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.
Finding 2024-011: Material Weakness and Material Noncompliance Finding, Reporting – Special Reporting Assistance Listing Program Title and Number: Coronavirus State and Local Fiscal Recovery Funds (ALN# 21.027) Federal Agency: U.S. Department of Treasury Pass-through Entity: N/A Award year: 2023-2024 Criteria or specific requirement: Generally, recipients must submit one initial Interim Report, quarterly or annual Project and Expenditure reports which include subaward reporting, and in some cases annual Recovery Plan reports. The Project and Expenditure Reports are due quarterly and/or annually based on 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information. Cities were required to submit quarterly Project and Expenditure Reports which cover one calendar quarter and must be submitted to Treasury by the last day of the month following the end of the period covered. 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. Condition: None of the quarterly Project and Expenditure Reports were submitted as required, and instead the City elected to submit an annual Project and Expenditure Report that was submitted past the deadline for the fourth quarterly report. Cause: Grant management and reporting is not fully centralized within the City and there was turnover in the grant administrator position. The City did not have sufficient internal controls in place to ensure the reports were filed. Effect: Failure to file timely reports resulted in non-compliance with the Reporting requirements of the program. This could also result in the Federal government cancelling funding of the program or denying eligible expenditures. Context: There were four Project and Expenditure Reports required to be submitted during the audit period. Of the four quarterly Project and Expenditure reports required, none were submitted. The City elected to submit an annual Project and Expenditure Report, which was submitted 13 days after the deadline for the fourth quarterly report. Questioned Cost: None Repeating Finding: 2023-006 Recommendation We recommend that the City implement controls to ensure all reports are prepared, reviewed and submitted by the due date to the requisite agency, as well as contact the grantor about whether or not the delinquent reports should still be filed. Views of Responsible Officials: Management agrees with the finding.
Condition: During our test of the annual expenditure report filed by the County for compliance with grant reporting requirements, it was noted that the report listed inaccurate information regarding the actual expenditures. The annual report listed the expenditures totaling $3,765,498; however, the confirmed amount on the financial statement and SEFA indicated the actual expenditures were $4,453,372 resulting in an understatement of $687,874. Cause of Condition: Policies and procedures have not been designed and implemented to ensure compliance with federal grant requirements. Effect of Condition: This condition resulted in noncompliance with federal grant requirements for this program and could result in loss of federal funds to the County. Recommendation: OSAI recommends the County gain an understanding of the compliance requirements for federal programs to ensure compliance with the grant requirements and filing accurate quarterly reports. Management Response: Chairman of the Board of County Commissioners and County Clerk: The Creek County Clerk's Office will work with the SEFA preparer to ensure that the correct paid dates are being used when reporting. This should eliminate the actual expenditures differences. We will work to educate all offices involved in the reporting process on financial statement and SEFA. Criteria: 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.
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.
Finding 2024-013 – Noncompliance with Reporting Over Major Federal Program - Coronavirus State and Local Fiscal Recovery Funds (Repeat Finding – 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: During the test of 100% of expenditures for the Coronavirus State and Local Fiscal Recovery Funds, totaling $1,152,068, twenty-three (23) expenditures totaling $905,330 were not accurately reported in the proper period on the quarterly reports as required by the Reporting compliance requirement. 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 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 reports and to ensure compliance with federal 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.
FINDING REFERENCE NUMBER 2024-039 FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G996117 (Federal Award Year: 10/1/2021 – 9/30/2022) 2023G996117 (Federal Award Year: 10/1/20212 – 9/30/2023) 2401PRTANF1 (Federal Award Years: 10/1/2023 through 9/30/2026) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – SPECIAL REPORTS FOR FFATA TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA In accordance with 2 CFR Part 170, establishes that 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). The non-Federal entity or Federal agency must report each obligating action to http://www.fsrs.gov. For subaward information, report no later than the end of the month following the month in which the obligation was made. STATEMENT OF CONDITION During our testing of reporting compliance requirements applicable to the TANF program, we noted that Administration for Socioeconomic Development of the Family (ADSEF) did not submit the required FFATA reports for applicable first-tier subawards equal to or exceeding $30,000 to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Based on the amounts reported in the SEFA, certain entities receiving TANF funds were identified as subrecipients as defined in 2 CFR 200.1. However, ADSEF does not have appropriate internal control procedures related to reporting requirements and, as a result, did not identify the related payments as reportable subawards under 2 CFR Part 170. Consequently, ADSEF could not provide evidence that the required FFATA subaward reports were submitted accurately and within the required reporting timeframe. QUESTIONED COSTS None. PERSPECTIVE INFORMATION ADSEF consultants identified entities for which they understand are subrecipients. There were a total of twenty (20) agreements/contracts executed during fiscal year 2023-2024 that could be subject to FFATA reporting requirements, however, ADSEF cannot certify if all are subrecipients. According to the audit procedures performed, the agency did not have an established process for identifying first-tier subawards subjects to reporting or for submitting the corresponding FFATA notification through the FSRS. The deficiency is systemic, since the situation stemmed from ADSEF's general process and methodology for classifying entities that receive TANF funds and determining the applicability of FFATA reports. STATEMENT OF CAUSE ADSEF did not establish adequate policies, procedures, and internal controls to properly evaluate and determine whether entities receiving TANF funds should be classified as subrecipients or contractors in accordance with 2 CFR 200.331. As a result, applicable subawards subject to FFATA reporting requirements were not identified and reported to FSRS. POSSIBLE ASSERTED EFFECT Failure to report first-tier subawards in FSRS results in noncompliance with Federal transparency and reporting requirements established under 2 CFR Part 170 and may impair public transparency and accountability over the use of Federal funds. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADSEF strengthen its internal control procedures over FFATA compliance to ensure that all applicable first-tier subawards equal to or exceeding $30,000 are identified, monitored, and reported timely and accurately in FSRS in accordance with 2 CFR Part 170 requirements.
Condition: Expenditures for federal programs were not adequately reported on the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) Compliance Reports. The actual expenditures to vendors were $1,163,327. The County reported $941,437, resulting in an understatement of $221,890. In addition, it was noted one vendor was reported under the wrong category in the amount of $135,409. This amount was reported as revenue loss and should have been reported as administrative expense. 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 resulted in noncompliance with grant requirements. Management Response: Chairman of the Board of County Commissioners: To correct this issue, the County will develop policy and procedures to timely and accurately track and report on federal funds. The policy and procedures will be reviewed, adopted, and monitored by the Board of County Commissioners. County Clerk: County will implement internal controls to ensure compliance 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. 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, 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.
