment requirements related to covered transactions. A population of nine covered transactions for goods or services were paid from SLFRF award funds during the audit period. A sample of three transactions were selected for testing. Of the three transactions tested, one vendor was not verified to not be suspended nor debarred or otherwise excluded or disqualified from participating in federal assistance programs or activities. The lack of effective internal controls and noncompliance were isolated to the small purchase noted above. Criteria 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. 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). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . INDIANA STATE BOARD OF ACCOUNTS 20 CITY OF MUNCIE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity." Part 4 of the Treasury's Compliance and Reporting Guidance states: ". . . recipients are expected to have procurement policies and procedures in place that comply with the procurement standards outlined in the Uniform Guidance . . ." Cause The system of internal controls as established by management of the City was not effective at ensuring all required aspects of a procurement policy were included and that small purchases adhered to the procurement requirements. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the City cannot ensure their policy includes all the necessary elements and that the detailed history of procurement including the method utilized are retained for audit. INDIANA STATE BOARD OF ACCOUNTS 21 CITY OF MUNCIE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended management of the City establish documented procurement procedures consistent with state and local laws for the acquisition of property or services required under a federal award or subaward as outlined in the code of federal regulations. In addition, we recommended the City adhere to the procurement policies and obtain required quotes and bids or adequately document a sole source situation. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-001 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): FY 2023 Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 13 HOWARD COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-001. Condition and Context Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its population, as well as the recipient's allocation amount. Information to be reported includes projects funded, expenditures, and contract for the appropriate reporting period. The County was classified as a metropolitan county with a population below 250,000 residents that received an allocation of more than $10 million in the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) funding. As such, the initial P&E report, covering three calendar quarters from March 3, 2021 to December 31, 2021, was required to be submitted to the Treasury by January 31, 2022. The subsequent quarterly reports are to cover one calendar quarter and must be submitted to the Treasury by the last day of the month following the end of the period covered. The Deputy County Auditor prepared the quarterly reports, and the County Auditor reviewed the reports; however, the internal control was not effective and did not detect and allow correction of material misstatements prior to submission. Two of the four quarterly reports submitted during the audit period were selected for testing. For the two reports tested, all activity for the reporting period was not included, information submitted was not supported by the County's records, and the reports were not fairly presented. Errors identified included the following: Quarter 1 report (January 1, 2023 to March 31, 2023) The Total Cumulative Obligations were understated by $2,937. The Current Period and Total Cumulative Expenditures were overstated by $62. Quarter 3 report (July 1, 2023 to September 30, 2023) The Total Cumulative Obligations were understated by $118,025. The Current Period Expenditures were understated by $56,781. The Total Cumulative Expenditures were understated by $147,930. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 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. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 14 HOWARD COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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. . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, 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. . . ." Cause Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the County's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. These errors were due to not all expenditures being included in the P&E reports ran for the time frame. Effect Without the proper implementation of an effectively designed system of internal controls over reporting, the County could not ensure that the P&E reports submitted were accurate. In addition, not meeting the SLFRF reporting requirements increases the likelihood that the public will not have access to transparent and accurate information regarding expenditures of federal awards. 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. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County design and implement a proper system of internal controls, including policies and procedures, to ensure that the County provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 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): CY 2023 Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context Recipients are required quarterly or annually to submit Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its 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 Town was classified as a Non-Entitlement Unit with a population below 250,000 residents that are allocated less than $10 million in COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF). As such, the Town's P&E report, covering the period from April 1, 2022 to March 31, 2023, was required to be submitted to the Treasury by April 30, 2023. The Town timely submitted one P&E report during the audit period; however, the report was submitted without a review or oversight process in place to prevent, or detect and correct, errors. As a result, errors in reporting were identified. The cumulative expenditures and current period expenditures reported were both incorrect. The Town did not have any expenditures prior to March 31, 2023; however, the Town reported the full amount received for the grant of $376,654 for both cumulative expenditures and current period expenditures. The lack of internal controls and noncompliance were isolated to the one annual P&E report. Criteria 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. 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). . . ." 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, . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, 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. . . ." The Indiana State Board of Accounts (SBOA) is required under Indiana Code 5-11-1-27(e) to define the acceptable minimum level of internal control standards. To provide clarifying guidance, the State Examiner compiled the standards contained in the manual, Uniform Internal Control Standards for Indiana Political Subdivisions. All political subdivisions subject to audit by SBOA are expected to adhere to these standards. The standards include adequate control activities. According to this manual: "Control activities are the actions and tools established through policies and procedures that help to detect, prevent, or reduce the identified risks that interfere with the achievement of objectives. Detection activities are designed to identify unfavorable events in a timely manner whereas prevention activities are designed to deter the occurrence of an unfavorable event. Examples of these activities include reconciliations, authorizations, approval processes, performance reviews, and verification processes. An integral part of the control activity component is segregation of duties. . . . There is an expectation of segregation of duties. If compensating controls are necessary, documentation should exist to identify both the areas where segregation of duties are not feasible or practical and the compensating controls implemented to mitigate the risk. . . ." Cause A proper system of internal controls over P&E reports was not implemented by the management of the Town to ensure that complete and accurate information related to the SLFRF awards was provided to the Treasury. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the Town's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. The Town incorrectly reported the correct current and cumulative expenditures due to misunderstanding the line item requirement. Effect Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, errors, as identified in the Condition and Context, occurred, and inaccurate information was provided to the Treasury. 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 Town. In addition, not meeting the SLFRF reporting requirements increases the likelihood that the public will not have access to transparent and accurate information regarding expenditures of federal awards. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the Town design and implement a proper system of internal controls that would provide for segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the Town provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-001 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): CY 2023 Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 13 CITY OF BUTLER SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its 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 City was classified as a metropolitan city with a population below 250,000 residents that received an allocation of less than $10 million in COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) award funds. As such, the initial P&E report, covering the period from March 3, 2021 to March 31, 2022, was required to be submitted to the Treasury by April 30, 2022. The subsequent annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year. The City submitted one P&E report during the audit period; however, the report was submitted without a review or oversight process in place to prevent, or detect and correct, errors. As a result, errors in reporting were identified. The cumulative obligations and current period obligations were understated by $104,988. The cumulative obligations and current period obligations reported was the total amount of grant funds expended through December 31, 2022, instead of the amount of funds expended through March 31, 2023. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 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. 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). . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, 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 com-piling 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, . . ." INDIANA STATE BOARD OF ACCOUNTS 14 CITY OF BUTLER SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls over the P&E report was not implemented by the management of the City to ensure that complete and accurate information related to the SLFRF awards was provided to the Treasury. The City incorrectly reported the cumulative obligations and current period obligations due to abstracting and reporting data through the end of the year, instead of the end of March 2023 as required. Effect Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, errors, as identified in the Condition and Context, occurred, and inaccurate information was provided to the Treasury. 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 City. In addition, not meeting the SLFRF reporting requirements increases the likelihood that the public will not have access to transparent and accurate information regarding expenditures of federal awards. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the City design and implement a proper system of internal controls that would provide for segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the City abstracts and reports on the correct time frame for each report submitted to provide the Treasury with 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
FINDING 2023-005 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): 2023 Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-004. INDIANA STATE BOARD OF ACCOUNTS 23 JEFFERSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its 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 was classified as a metropolitan county with a population below 250,000 residents that received an allocation of less than $10 million in COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF). As such, the initial P&E report, covering the period from March 3, 2021 to March 31, 2022, was required to be submitted to the Treasury by April 30, 2022. The subsequent annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year. The County submitted one P&E report during the audit period; however, the report was submitted without a review or oversight process in place to prevent, or detect and correct, errors. As a result, errors in reporting were identified. The cumulative obligations and expenditures and current period obligations and expenditures were incorrectly reported. The cumulative obligations and expenditures and current period obligations reported was the total amount of grant funds received to date instead of actual funds obligated and expended. The current period expenditures reported equaled the total expenditures for 2022, rather than expenditures that occurred during the reporting period of April through December of 2022, and January through March of 2023. The lack of internal controls and the failure to maintain adequate supporting documentation was isolated to the annual P&E report. Criteria 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. 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). . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, 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, . . ." INDIANA STATE BOARD OF ACCOUNTS 24 JEFFERSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause The County's oversight process for filing the P&E report for the period of April 1, 2022 to March 31, 2023, did not detect errors. Furthermore, due to the timing of the prior audit completion and the P&E report submission due dates, corrective actions as outlined in the County's corrective action plan for item 2022-004 could not be implemented in time to correct the noncompliance for this audit period. Effect Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, the County did not report cumulative obligations and current period obligations properly when filing the P&E report for the period April 1, 2022 to March 31, 2023. 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. In addition, not meeting the SLFRF reporting requirements increases the likelihood that the public will not have access to transparent and accurate information regarding expenditures of federal awards. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County strengthen its system of internal controls to provide for a segregation of duties in the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight are taking place. We also recommended the development of policies and procedures to ensure the County provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 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): FY 2023 Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its 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 Town was classified as a Non-Entitlement Unit with a population below 250,000 residents that are allocated less than $10 million in Coronavirus State and Local Fiscal Recovery Funds (SLFRF). As such, the Town's P&E report, covering the period from April 1, 2022 to March 31, 2023, was required to be submitted to the Treasury by April 30, 2023. The Town timely submitted one P&E report during the audit period; however, the report was submitted without a review or oversight process in place to prevent, or detect and correct, errors. As a result, errors in reporting were identified. The Town reported current expenditures of $33,325, which did not agree with the accounting records. The lack of internal controls and noncompliance were isolated to the one annual P&E report. INDIANA STATE BOARD OF ACCOUNTS 18 TOWN OF PENDLETON SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 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. 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). . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, 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, . . ." The Indiana State Board of Accounts (SBOA) is required under Indiana Code 5-11-1-27(e) to define the acceptable minimum level of internal control standards. To provide clarifying guidance, the State Examiner compiled the standards contained in the manual, Uniform Internal Control Standards for Indiana Political Subdivisions. All political subdivisions subject to audit by SBOA are expected to adhere to these standards. The standards include adequate control activities. According to this manual: "Control activities are the actions and tools established through policies and procedures that help to detect, prevent, or reduce the identified risks that interfere with the achievement of objectives. Detection activities are designed to identify unfavorable events in a timely manner whereas prevention activities are designed to deter the occurrence of an unfavorable event. Examples of these activities include reconciliations, authorizations, approval processes, performance reviews, and verification processes. An integral part of the control activity component is segregation of duties. . . . There is an expectation of segregation of duties. If compensating controls are necessary, documentation should exist to identify both the areas where segregation of duties are not feasible or practical and the compensating controls implemented to mitigate the risk. . . ." INDIANA STATE BOARD OF ACCOUNTS 19 TOWN OF PENDLETON SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls over P&E reports was not implemented by the management of the Town to ensure that complete and accurate information related to the SLFRF awards was provided to the Treasury. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the Town's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. The Town incorrectly reported the current expenditures due to misunderstanding the line-item requirement. Effect Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, errors, as identified in the Condition and Context, occurred and inaccurate information was provided to the Treasury. 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 Town. In addition, not meeting the SLFRF reporting requirements increases the likelihood that the public will not have access to transparent and accurate information regarding expenditures of federal awards. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the Town design and implement a proper system of internal controls that would provide for segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the Town provides the Treasury with complete and accurate information for the P&E report. 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 20
FINDING 2023-003 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Procurement and Suspension and Debarment 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): FR-2023-ILBC-00004 Pass-Through Entity: Indiana Department of Homeland Security Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context Procurement Policy The County did not have documented procurement procedures or policies reflecting applicable state or federal laws and regulations for procuring goods and services paid with federal funds. INDIANA STATE BOARD OF ACCOUNTS 17 DECATUR COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Small Purchases Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. One vendor was identified that fell within the small purchase threshold. Purchases for body cameras and associated equipment/accessories to the vendor totaled $117,144, of which $7,144 was paid from the COVID-19 - Coronavirus State and Local Fiscal Recovery Funds received from the Indiana Department of Homeland Security. As a portion of the purchases to the vendor were paid with federal funds subject to procurement requirements, the entirety of purchases with the vendor was required to follow applicable procurement requirements. As such, price or rate quotations from an adequate number of qualified sources should have been obtained. However, the County did not obtain price or rate quotations for the purchases, nor was full and open competition provided for the vendor. Additionally, there was no documentation available to support the rationale to limit competition. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 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. 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). . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . INDIANA STATE BOARD OF ACCOUNTS 18 DECATUR COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." Cause A proper system of internal controls over procurement and suspension and debarment was not implemented by the management of the County to ensure that goods and services were properly procured. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the County's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. 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. As a result, property and services were not properly procured. 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. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County establish a proper system of internal controls and develop procedures to ensure that property and services are properly procured. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Procurement and Suspension and Debarment 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): FY23 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 19 DECATUR COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context Procurement Policy The County did not have documented procurement procedures or policies reflecting applicable state or federal laws and regulations for procuring goods and services paid with federal funds. Small Purchases Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. One vendor was identified that fell within the small purchase threshold, with total purchases of $33,100. Price or rate quotations were not obtained, nor was full and open competition provided for the vendor. Additionally, there was no documentation available to support the rationale to limit competition. Simplified Acquisition Threshold When the value of the procurement for property or services exceeds the simplified acquisition threshold (SAT), or a lower threshold established by a nonfederal entity, formal procurement methods are required. The SAT is typically set at $250,000; however, Indiana Code 5-22-8 has a more restrictive