Finding 2024-003 Internal Control and Compliance over Subrecipient Monitoring (Material Weakness) Information on the Federal Program: Assistance Listing Number(s): 17.258, 17.259, 17.278 Federal Program Name: Workforce Innovation and Opportunity Act (WIOA) Federal Agency: U.S. Department of Labor Pass-Through Entity: California Employment Development Department Federal Award Number and Award Year: AA211008/AA311008/AA411008/AA411009/AA411010 Criteria: 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. Standards for Financial and Program Management. §200.303 Internal controls (2 CFR 200.303): 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). 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, Subrecipient Monitoring and Management, §200.331 Requirements for pass-through entities (2 CFR 200.331): 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.; (1) 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; (2) 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; 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, Subrecipient Monitoring and Management, §200.332 Requirements for pass-through entities (2 CFR 200.332): All pass-through entities must: (a) Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section, which may include consideration of such factors as: (1) The subrecipient's prior experience with the same or similar subawards; (2) The results of previous audits including whether or not the subrecipient receives a Single Audit in accordance with Subpart F of this part, and the extent to which the same or similar subaward has 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 awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency). Condition: During our testing of the Imperial County Workforce Development Office’s (ICWDO) provisions for subrecipient monitoring under the WIOA Cluster, we noted two (2) of the two (2) subrecipient selected for testing, there was no review or approval over the monitoring procedures performed by ICWDO monitoring staff. The entire population consisted of two (2) subrecipients. Also, the County did not document their evaluation of the subrecipient’s risk of noncompliance. The following information was not provided at the time of the subaward for two (2) of the two (2) subawards selected for testing: o Federal award identification number o Federal award date of award to recipient by the Federal agency o Name of federal awarding agency o Federal Financial Assistance Listing/CFDA Number o Identification of whether the award is research and development Cause: The County’s ICWDO department does not have a formal procedure in place for the department’s review and approval over the monitoring procedures performed by the department over its subrecipients. The ICWDO department did not ensure that the required award information and applicable requirements were communicated to the subrecipients and did not maintain documentation of their evaluation of each subrecipient’s risk of noncompliance. Effect: The County’s ICWDO department did not review and approve monitoring procedures performed over its subrecipients. Additionally, the ICWDO department did not maintain policies and procedures to align with the Subrecipient Monitoring requirements in 2 CFR 200.332 (a) and 200.332(b). Identification as a Repeat Finding, If Applicable: Yes. See Finding 2023-004. Questioned Costs: No questioned costs were identified. Recommendation: We recommend ICWDO implement policies and procedures in accordance with 2 CFR 200.331(a) 200.332(b) to ensure compliance with subrecipient monitoring requirements and that require the review and approval of the monitoring procedures performed over its subrecipients by a separate individual. View of Responsible Officials and Planned Corrective Action: See separate Corrective Action Plan.
FINDING NO: 2024-047 Strengthen Controls over Record Retention for Consultant Selection and Indirect Cost Rate Review STATE AGENCY: Oklahoma Department of Transportation FEDERAL AGENCY: U.S. Department of Transportation ALN: 20.205 FEDERAL PROGRAM NAME: Highway Planning and Construction FEDERAL AWARD YEAR: 2024 CONTROL CATEGORY: Procurement and Suspension and Debarment QUESTIONED COSTS: $0 Condition and Context: Engineering consultants are selected by an Oklahoma Department of Transportation (Department) Consultant Selection Committee (DCSC). A DCSC is formed for each project as a designated group responsible for evaluating, interviewing, and ranking engineering consultants based on their qualifications, experience, and project approach (qualifications-based selection). The DCSC evaluates interested consultants and develops a short-list of consultants, which is provided to the Director of Engineering for concurrence and the Chief Engineer for approval. After the short-list is approved, the DCSC interviews the consultants and performs evaluations to rank the consultants. The final results are sent to the Director of Engineering for recommendation, to the Chief Engineer for concurrence, and to the Executive Director for approval. The Department’s Grants & Contracts Audit Office (Audit Office, formerly Operations Review and Evaluation) is responsible for reviewing and accepting consultant indirect cost rates to ensure that overhead rates charged to consultant contracts are reasonable, allowable, and compliant with Federal Acquisition Regulations (FAR). The Audit Office maintains the review files and the accepted FAR internal cost rate and/or a provisional indirect cost rate. The timeline from DCSC selection, to contracting with a consultant, to reimbursement of eligible consultant claims can span multiple state fiscal years. The Department reimbursed 516 consultant contracts during the audit period, totaling $64,125,923. We tested 47 of the contracts, which included a total of 29 consultants, to determine whether the contracts had related DCSC selection approvals and an accepted FAR indirect cost rate when the Department contracted with the consultant. We identified: • One (1) of the 47 (2.12%) consultant contracts in which the Department was unable to provide the DCSC’s short-list, final recommendation, or the associated selection approvals. • 14 of the 47 (29.79%) contracts, relating to 9 consultants, in which the Department did not have an accepted FAR indirect cost rate and/or a provisional indirect cost rate on record with the Audit Office. Cause: The Department’s record retention process lacked the necessary strength and consistency to ensure the DCSC selection and approval documentation was maintained. Further, the Audit Office experienced turnover in 2021 and 2022, which affected the performance and maintenance of FAR indirect cost rates. Effect: Without a DCSC approved short-list of consultants, the Department is unable to provide proof that consultant contract procurement guidelines were followed. There is also the risk that the consultant selected may not be the most qualified consultant for the project or that the contract was selected due to wrong-doing.* The consultant’s indirect cost rate charged to the contracts may be unreasonable, unallowable, and/or noncompliant with Federal Acquisition Regulations. * The vendor associated with this contract has been used by the Department for years and is an established consultant; therefore, there are no concerns regarding the consultant’s existence, just the methodology used to select the consultant. Recommendation: We recommend the Department evaluate DCSC record retention process and implement training necessary to ensure all DCSC recommendations are maintained in the contract file. Furthermore, we recommend the Department evaluate the FAR indirect cost rate review and retention process and strengthen indirect cost rate review tracking to ensure that all consultants’ indirect cost rates are reviewed annually and retained, and necessary adjustments to the consultants’ provisional indirect cost rates are made. Criteria: 2 CFR § 1201.1 states in part: “Except as otherwise provided in this part, the Department of Transportation adopts the Office of Management and Budget Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR part 200)….” 2 CFR § 200.334 states in part: “Retention requirements for records. Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. … “ 23 CFR § 172.11(b) states in part: “Elements of contract costs. The following requirements shall apply to the establishment of the specified elements of contract costs: (1) Indirect Cost Rates. (i) Indirect cost rates shall be updated on an annual basis in accordance with the consultant's annual accounting period and in compliance with the Federal cost principles. (ii) Contracting agencies shall accept a consultant's or subconsultant's indirect cost rate(s) established for a 1-year applicable accounting period by a cognizant agency that has: (A) Performed an audit in accordance with generally accepted government auditing standards to test compliance with the requirements of the Federal cost principles and issued an audit report of the consultant's indirect cost rate(s); or (B) Conducted a review of an audit report and related workpapers prepared by a certified public accountant and issued a letter of concurrence with the related audited indirect cost rate(s).” 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.” 2 CFR § 200.1 states in part: “Internal controls for non-Federal entities means: (1) Processes designed and implemented by non-Federal entities to provide reasonable assurance regarding the achievement of objectives in the following categories: (i) Effectiveness and efficiency of operations; (ii) Reliability of reporting for internal and external use; and (iii) Compliance with applicable laws and regulations.” Oklahoma Department of Transportation Guidelines for the Administration of Consultant Contracts, dated June 22, 2016, contains the following guidance: • Section 4.01 Short-List Development states in part: “a) Department Consultant Selection Committee Determination. … The DCSC will review the LOIs submitted by each Consultant. The DCSC is a working committee which consists of a minimum of three (3) representatives (Committee Chair and two (2) members) and is generally determined by the different components of a project (i.e. roadway design, bridge design, survey etc.). The DCSC will be composed of Department representatives with knowledge and expertise in critical aspects of the projects and/or services, and are generally recommended by the Director of Engineering, for Chief Engineer concurrence and Executive Director approval.…” • Section 4.04 Interview Evaluation states in part: “Based upon the DCSC’s evaluation of the proposals and oral presentations, a final ranking is established and the CA provides the Director of Engineering recommendation for Chief Engineer concurrence and Executive Director approval….” • Section 6.11 Federal Acquisition Regulations (FAR) states: “The Consultant shall certify that the indirect cost rate submitted does not include any costs which are expressly unallowable and that the indirect cost rate was established only with allowable costs in accordance with the applicable cost principles contained in the FAR. The Department’s OR&E Division will be responsible for ensuring that a Consultant’s indirect cost rate complies with the FAR cost principles.” • Section 16.3 states: “An audited FAR indirect cost rate and related information must be submitted by the Consultant to the Department for review and acceptance no later than July 31st following the end of the previous calendar year. A provisional overhead rate may be used until such time that an annual overhead rate is audited and established. In the event the Consultant is unable to provide the audit report within the time frame specified, the Consultant shall submit a written request for an extension citing the reason for the delay. Submittal of the Consultant’s annual indirect cost rate audit will be documented in the Consultant’s contract evaluation.” Views of Responsible Official(s) Contact Person: Jennifer Hankins Anticipated Completion Date: 12/31/2026 Corrective Action Planned: The Oklahoma Department of Transportation agrees with the finding. See corrective action plan located in the corrective action plan section of this report.
FINDING NO: 2024-054 (Repeat 2023-097) Strengthen Internal Controls Over Claim Voucher Approvals STATE AGENCY: Oklahoma Department of Transportation (Department) FEDERAL AGENCY: Federal Highway Administration ALN: 20.205 FEDERAL PROGRAM NAME: Highway Planning and Construction Program FEDERAL AWARD YEAR: 2024 CONTROL CATEGORY: Allowable Cost/Cost Principles QUESTIONED COSTS: $50,910 Condition and Context: To initiate the payment of program expenditures, individual divisions review and approve invoices related to the divisions’ operations and prepare the Claim Voucher Form (ODOT Form 324) before submitting them to the Comptroller Division for processing. We analyzed 100% of federally reimbursed Highway Planning and Construction Program (ALN 20.205) claims that were paid during the audit period. The population consisted of 11,622 claims, totaling $1,062,621,905. During the analysis, we identified three (3) duplicate claims, totaling $50,910, which are considered improper payments. Cause: The Department’s claim preparation and review processes lacked the necessary strength and consistency to ensure personnel verified whether the invoices had previously been paid prior to processing the duplicate claims. Further, the review and approval process was not robust enough to detect the duplicate claim. Effect: The Department made three (3) improper payments for $50,910 with ALN 20.205 funding. Continued noncompliance with 2 CFR § 200.1 increases the risk of Federal claw backs, which impacts state dollars. Recommendation: We recommend the Department evaluate and strengthen the claim preparation and review processes in the divisions involved and provide appropriate training to ensure that future duplicate payments are prevented. Additionally, we recommend the affected Divisions maintain a log documenting the invoice date and number, vendor name, and payment amount and review the log for prior claim vouchers issued before approving and processing potential duplicate invoices for payment. Criteria: 2 CFR § 1201.1 states: “Except as otherwise provided in this part, the Department of Transportation adopts the Office of Management and Budget Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR Part 200). This part supersedes and repeals the requirements of the Department of Transportation Common Rules (49 CFR Part 18 - Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments and 49 CFR Part 19 - Uniform Administrative Requirements - Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and other Non-Profit Organizations), except that grants and cooperative agreements executed prior to December 26, 2014 shall continue to be subject to 49 CFR Parts 18 and 19 as in effect on the date of such grants or agreements. New parts with terminology specific to the Department of Transportation follow.” 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 § 200.1 states in part: “Internal controls for non-Federal entities means: (1) Processes designed and implemented by non-Federal entities to provide reasonable assurance regarding the achievement of objectives in the following categories: (i) Effectiveness and efficiency of operations; (ii) Reliability of reporting for internal and external use; and (iii) Compliance with applicable laws and regulations.” 2 CFR § 200.1 states in part: “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. (i) Incorrect amounts are overpayments or underpayments that are made to eligible recipients (including inappropriate denials of payment or service, any payment that does not account for credit for applicable discounts, payments that are for an incorrect amount, and duplicate payments). An improper payment also includes any payment that was made to an ineligible recipient or for an ineligible good or service, or payments for goods or services not received (except for such payments authorized by law).” Views of Responsible Official(s) Contact Person: Sam Ddamba Anticipated Completion Date: 07/02/2025 Corrective Action Planned: The Oklahoma Department of Transportation agrees with the finding. See corrective action plan located in the corrective action plan section of this report.