threshold, and, therefore, the threshold the SAT is set at $150,000. Formal procurement methods require adherence to documented procedures and formal methods such as sealed bids or proposals. One vendor was identified that fell within the SAT, with total purchases of $213,734. Sealed bids or competitive proposals were not obtained, nor was a circumstance met that would have allowed for a noncompetitive procurement for the purchases. Suspension and Debarment Prior to entering into subawards and covered transactions with the COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the Excluded Parties List System (EPLS), collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. INDIANA STATE BOARD OF ACCOUNTS 20 DECATUR COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The County did not have any policies or procedures in place for verifying that an entity with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded. A population of six covered transactions, totaling $470,435, that equaled or exceeded $25,000 paid from SLFRF award funds was identified. Four of the six covered transactions, totaling $312,745, were selected for testing. For each of the four transactions, the County did not verify the vendors' suspension or debarment status prior to payment due to the County not having any policies or procedures in place to verify that contractors were neither suspended nor debarred, or otherwise excluded or disqualified, from participating in federal assistance programs or activities. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 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. 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). . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . . INDIANA STATE BOARD OF ACCOUNTS 21 DECATUR COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (b) Formal Procurement Methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with § 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: . . . (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bids method is the preferred method for procuring construction, if the conditions. . . . (2) Proposals. A procurement method in which either a fixed price or costreimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. . . ." 31 CFR 19.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the EPLS; or (b) Collecting a certification from that person if allowed by this rule; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls over procurement and suspension and debarment was not implemented by the management of the County to ensure that goods and services were properly procured and that vendors to whom payment equaled or exceeded $25,000 were not suspended or debarred. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the County's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. 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. As a result, property and services were not properly procured and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. 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. INDIANA STATE BOARD OF ACCOUNTS 22 DECATUR COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County establish a proper system of internal controls and develop procedures to ensure that property and services are properly procured and that contractors are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 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): FY23 Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its 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 was classified as a metropolitan county with a population below 250,000 residents that received an allocation of less than $10 million in COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) award funds. As such, the initial P&E report, covering the period from March 3, 2021 to March 31, 2022, was required to be submitted to the Treasury by April 30, 2022. The subsequent annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year. The County submitted one P&E report during the audit period; however, internal controls were not in place to prevent, or detect and correct, errors. As a result, the following errors were noted: The current period expenditures for 8 of 16 projects were understated by $635,748. In addition, current period expenditures for 1 of 16 projects was overstated by $29,767. The cumulative expenditures for 6 of 16 projects were understated by $285,748. In addition, cumulative expenditures for 1 of 16 projects was overstated by $29,767. The lack of internal controls and noncompliance were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 23 DECATUR COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 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. 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) . . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, 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 was not designed or implemented by management of the County to prevent and detect errors on the P&E report prior to submission. Effect Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, the County did not report current period expenditures and cumulative expenditures properly when filing the P&E report for the period April 1, 2022 to March 31, 2023. 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. In addition, not meeting the SLFRF reporting requirements increases the likelihood that the public will not have access to transparent and accurate information regarding expenditures of federal awards. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 24 DECATUR COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the County strengthen its system of internal controls to provide for a segregation of duties in the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight are taking place. We also recommended the development of policies and procedures to ensure the County provides the Treasury with complete and accurate information for the P&E report. 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 25
2023-001 OVERPAYMENTS TO SUBRECIPIENT Federal agency: U.S. Department of Department of Health and Human Services Federal Program Title & Assistance Listing Number: Substance Abuse and Mental Health Services Projects of Regional and National Significance -93.243 Award Period: 12/31/2022 - 12/30/2024 Type of Finding: Significant Deficiency Compliance Areas: Allowable Costs, Cash Management Questioned Costs: None Condition During our testing of subrecipient disbursements, we found that management does not require invoices from subrecipients before making disbursements. Instead, they allocate a predetermined monthly amount based on prorated subaward totals, making adjustments upon receipt of invoices and again at year-end. An error in a subrecipient's invoice led to an overpayment of $27,525 and remained uncorrected during the year. As a result, UVNR over recognized federal revenue by the same amount. An audit adjustment was made to correct both federal expenditures and revenues in 2023. Criteria An improper payment, as defined in 2 CFR §200.1, is any payment that should not have been made or that was made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements. According to §200.303 Internal controls of 2 CFR Part 200, the non-Federal entity must 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. Specific to the Organization, federal reimbursement requests are completed monthly. Effect Overstatement of federal revenues and expenditures, respectively. The overpayment would also necessitate certain adjustments to the award amounts given to the subrecipient in the following year. Cause Management admittedly overlooked the error in the subrecipient’s submitted invoice during review.