FINDING NO: 2024-015 (Partial Repeat # 2023-061) Strengthen Internal Controls Over Review and Approval or Claims STATE AGENCY: Oklahoma State Department of Education (OSDE) FEDERAL AGENCY: United States Department of Education (USDE) ALN: 10.558; 84.010; 84.425 - 84.425U FEDERAL PROGRAM NAME: Child and Adult Care Food Program (CACFP); Title I, Part A – Grants to Local Educational Agencies; Education Stabilization Fund (ESF): Elementary and Secondary School Emergency Relief Fund (ESSER); American Rescue Plan – Elementary and Secondary Schools Emergency Relief Fund (ARP ESSER) FEDERAL AWARD NUMBER: 6OK300330, 6OK300349; S010A230036; S425U210024 FEDERAL AWARD YEAR: 2024 CONTROL CATEGORY: Activities Allowed or Unallowed & Allowable Costs/Cost Principles QUESTIONED COSTS: ALN 84.425U - $1,549 Condition and Context: OSDE has policies and procedures in place to review and approve claims. In addition, the Comptroller’s Office has policies and procedures in place to determine which claims are to be included in accounts payable We tested a sample of 35 of 745 (4.7%) Education Stabilization Fund (ESF) accounts payable claims totaling $57,843,297, and identified: • One of 35 (2.86%) ESF claims lacked supporting invoices which were not obtained by OSDE until after our inquiry, indicating inadequate review and approval. We subsequently received supporting documentation and were able to verify the invoices were for allowable costs. • One of 35 (2.86%) ESF claims had invoiced amounts less than the expenditure within the claim, resulting in an overclaim of $1,549. We tested a sample of 23 of 456 (5.04%) Title I, Part A accounts payable claims totaling $34,218,534 and identified: • One of 23 (4.35%) Title I, Part A claims lacked supporting invoices which were not obtained until after our inquiry, indicating an inadequate review and approval. We subsequently received supporting documentation and were able to verify the invoices for allowable costs. We tested a sample of 6 of 1,491 (.40%) CACFP accounts payable claims totaling $16,763, reported on the state fiscal year (SFY) 2024 Schedule of Federal Awards (SEFA) dated July 1, 2024 to August 15, 2024, and identified: • Four of six (66.67%) CACFP claims totaling $6,268 with claim months after June 30, 2024 should not have been included in the SFY 2024 CACFP accounts payable population. Cause: OSDE’s claims review and approval process lacked the necessary strength and consistency to adequately review Title I and CACFP claims to ensure proper supporting documentation, including invoices, agrees with the expenditures submitted on the claim to ensure the amounts claimed were accurate and for allowable costs. In addition, OSDE’s accounts payable determination lacked necessary strength and consistency to accurately review and account for accounts payable transactions for goods and services received after June 30, 2024. Effect: Inadequate review of claims with proper supporting documentation increases the risk of reimbursement of unallowable expenses resulting in noncompliance. Furthermore, noncompliance increases the risk of Federal claw backs, which impacts state dollars. Noncompliance during the audit period resulted in $1,549 of state funds owed to the USDE. Additionally, inaccurate reporting of goods and services received during the period increases the risk of accounts payable in the CACFP SEFA accrual amount to be overstated. The exception rate in our testwork indicates a significant overstatement of accounts payable is likely. Recommendation: We recommend OSDE strengthen its claims review and approval process to ensure accurate supporting documentation for claims is included and only allowable costs are reimbursed. We also recommend OSDE strengthen its accounts payable determination process to accurately account for claims identified as accounts payable for the audit period. Criteria: 2 CFR § 200.403 states in part: “Except where otherwise authorized by statute, costs must meet the following criteria 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. … (g) Be adequately documented.” 2 CFR Part 200 §200.1 states in part: “Improper payment means 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 an ineligible good 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.” 2 CFR § 200.303(a) states in part: “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.” Management Response Contact Person: Tammy Smith | Senior Director of Federal Programs Anticipated Completion Date: July 31, 2026 Corrective Action Planned: The Oklahoma State Department of Education agrees with the finding. See corrective action plan located in the corrective action plan section of this report.
FINDING NO: 2024-031 (Repeat 2023-104) Strengthen Internal Controls over Monitoring for Desert Grant Awards STATE AGENCY: Oklahoma Department of Human Services (OKDHS) FEDERAL AGENCY: Department of Health and Human Services ALN: 93.575 FEDERAL PROGRAM NAME: CCDF Cluster FEDERAL AWARD NUMBER: 2101OKCDC6 FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility QUESTIONED COSTS: $12,616,296 Condition and Context: OKDHS begam implementing a new Childcare Desert Grant (DG) program starting in August 2022 in order to help increase accessibility to quality childcare for working families living in a county where there is not enough licensed childcare to support the needs of the residents. The grants were available for new or existing daycare homes or centers seeking to increase licensed capacity. Funds awarded under this program were intended to be used for minor construction, program materials, or technology and software for business development necessary to meet licensing requirements. For new daycares, applicants could receive a total of $10,000 per child with an initial advance of $5,000 per child payment made at the time of approval based on the licensed capacity, and a second $5,000 payment made at 12 months based on the enrollment and attendance. For expansion/ existing daycares, applicants could receive a total of $10,000 per child with an initial advance of $5,000 per child payment made at the time of approval based on the number of expanded slots, and a second $5,000 per child payment made at 12 months based on the number of children enrolled and attending in the expanded slots. We tested a sample of 71 (55 new and 14 existing sites) Child Care Centers (CCC) or Family Daycare Homes (FDCH) that received American Rescue Plan (ARP) Desert grant supplemental funds during SFY 2024 (July 1, 2023 – June 30, 2024). The universe included 253 Child Care providers with $24,050,000 in total awards. Tested awards for sampled providers totaled $13,295,000. We noted the following Desert grant Eligibility or Activities Allowed expenditure exceptions: ACTIVITIES ALLOWED and ELIGIBILITY • The 2nd round DG payment was based on both the attendance records and the enrollment records for the recertification month. However, OKDHS did not obtain the attendance records and ensure enrollment records agreed to attendance records for 10 of 71 (14.08%) facilities. Questioned costs totaled $1,956,582. We also noted that OKDHS did not obtain the attendance records for any of the facilities that had their 2nd round recertification performed in October of 2023. Total award amount paid by OKDHS without verifying attendance records is $3,450,000, of which nine facilities are already included in the questioned costs of $1,956,582 and an additional 22 facilities not in our sample were paid the remaining $1,493,418. • For 30 of 71 (42.25%) awards paid, the Desert grant award amount per CCC/FDCH was not calculated correctly based on the attendance and enrollment records submitted: overpayments totaled $1,340,000. We questioned these costs. • Eligibility criteria per the 2nd round Desert Grant Application was not met prior to the application approval date for the following: o For 4 of 71 (5.63%) new facilities, the CCC had a change in ownership or change in license number without a break in operations. Questioned costs totaled $1,080,000 for the 2nd round award. In addition, the CCC’s should not have received the 1st round of awards totaling $1,765,000 as the facilities did not meet the DG requirements for a new facility. o For 1 of 71 (1.41%) the amount of the 2nd round payment exceeds the amount of the 1st round payment. Questioned costs totaled $10,000. • The new/expanded CCC's/FDCH's did not comply with all post application approval eligibility criteria applicable to the SFY24 time period as follows: o For eight of 71 (11.27%) of facilities, the facility closed prior to two years from the date of the 1st round award payment; overpayments totaled $575,000 We questioned these costs. We also noted that six of 71 (8.45%) facilities closed prior to two years from the date the facility first started offering childcare, and another 11 of 71 (15.49%) had closed as of 11/6/2025 per OKDHS. The total amount of DG funds (1st and 2nd rounds) paid to facilities that are no longer operating is $8,190,000. o For 24 of 71 (33.80%) awardees paid a totaling total $2,091,582 (15.73% of total award amount of $13,295,000), the CCC/FDCH did not provide program expenditure records as required o For the 47 of 71 (66.20%) of Desert Grant awardees that reported expenditures for the 2nd round of Desert Grant awards, $10,534,714 (79.24% of the total award amount of $13,295,000), was spent on activities not designated as allowable per the Desert Grant application and OKDHS program objectives. We questioned these costs Inadequate Desert Grant program design and administration resulted in mismanagement of funds by OKDHS per the following: • For 55 of 71 (77.46%) Desert Grant awardees, OKDHS awarded STARS under the OKDHS Quality Rating Improvement System (QRIS) without any monitoring visits to verify the program met the requirements for the STAR level awarded. • For 32 of 71 (45.07%) Desert Grant awardees, the number of children present during monitoring visits does not reasonably support the number of children claimed in attendance and/ or enrollment in the documentation submitted by the facilities and used by OKDHS to calculate the 2nd round DG award amount. Fifteen of the 32 facilities had closed as of 11/6/2025. Eleven of the 32 facilities did not provide any expenditure records to SAI. Twenty-five of the 32 facilities received an increased STAR level without any monitoring visits to verify the program met the requirements for the STAR level awarded. While reviewing monitoring activities, we identified one recipient of the 1st round DG award who applied as a new childcare center and received $600,0000 in DG funds. However, the facility was already an existing childcare center. We determined the total number of facilities awarded DG funds in rounds 1 and 2 that closed as of 11/6/2025 is 128 (36.78 % of 348 total awarded the DG) with total desert grant payments for closed facilities totaling $19,865,000 or 29.31% of $67,775,000 in total DG payments made. Note: Because a tested provider may have questioned costs for one type of exception that overlaps with other types of exceptions, we are providing the following information: • Total non-compliance for exceptions related to issues with attendance/ enrollment support, facility closures, non-compliance with eligibility requirements and failure to provide records are $ 4,841,582 and projected non-compliance is $8,057,287 • Total non-compliance for exceptions related to issues with reported expenditures for activities not designated as allowable per the Desert Grant application and DHS program objectives are $7,774,714 and projected noncompliance is $15,028,104. • Total combined questioned costs for all exceptions (netted to ensure amounts do not exceed 2nd round award payment) are $12,616,296 and projected non-compliance is $23,085,391. Cause: The Department did not design the Desert grant program to ensure ARP Act CCDF funds were only used to expand access to childcare assistance to more income eligible families and improve the quality and availability of childcare. • The Department did not award funds based on the actual costs necessary for each individual CCC or FDCH to meet licensing requirements, which resulted in many providers that had large amounts of cash at their disposal even after meeting licensing requirements. • The Department advanced Desert grant funds to awardees in two lump sums instead of on an incremental basis ensuring planned remodeling work and program equipment and materials were being completed and/or acquired appropriately and were reasonable and necessary to meet program requirements. • The Department awarded Desert Grant funds based first on potential capacity and then enrollment and attendance but did not consider any other significant factors (i.e., business experience, number of children likely to be enrolled, ability to hire, train and retain qualified staff, etc.) essential to the operational sustainability of the new CCC or FDCH at the capacity level awarded. This contributed to many instances in which the CCC/ FDCH has already closed or is currently operating at an enrollment level significantly below the awarded capacity. • The Desert Grant Application included language that was insufficient to adequately inform the Desert grant awardees of all unallowable uses of the funds, including remodeling funding limits, limitations for sectarian organizations, and expenditures that were only allowable under other ARP CCDF stabilization grants. • The Department did not have adequate safeguards in place to ensure Desert Grant funds were appropriately awarded only to awardees that met the requirements to be considered a ‘new’ daycare center. • The Department allowed programs with the least restrictive licensing requirements (i.e., out of school, after school, summer programs) to receive the same amount per child as a program offering full time infant to school age childcare. The Department has not established adequate policies and procedures to monitor Desert Grant funds expended by childcare providers. The Desert Grant program may not effectively increase and/or sustain the increase in total capacity of childcare centers in low-income areas as intended. OKDHS CCDF did not normally create or administer new grant programs other than CCDF regular childcare subsidy program. In addition, the ARP CCDF Discretionary and supplemental funds had to be obligated by September 30, 2023, and liquidated by September 30, 2024, which reduced the timeline available to develop the new grant programs. However, OKDHS CCDF did have extensive experience with childcare licensing requirements and associated costs of operating the various types of childcare programs. Effect: The Desert Grant program may not effectively increase and/or sustain the increase in total capacity of childcare centers in low-income areas as intended. The combined effects of making advanced payments for all Desert Grant awards and the failure to monitor the use of Desert grant funds may lead to the Departments inability to recover grant funds not used in accordance with the grant requirements and/or used for non-childcare expenditures or misappropriated for other uses. Desert grant funds were not used by majority of CCC and FDCH to expand daycare attendance within desert regions; there were no repercussions to not meeting the licensing capacity they were paid on. Recommendation: We recommend the Department enhance its program design and planning processes to ensure that key elements—such as funding mechanisms and implementation workflows—are fully developed prior to launch. Strengthening the upfront design phase will help prevent challenges like those experienced with this grant and support more effective program execution in the future. We recommend the Department develop policies and procedures to ensure providers are adequately monitored to ensure Desert grant funds are expended properly to meet the objective of the grant. We recommend the Department perform a review of all Desert grant funds awarded and expended, identify all funds not used for the Desert grants intended purposes, and ensure remaining funds are expended appropriately or returned. We also recommend the Department recoup all funds for the following: o Funds awarded based on incorrect capacity counts and enrollment and attendance counts o Funds awarded to facilities that did not meet the requirements to be considered a new CCC/FDCH. o Expenditures for non-childcare purposes o Expenditures that benefited entities other than the facility awarded the desert grant o Excessive or unreasonable expenditures o Unexpended funds not needed to meet program requirements o Unaccounted for funds (i.e., funds transferred out or comingled with investment accounts, personal accounts, or other business/non-profit accounts) We recommend the Department improve their monitoring procedures to ensure significant discrepancies between the number of children claimed in attendance and the number of children present during monitoring visits are appropriately follow-up on. We also recommend that monitoring visits are performed during non-traditional hours and during before and after care hours for all providers offering these services at these times. Criteria: 2 CFR § 200.303(a) – Internal Controls states in part, “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.” 2 CFR § 200.403 Factors affecting allowability of costs states in part, “Costs must…(a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, and (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, and (g) Be adequately documented.” The Desert grant FAQs state in part, …“How much are the Child Care Desert grants? For New Programs: Applicants may receive a total of $10,000 per child with an initial payment made at the time of approval based on license capacity, and a second $5,000 per child payment made at 12 months based on enrollment. The second payment cannot exceed the amount of the first payment. For Expansion Programs: Applicants may receive a total of $10,000 per child with an initial payment made at the time of approval based on the number of expanded slots, and a second $5,000 per child payment made at 12 months based on the number of children enrolled in the expansion slots. … What are the Qualifications for grant eligibility? … • Must accept subsidy payments • Must participate in the Quality Rating Improvement System (QRIS/STARS) • Must operate for a minimum of two years after date of initial award. • Be located in an identified child care desert. (A list of Child Care Desert counties can be reviewed at the end of this document.) • Make services available to families regardless of race, color, creed, religion, national origin, sex, marital status, disability, age, sexual orientation, or familial status. • Complete grant