Federal Agency: Department of Justice Federal Assistance Listing Number: 16.756 Program: Court Appointed Special Advocates Award Number: 15JDP-21-GK-02762-CASA Criteria: The Uniform Guidance in 2 CFR §200.332 details requirements for pass-through entities in regard to subrecipient monitoring and management. Per 2 CFR §200.332, Requirements for Pass-Through Entities: “All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the federal award and subaward. Required information includes: (1) Federal award identification. i. Subrecipient name (which must match the name associated with its unique entity identifier); ii. Subrecipient’s unique entity identifier; iii. Federal Award Identification Number (FAIN); iv. Federal Award Date (see the definition of federal award date in §200.1 of this part) of award to the recipient by the federal agency; v. Subaward Period of Performance Start and End Date; vi. Subaward Budget Period Start and End Date; vii. Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; viii. Total Amount of Federal Funds Obligated to the subrecipient by the pass through entity, including the current financial obligation; ix. Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; x. Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); xi. Name of federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; xii. Assistance Listings Number and Title; the pass-through entity must identify the dollar amount made available under each federal award and the Assistance Listings Number at time of disbursement; xiii. Identification of whether the award is R&D; and xiv. Indirect cost rate for the federal award (including if the de minimis rate is charged) per § 200.414. (2) All requirements imposed by the pass-through entity on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the terms and conditions of the federal award; (3) Any additional requirements that the pass-through entity imposes on the subrecipient in order for the pass-through entity to meet its own responsibility to the federal awarding agency, including identification of any required financial and performance reports; (4) i. An approved federally recognized indirect cost rate negotiated between the subrecipient and the Federal Government. If no approved rate exists, the pass-through entity must determine the appropriate rate in collaboration with the subrecipient, which is either: (A) The negotiated indirect cost rate between the pass-through entity and the subrecipient, which can be based on a prior negotiated rate between a different PTE and the same subrecipient. If basing the rate on a previously negotiated rate, the pass-through entity is not required to collect information justifying this rate, but may elect to do so; (B) The de minimis indirect cost rate. ii. The pass-through entity must not require use of a de minimis indirect cost rate if the subrecipient has a federally approved rate. Subrecipients can elect to use the cost allocation method to account for indirect costs in accordance with §200.405(d). (5) A requirement that the subrecipient permits the pass-through entity and auditors to have access to the subrecipient’s records and financial statements as necessary for the pass-through entity to meet the requirements of this part; and (6) Appropriate terms and conditions concerning closeout of the subaward.” Condition: National CASA/GAL’s subrecipient agreements do not contain a level of specificity to fully comply with federal subrecipient regulations. During our testing of subrecipient monitoring, we selected 16 subrecipient awards. For all awards tested, National CASA/GAL’s subaward agreements did not comply with 2 CFR §200.332, Requirements for Pass-Through Entities, as they do not contain a specific scope of work or project description. Cause: National CASA/GAL did not have the proper policies and procedures in place to ensure subaward agreements complied to relevant federal regulation, and that all required elements are located in subaward agreements, and not in the application or by reference to other documents. Effect or Potential Effect: Without adequate controls in place to ensure conformity with subaward requirements, grantees may not ensure compliance with any award special conditions or revised budgets agreed upon at contract implementation. Questioned Costs: None. Context: This is a condition identified per review of National CASA/GAL’s compliance with specified requirements using a non-statistically valid sample. The population consisted of 79 subawards made totaling to $2,428,200 provided to subrecipients in 2023. The sample consisted of 16 subawards totaling $515,618 provided to subrecipients in 2023. Identification as a Repeat Finding: 2022-005. Recommendation: We recommend establishing and maintaining written policies and procedures to ensure subaward agreements conform to the requirements outlined in 2 CFR §200.332. Views of Responsible Officials: Management agrees that subrecipient agreements in place in 2022 did not fully comply with 2 CFR §200.332. Updates were made to the policies and procedures as well to ensure subaward files contain the requisite components. Management has additionally implemented a Grant Master File Checklist to ensure compliance with terms and conditions required in subaward agreements.
Criteria: 2 CFR 200.332 notes, “All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal award identification. (i) Subrecipient name (which must match the name associated with its unique entity identifier); (ii) Subrecipient's unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency;(v) Subaward Period of Performance Start and End Date; (vi) Subaward Budget Period Start and End Date; (vii) Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; (x) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; (xii) Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; (xiii) Identification of whether the award is R&D; and (xiv) Indirect cost rate for the Federal award (including if the de minimis rate is charged) per § 200.414. (2) All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award; …” Condition: All three of the subawards selected for testing, the recipient’s UEI number was missing from the subaward. We consider this condition to be an instance of noncompliance relating to the Subrecipient Monitoring compliance requirement. Statistical sampling was not used in making sample selections. Questioned Costs :N/A Cause and effect: Without communication of the required information, subrecipients may overspend award amounts or incur unallowable expenses towards the grant. Recommendation: We recommend ACT evaluates policies and procedures to ensure all required information is communication with the subrecipient. Views of Responsible Officials and Planned Corrective Actions: Management agrees with this Single Audit Finding and response is included in the Corrective Action Plan.
Criteria: 2 CFR 200.332 notes, “All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal award identification. (i) Subrecipient name (which must match the name associated with its unique entity identifier); (ii) Subrecipient's unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency;(v) Subaward Period of Performance Start and End Date; (vi) Subaward Budget Period Start and End Date; (vii) Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; (x) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; (xii) Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; (xiii) Identification of whether the award is R&D; and (xiv) Indirect cost rate for the Federal award (including if the de minimis rate is charged) per § 200.414. (2) All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award; …” Condition: All three of the subawards selected for testing, the recipient’s UEI number was missing from the subaward. We consider this condition to be an instance of noncompliance relating to the Subrecipient Monitoring compliance requirement. Statistical sampling was not used in making sample selections. Questioned Costs :N/A Cause and effect: Without communication of the required information, subrecipients may overspend award amounts or incur unallowable expenses towards the grant. Recommendation: We recommend ACT evaluates policies and procedures to ensure all required information is communication with the subrecipient. Views of Responsible Officials and Planned Corrective Actions: Management agrees with this Single Audit Finding and response is included in the Corrective Action Plan.
FINDING 2023-004 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Procurement and Suspension and Debarment Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Number and Year (or Other Identifying Number): FY 2023 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context The County received a total COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) allocation of $73,674,384 and chose to calculate its own revenue loss allowance, which totaled $35,932,557, to use for government services. Some SLFRF program funds expended in 2023 were expended under the revenue loss eligible use category. Additional program funds expended in 2023 were expended under the other eligible use categories. Procurement Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. For funds expended under the revenue loss eligible use category, the above listed procurement requirements do not apply. During the audit period, the County had four vendors with purchases over the $10,000 micropurchase threshold which were expended under an eligible use category other than revenue loss and, as such, were considered small purchase procurements. The County did not provide competitive price quotations for the small purchase procurements for three of the four vendors, which totaled $257,038. Suspension and Debarment Prior to entering into subawards and covered transactions with SLFRF award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the Excluded Parties List System, collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. During the engagement, an employee of the Board of County Commissioners stated that verification was completed by checking the Excluded Parties List System when covered transactions were entered into by the County to verify that an entity with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded or disqualified from participating in federal assistance programs or activities. Six covered transactions, totaling $3,952,203, were paid from SLFRF funds to six different vendors for goods or services that equaled or exceeded $25,000 during the audit period. Three of the six covered transactions were selected for testing. For all three transactions tested, documentation was not provided that the vendor's suspension and debarment status was verified. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 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. 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). . . ." 31 CFR 19.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you do business is not excluded or disqualified. You do this by: (a) Checking the EPLS; or (b) Collecting a certification from that person if allowed by this rule; or (c) Adding a clause or condition to the covered transaction with that person." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . . Cause The County was unable to provide documentation to demonstrate it had properly procured services. In addition, the County was unable to provide documentation to demonstrate it had checked the Excluded Parties List System, per the County's procedures, to ensure vendors were not suspended or debarred prior to entering into covered transactions that exceeded $25,000. Effect Without the proper implementation of an effectively designed system of internal controls, the County cannot demonstrate it obtained an adequate number of price or rate quotations prior to selecting a vendor. Therefore, the County could have overpaid for the services obtained. Furthermore, without the proper implementation of an effectively designed system of internal controls, the County cannot ensure the vendors paid with federal funds are eligible to participate in federal programs. Any program funds the County used to pay vendors that have been suspended or debarred would be unallowable, and the funding agency could potentially recover them. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the Board of County Commissioners strengthen the County's system of internal controls to ensure that an adequate number of price or rate quotations are obtained for small purchase procurements. Additionally, we recommended policies and procedures be strengthened to ensure appropriate supporting documentation for federal programs is retained. Lastly, we recommended that the Board of County Commissioners strengthen the County's system of internal controls to ensure that all vendors that are paid $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before entering into any covered transactions. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 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): 2023 Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 20 BARTHOLOMEW COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-003. Condition and Context Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its 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 was classified as a metropolitan county with a population below 250,000 residents that received an allocation of more than $10 million in COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) award funds. As such, the initial P&E report, covering the period from March 3, 2021 to December 31, 2021, was required to be submitted to the Treasury by January 31, 2022. The subsequent quarterly reports were to cover one calendar quarter and must be submitted to the Treasury by the last day of the month following the end of the period covered. The County submitted all four P&E reports that were required during the audit period. Although a review process over the reports was in place, the internal controls were not effective and did not detect and allow corrections of errors in the reports. As a result, the following errors were noted: The current period expenditures were incorrectly reported on two of four reports. The current period expenditures were underreported by $70,309 and $13,090 in the Q4 2022 and Q3 2023 reports, respectively. The total cumulative expenditures were incorrectly reported on all four reports. The total cumulative expenditures were overreported by $174,750 in the Q4 2022 and Q1 2023 reports, and $19,204 in the Q3 2023 report. The total cumulative expenditures were underreported by $690,272 in the Q2 2023 report. The lack of effective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 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. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 21 BARTHOLOMEW COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, 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 was not designed or implemented by management of the County to prevent and detect errors on the P&E report prior to submission. 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. As such, the County did not report current period expenditures and total cumulative expenditures properly when filing the P&E reports for the quarterly reporting periods from October 1, 2022 to September 30, 2023. 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. In addition, not meeting the SLFRF reporting requirements increases the likelihood that the public and the Treasury will not have access to transparent and accurate information regarding expenditures of federal awards. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County develop policies and procedures to ensure the County provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 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): CY2022 Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (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 was classified as a metropolitan county with a population below 250,000 residents that received an allocation of less than $10 million in COVID-19 - Coronavirus State and Local Fiscal Recovery Funds. As such, the initial P&E report, covering the period from March 3, 2021 to March 31, 2022, was required to be submitted to the Treasury by April 30, 2022. The subsequent annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year. INDIANA STATE BOARD OF ACCOUNTS 18 CLINTON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The County submitted one P&E report during the audit period, which was obtained from the Treasury's website. Although one employee prepared the P&E report and another reviewed the entries, the system of internal controls was not effective in preventing, detecting, or correcting errors. The data submitted included amounts which should not have been included and amounts which were not supported by the County's records. Errors identified included the following: Total Cumulative Obligations were overstated by $907,630. Total Cumulative Expenditures were overstated by $4,332,524. The lack of effective internal controls and noncompliance were isolated to the P&E report submitted during the audit period. Criteria 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. 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). . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, 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 Although a system of internal controls over the P&E report was designed by management, which included segregation of duties, it did not ensure that the County provided the Treasury with complete and accurate information related to the SLFRF awards. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the County's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. INDIANA STATE BOARD OF ACCOUNTS 19 CLINTON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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. 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. In addition, not meeting the SLFRF reporting requirements, by reporting erroneous data, increases the likelihood that the public and the Treasury will not have access to transparent and accurate information regarding expenditures of federal awards. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County design and implement a proper system of internal controls that would ensure appropriate reviews, approvals and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the County provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-002 Subject: Coronavirus State and Local Fiscal Recovery Funds - Reporting Federal Agency: U.S. Department of Treasury Assistance Listing Number: 21.027 Federal Award Number: FY 2022 Pass-Through Entity: N/A Compliance Requirements: Reporting Audit Findings: Material Weakness, Modified Opinion Criteria: 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. 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). . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, 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, . . ." Condition: The City had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties that would likely be effective in preventing, or detecting and correcting, noncompliance. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the Department of Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its 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 City was classified as a metropolitan city with a population below 250,000 residents that received an allocation of less than $10 million in Coronavirus State and Local Fiscal Recovery Funds (CSLFRF). As, annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year. Cause: A proper system of internal controls over the P&E report was not designed by management of the City, which would include segregation of key functions to ensure the City provided the Treasury with complete and accurate information related to the CSLFRF awards. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management of what should be done to effect internal control, and procedures should consist of actions that would implement these policies. Context: The City submitted one P&E report during the audit period; however, a single employee prepared and submitted the P&E report without a review or oversight process in place to prevent, or detect and correct errors. In addition, the P&E report was not properly supported by the City’s records. All but $100,000 of the expenditures were reported under the Eligible Use Category of “Administrative Expenses.” However, the City’s expenditures during the audit period consisted of assistance to business and households, sewer infrastructure, and tourism support, none of which qualified as Administrative Expenses. Furthermore, the City reported that it was electing to take the Revenue Loss Standard Allowance, but the amount reported as Revenue Loss was $0. Effect: Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. 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 City. Identification as a repeat finding, if applicable: Yes. The finding appeared in the prior year report as Finding 2022-001. Recommendation: We recommended that management of the City design and implement a proper system of internal controls that would provide a segregation of duties for the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the City provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-002 Subject: Coronavirus State and Local Fiscal Recovery Funds - Reporting Federal Agency: U.S. Department of Treasury Assistance Listing Number: 21.027 Federal Award Number: FY 2022 Pass-Through Entity: N/A Compliance Requirements: Reporting Audit Findings: Material Weakness, Modified Opinion Criteria: 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. 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). . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, 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, . . ." Condition: The City had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties that would likely be effective in preventing, or detecting and correcting, noncompliance. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the Department of Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its 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 City was classified as a metropolitan city with a population below 250,000 residents that received an allocation of less than $10 million in Coronavirus State and Local Fiscal Recovery Funds (CSLFRF). As, annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year. Cause: A proper system of internal controls over the P&E report was not designed by management of the City, which would include segregation of key functions to ensure the City provided the Treasury with complete and accurate information related to the CSLFRF awards. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management of what should be done to effect internal control, and procedures should consist of actions that would implement these policies. Context: The City submitted one P&E report during the audit period; however, a single employee prepared and submitted the P&E report without a review or oversight process in place to prevent, or detect and correct errors. In addition, the P&E report was not properly supported by the City’s records. All but $100,000 of the expenditures were reported under the Eligible Use Category of “Administrative Expenses.” However, the City’s expenditures during the audit period consisted of assistance to business and households, sewer infrastructure, and tourism support, none of which qualified as Administrative Expenses. Furthermore, the City reported that it was electing to take the Revenue Loss Standard Allowance, but the amount reported as Revenue Loss was $0. Effect: Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. 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 City. Identification as a repeat finding, if applicable: Yes. The finding appeared in the prior year report as Finding 2022-001. Recommendation: We recommended that management of the City design and implement a proper system of internal controls that would provide a segregation of duties for the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the City provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-004 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Fund - Reporting Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Fund Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): 20-1892-0-1-806 Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context Recipients are required to quarterly or annually submit Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its 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 was classified as a metropolitan county with a population below 250,000 residents that received an allocation less than $10 million in COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) award funds. As such, the initial P&E report, covering the period from March 3, 2021 to March 31, 2022, was required to be submitted to the Treasury by April 30, 2022. The subsequent annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year. The County submitted one P&E report during the audit period. Although the Deputy County Auditor compiled the information for the report and the County Auditor reviewed and submitted the report, the internal controls were not effective in preventing, or detecting and correcting, errors. As a result, the P&E report contained the following errors: The current period expenditures were overstated by $336,376. The cumulative expenditures were understated by $18,624. The lack of effective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 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. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 PERRY COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, 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. . . ." Cause The County's internal controls were not effective to prevent and detect errors on the P&E report prior to submission. The County did not insure that information reported was correct and applicable to the reporting period of the submission. 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. As such, the County did not accurately report current period expenditures and total cumulative expenditures properly when filing the P&E report for the period from April 1, 2022 to March 31, 2023. Not properly reporting the information to the Treasury provides the Treasury with an inaccurate picture of the County's activity for the reporting period. 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. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County develop policies and procedures to ensure the County accurately reports current period and cumulative expenditures on the P&E report to the Treasury. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.