participation agreement, located at the end of the application. • Complete and return questionnaire that will be provided to you via email after you submit the grant application. • Be determined eligible by Oklahoma Human Services staff who review the applications. NOTE: Programs that have recently closed and reopen without an increase in capacity do not qualify OR Programs that have recently had a change in ownership without a break in operation do not qualify. … Childcare providers must NOT use the funds for any of the following purposes: • Purchase of land or property • Major construction or renovations. Major renovation means: (1) structural changes to the foundation, roof, floor, exterior or load-bearing walls of a facility or the extension of a facility to increase its floor area; or (2) extensive alteration of a facility such as to significantly change its function and purpose, even if such renovation does not include any structural change. • Consumable supplies (diapers, wipes, soap, paper products) or office supplies (paper, staples, pens) • One-time field trips for children • Child care tuition (scholarships) • Items prohibited by licensing • Used items • Non-childcare expenses … How long do I have to start operating my program after I receive the initial award? Childcare programs will have 90 days from receipt of the awarded grant funds to complete the application process and be placed on a six-month permit. Once you have a permit, you can begin serving children. If you are not on permit within 90 days, you may be required to return the initial award amount. … You must be approved for a 2-star level or higher within 12 months of receipt of initial award. If you do not meet this requirement, you may be required to return the initial award and will not qualify for a second award. You must be approved for a subsidy contract within 12 months of receipt of initial award. If you do not meet this requirement, you may be required to return the initial award and will not qualify for a second award. Childcare programs must participate in QRIS at two star or higher in order to receive a subsidy contract. The Desert Grant application states in part, “By signing this application, I understand that it is my responsibility to maintain records and other documentation to support the use of funds I receive, as well as to document my compliance with the requirements. I understand I must provide these documents to Oklahoma Human Services if requested. … Allowable uses of Grant Funds: Grant funds can be used to cover minor construction projects or program materials per application. All materials must be new, and must be purchased from a retail store, not a private party. In the event the grant recipient wishes to have the cost of assembly and/or installation covered by a grant, the labor must be performed by a licensed and bonded contractor. The grant may be used for technology and software to create and maintain business management systems. Provider Affirmation The following signature affirms that I will adhere to the qualifications listed above and will only spend the funds on allowable uses. I understand that I may be required to re-pay grant funds if I do not adhere to all the terms of this agreement. 42 U.S. Code § 9858 c(c)(2)(I) states in part, “In the case of a sectarian agency or organization, no funds made available under this subchapter may be used for the purposes described in paragraph (1) except to the extent that renovation or repair is necessary to bring the facility of such agency or organization into compliance with health and safety requirements…” 42 U.S. Code § 9858k(a) states, “No financial assistance provided under this subchapter, pursuant to the choice of a parent under section 9858c(c)(2)(A)(i)(I) of this title or through any other grant or contract under the State plan, shall be expended for any sectarian purpose or activity, including sectarian worship or instruction.” 42 U.S. Code § 9858k(b) states in part, “With regard to services provided to students enrolled in grades 1 through 12, no financial assistance provided under this subchapter shall be expended for— (1) any services provided to such students during the regular school day; (2) any services for which such students receive academic credit toward graduation.” 42 U.S. Code § 9858d(b) states in part, “…no funds shall be expended for the purchase or improvement of land, or for the purchase, construction, or permanent improvement (other than minor remodeling) of any building or facility. 45 CFR § 98.2, states in part, Definitions states in part, “Major renovation means any renovation that has a cost equal to or exceeding $350,000 in CCDF funds for child care centers and $50,000 in CCDF funds for family child care homes, which amount shall be adjusted annually for inflation and published on the Office of Child Care website. If renovation costs exceed these thresholds and do not include: (1) Structural changes to the foundation, roof, floor, exterior or load-bearing walls of a facility, or the extension of a facility to increase its floor area; or (2) Extensive alteration of a facility such as to significantly change its function and purpose for direct child care services, even if such renovation does not include any structural change; and improve the health, safety, and/or quality of child care, then it shall not be considered major renovation;” Views of Responsible Official(s) Contact Person: Kayla Urtz Anticipated Completion Date: N/A Corrective Action Planned: The Department of Human Services partially agrees with the finding. Please see the corrective action plan located in the corrective action plan section of this report. Auditor Response: Per OKDHS disagreement with SAI’s characterization of questioned costs, the treatment of unsupported expenditures as unallowable expenditures: For Single Audits, SAI is required to comply with 2 C.F.R. § 200.1 which states in part “(1) Questioned cost means an amount, expended or received from a Federal award, that in the auditor's judgment: (i) Is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award; (ii) At the time of the audit, lacked adequate documentation to support compliance; or (iii) Appeared unreasonable and did not reflect the actions a prudent person would take in the circumstances. (2) The questioned cost amount under (1)(ii) is calculated as if the portion of a transaction that lacked adequate documentation were confirmed noncompliant. We are required to report as questioned costs the $2,091,582 in Desert Grant funds, for which 24 providers did not submit any records. These providers were required to maintain these records and agreed to this per their Desert Grant application agreement which states in part, “Child Care Desert Grant Agreement - By signing this application, I understand that it is my responsibility to maintain records and other documentation to support the use of funds I receive, as well as to document my compliance with the requirements. I understand I must provide these documents to Oklahoma Human Services if requested.” Of note, 21 of the 24 providers that refused to provide records for the Desert Grant award also had other questioned costs related to enrollment and/or attendance records that did not support the award amount paid, the facility closed prior to the 2 year minimum an/or the facility was not a new daycare but received Desert Grant funds for being a new daycare. We also identified numerous other exceptions for these daycares that did not result in questioned costs due to the nature of the exception. SAI has also noted that investigations carried out by the OKDHS OIG unit also treat unsupported costs as questioned costs. With regard to sampling methodology and the extrapolation of questioned costs, SAI follows the AICPA Government Auditing Standards and Single Audits audit guide. All questioned costs identified in individually selected items (ISI’s) (not part of the sampled population) are not extrapolated, only the questioned costs identified in the sample. The sampling methodology we used for testing Desert Grant payments is appropriate for the attributes tested in this population and reflects the separate requirements for the daycare centers and family daycare homes related to the Desert Grant. The types and amounts of questioned costs identified in our audit are presented separately in the ‘Condition’ of the finding and the extrapolation methodology used does not duplicate any overlapping exception amounts. Please see the paragraph right above the ‘Cause’ section which breaks out the exception types between 1) expenditures reported by providers that did not align with the allowable uses of funds stated in the Desert grant application and 2) all other non-compliance issues that resulted in questioned costs. Also, there are not any questioned costs identified that are associated with “retrospective assessments regarding how the program could have been structured differently”. The Department of Human Services advanced all Supplemental Desert grant funds without having proper controls in place to ensure the funds were spent on allowable CCDF costs. Federal regulations state the lead agency (i.e., DHS) is responsible for fiscal controls and accounting procedures sufficient to permit the tracing of funds to a level adequate to establish that CCDF funds have not been used in violation of this grant.
FINDING NO: 2024-033 (Repeat 2023-099) Strengthen Internal Controls over Monitoring for Stabilization Awards STATE AGENCY: Oklahoma Department of Human Services (OKDHS) FEDERAL AGENCY: Department of Health and Human Services ALN: 93.575 FEDERAL PROGRAM NAME: CCDF Cluster FEDERAL AWARD NUMBER: 2101OKCSC6 FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility QUESTIONED COSTS: $698,608 Condition and Context: OKDHS began implementing a new Quality Rating and Improvement System (QRIS), also known as Stars, that became effective January 1, 2023. Under the new system, the State of Oklahoma has five levels (1-5) of quality ratings for all licensed childcare programs. All licensed programs immediately qualify as a 1 Star. In preparation of the new system, all daycares were asked to submit an updated Stars application (also called reapplication period). A Stars resource booklet, applicable to the daycare type, facility, small home, or large home, and a cover letter was e-mailed to each daycare on June 1, 2022, to provide guidance when requesting a Stars level. OKDHS offered a financial incentive to those daycares who submitted an application on or before November 30, 2022. The application asked each daycare to provide Stars Level Requested; the higher the Stars level approved the greater the grant funding and subsidy payments. For example, if you were a 1 Star facility for cycles 5 & 6 and you requested and were approved to become a 5 Star facility for cycles 7 & 8, you would receive approximately 3 times more funding for those cycles. Daycares were informed that Stars criteria reviews would not be performed during the reapplication period unless a serious non-compliance was observed during a regular monitoring visit. Also, the Stars yearly monitoring visit, and two partial visits, were waived by OKDHS for calendar year 2023. OKDHS provided Childcare ARP Act Stabilization grant funding to daycare homes and centers for SFY 2024 (July 1, 2023 to June 30, 2024) based on an approved grant application per cycle. Stabilization grant funding for cycle 9 (July 2023 – September 2023) were awarded based on licensed capacity and Stars rating. When attempting to obtain the supporting documentation for discretionary stabilization benefit payments, we were informed by OKDHS that no financial documentation was requested from the homes or centers for the funding provided in SFY 2024 and no monitoring of these payments to ensure the funds were used appropriately was performed. As a result, we requested the documentation directly from the homes and centers in order to determine if grant funds were spent in accordance with the objectives of the DHS child-care stabilization program. We tested a total of 84 daycare homes and centers that received ARP Act Discretionary stabilization funds during SFY 2024 (July 1, 2023 – June 30, 2024). The universe included 2,488 providers with $86,335,000 in total awards. Tested awards for daycare homes and centers totaled $3,419,000. We noted the following issues for the 84 grant recipients tested: • For 4 (4.76%) of 84 daycare providers tested, stabilization funds were not expended on allowable activities. Expenditures for unallowable activities totaled $20,014. • For 25 (33.33%) of 84 daycare providers tested, stabilization funds could not be supported with adequate documentation; therefore, we could not determine whether the stabilization funds were expended on allowable activities. Expenditures for unsupported activities totaled $678,595. • For 42 (50%) of 84 daycare providers tested, the Stars rating increased by at least 2 from cycles 5-6 to cycles 7-8. This greatly increased the amount of child-care subsidy payments these providers received, often doubling the amount. For example, a childcare center provider with a 2 Star rating would receive $22.80 per day for an infant aged 0 to 12 months. By increasing the star rating to 5, the daily rate is increased to $50.60. Other COVID-19 exceptions also increased the subsidy amounts by $5 per day per child and decreased the number of days a child must attend the day care from (14 to 11) before receiving subsidy payments for all absent days as well. SAI noted a large number of childcare centers received increased star ratings during the period DHS did not review the Stars requirements that later were not able to qualify for Star rating they received. Cause: OKDHS had no process or internal controls in place to adequately monitor stabilization funds awarded to childcare providers to ensure the grant funds were actually spent on the approved activities per the application. Also, OKDHS did not have adequate controls in place to support the increase in Stars rating for homes and centers since there were no reviews and/or monitoring performed on which to quantify their assessments. Effect: Stabilization funds were not expended in compliance with Section 2202(e)(1) of the ARP Act of 2021. Further, allowing daycares to request their own Star level increase dramatically increased the amount of funding most daycare homes or centers received, and the increased Star level may not have been appropriate based on the actual performance, or quality and safety level, of the daycare. Lastly, without OKDHS monitoring stabilization funds expended by providers, grant funds could continue to be expended on unallowable activities that did not align with the objectives of the DHS child-care stabilization program. Recommendation: We recommend OKDHS continue to strengthen its internal controls over monitoring daycares to ensure stabilization funds are expended in accordance with the objectives of the DHS child-care stabilization program. Further, we recommend OKDHS ensure adequate Stars reviews and/or monitoring have been performed prior to increasing grant funding and subsidy payments. Lastly, we recommend OKDHS develop an appropriate process to ensure daycare homes and centers are adequately documenting and supporting grant expenditures and that the records are available for review. Criteria: 45 CFR 98.67 states: “Fiscal Requirements. (a) Lead Agencies shall expend and account for CCDF funds in accordance with their own laws and procedures for expending and accounting for their own funds. (b) Unless otherwise specified in this part, contracts that entail the expenditure of CCDF funds shall comply with the laws and procedures generally applicable to expenditures by the contracting agency of its own funds. (c) Fiscal control and accounting procedures shall be sufficient to permit: (1) Preparation of reports required by the Secretary under this subpart and under subpart H; and (2) The tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the provisions of this part.” 2 CFR § 200.303(a) states in part, “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.” 2 CFR § 200.403 states in part, “Costs must…(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, … and (g) Be adequately documented.” American Rescue Plan Act of 2021 (ARP) § 2202(e)(1) states in part, USES OF FUNDS-, ”In GENERAL - A qualified child care provider that receives funds through such a subgrant shall use the funds for at least one of the following: (A) Personnel costs, including payroll and salaries or similar compensation for an employee (including any sole proprietor or independent contractor), employee benefits, premium pay, or costs for employee recruitment and retention. (B) Rent (including rent under a lease agreement) or payment on any mortgage obligation, utilities, facility maintenance or improvements, or insurance. (C) Personal protective equipment, cleaning and sanitization supplies and services, or training and professional development related to health and safety practices. (D) Purchases of or updates to equipment and supplies to respond to the COVID–19 public health emergency. (E) Goods and services necessary to maintain or resume childcare services. (F) Mental health supports for children and employees.” Views of Responsible Official(s) Point of Contact: Kayla Urtz, Director of Internal Audit Anticipated Completion Date: N/A Corrective Action Planned: The Department of Human Services partially agrees with the finding. Please see the corrective action plan located in the corrective action plan section of this report. Auditor Response: SAI would like to clarify our position with regard to OKDHS responsibility to ensure funds awarded under any COVID-19 program are expended for the purposes for which they were awarded. The term ‘monitoring’ in this finding refers to OKDHS oversight and review of how the Stabilization funds were expended. While there are portions of the CCDF regulations that the Stabilization funds are exempted from, including formal subrecipient monitoring under Uniform Guidance (45 CFR Part 75), the following regulations do apply: Per the Notice of Grant Award for Child Care Stabilization Funds American Rescue Plan (Arp) Act: “APPLICABLE LEGISLATION, STATUTE, REGULATIONS 1. The administration of this program is subject to: … Child Care and Development Block Grant (CCDBG) Act and related regulations a. The CCDBG Act is codified at 42 U.S.C. §9857 et seq., b. Implementing program regulations are located at 45 CFR Part 98 and 99 … Financial Reporting and Requirements 10. Federal funds awarded under this grant must be expended for the purposes for which they were awarded. 11. Each grantee's fiscal and accounting procedures must be sufficient to permit the preparation of required reports and the tracing of expenditures to a level necessary to establish that Federal funds have not been used in violation of the terms and conditions.” The applicable regulations include the following: 45 CFR 98.67 states: “Fiscal Requirements. (a) Lead Agencies shall expend and account for CCDF funds in accordance with their own laws and procedures for expending and accounting for their own funds. (b) Unless otherwise specified in this part, contracts that entail the expenditure of CCDF funds shall comply with the laws and procedures generally applicable to expenditures by the contracting agency of its own funds. (c) Fiscal control and accounting procedures shall be sufficient to permit: (1) Preparation of reports required by the Secretary under this subpart and under subpart H; and (2) The tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the provisions of this part.” The Stabilization program award application includes the following attestation: “To receive a stabilization grant, I agree to use the funds only for the categories and purposes indicated on this application and have marked above which categories I plan to fund. I also understand that it is my responsibility to maintain records and other documentation to support the use of funds I receive, as well as to document my compliance with the requirements described in A, B, and C. By signing this application, I am certifying that I will meet requirements throughout the period of the subgrant, including the following: 1. When open and providing services, I will implement policies in line with guidance and orders from corresponding state, territorial, Tribal, and local authorities and, to the greatest extent possible, implement policies in line with guidance from the U.S. Centers for Disease Control and Prevention (CDC). I will remain open during the grant periods. 2. For each employee (including lead teachers, aides, and any other staff who are employed by the child care provider to work in transportation, food preparation, or other type of service), I must continue paying at least the same amount of weekly wages and maintain the same benefits (such as health insurance and retirement) for the duration of the subgrant. I understand that I may not furlough employees from the date of application submission through the duration of the subgrant period. 3. I will provide relief from copayments and tuition payments for the families enrolled in the child care program, to the extent possible, and prioritize such relief for families struggling to make either type of payment. Note: Child care providers must agree to use the funds for one or more of the following purposes: 1. Personnel costs, benefits, premium pay, and employee recruitment and retention for an employee (someone who owns their own business, like a sole proprietor or an independent contractor, can count themselves as an employee) 2. Rent or mortgage payments, utilities, facilities maintenance and improvements, or insurance 3. Personal protective equipment, cleaning and sanitation supplies and services, or training Provider Affirmation The following signature affirms that I will adhere to the items noted in A, B, and C. It also affirms I will only use the funds in the areas noted in section 5 of this application.” It is the position of SAI that OKDHS cannot adequately ensure the funds were expended appropriately without implementing procedures for oversight and review of amounts actually expended. This would require OKDHS to have procedures to obtain and review the records and other documentation the provider has to determine whether the provider complied with the required use of funds per the Stabilization agreement for at least a sample (or other selected number) of providers receiving the award. SAI would also like to clarify our position with regard to questioned costs related to providers that failed to submit any records requested which the providers are required to maintain and provide for audit purposes. For Single Audits, SAI is required to comply with 2 C.F.R. § 200.1 which states in part “(1) Questioned cost means an amount, expended or received from a Federal award, that in the auditor's judgment: (i) Is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award; (ii) At the time of the audit, lacked adequate documentation to support compliance; or (iii) Appeared unreasonable and did not reflect the actions a prudent person would take in the circumstances. (2) The questioned cost amount under (1)(ii) is calculated as if the portion of a transaction that lacked adequate documentation were confirmed noncompliant. We are required to report as questioned costs the $678,595 in Stabilization funds for which 23 providers did not submit any records. These providers were required to maintain these records and agreed to this per their application attestation. Of note, eight of the providers that refused to provide records for the Stabilization award also received the Desert grant award for which they also did not provide any records among other exceptions noted. SAI has also noted that investigations carried out by the OKDHS OIG unit also treat unsupported costs as questioned costs. Lastly, with regard to sampling methodology and the extrapolation of questioned costs, SAI follows the AICPA Government Auditing Standards and Single Audits audit guide. All questioned costs identified in individually selected items (ISI’s) (not part of the sampled population) are not extrapolated, only the questioned costs identified in the sample. The sampling methodology we used for testing Stabilization payments is appropriate for the attributes tested in this population. Questioned Costs Projected Questioned Costs Noncompliance noted in ISI's for records not provided by Provider $146,750 N/A Noncompliance noted in sample for unallowable uses of funds $20,014 $15,624,863 Noncompliance noted in sample for records not provided by Provider $531,845 Total noncompliance noted in sample $551,858 Total Questioned Costs $698,608 Total Projected Questioned Costs $15,771,613
FINDING NO: 2024-025- Improve Subrecipient Monitoring (Repeat 2023-006) STATE AGENCY: Oklahoma Department of Human Services (DHS) FEDERAL AGENCY: Department of Health and Human Services (DHHS) ALN: 93.658 FEDERAL PROGRAM NAME: Foster Care – Titel IV-E FEDERAL AWARD NUMBER: 2301 OKFOST and 2401 OKFOST FEDERAL AWARD YEAR: 2023 and 2024 CONTROL CATEGORY: Subrecipient Monitoring QUESTIONED COSTS: $0 Condition and Context: We judgmentally selected 2 of the 11 subrecipients (18.18%) to determine whether controls were designed and implemented to ensure a risk assessment of the subrecipient was performed by the Pass-Through Entity (PTE) and noted the following: For 2 subrecipients (100%), we determined a risk assessment was performed based on previous year’s performance to determine the appropriate subrecipient monitoring of each subrecipient; however, the date the risk assessments were performed are not documented, the award amount on the risk assessment equals the amount of funds paid during SFY24, and the line items Results of Single Audit are dated in July 2024. We randomly selected 4 of the 11 subrecipients (36.36%) to determine if all requirements imposed by the PTE on the subrecipient so that the federal award was used in accordance with federal statutes, regulations, and the terms and conditions of the award (2 CFR section 200.331(a)(2)); and any additional requirements that the PTE imposed on the subrecipient in order for the PTE to meet its own responsibility for the federal award and we noted: • Two of four (50%) subawards, cost allocation plans were not received per the contract. • Four of four (100%) subawards, the statement of work had insufficient detail to determine if deliverables were met. For both of our samples, we reviewed the subrecipient contracts to determine whether they included information required in accordance with 2 CFR 200.332(b) and we noted: • Two of six (33.33%) subawards did not include the subrecipient name and unique entity identifier • Six of six (100%) subawards did not include the Federal Award Identification Number (FAIN) • Six of six (100%) subawards did not include the Federal Award Date • One of six (17%) subawards did not include the Federal Award project description • Two of six (33.33%) subawards did not include the name of Federal awarding agency, pass through entity (PTE), and PTE awarding official contact information in the award document • One of six (16.67%) subawards did not include the ALN (Assistance Listings number) and title as required on the contract • Six of six (100%) subawards did not include identification of whether the award was for Research & Development • Three of six (50%) subawards did not include an indirect cost rate negotiated between the subrecipient and the Federal Government and also did not include an appropriate rate determined by the PTE in collaboration with the subrecipient. Cause: Management does not properly understand the program requirements. This is a prior audit finding dating back to SFY2017; however, DHS Management has shown some corrective action has been implemented to address identifying the award and applicable requirements and monitoring as required in 2 CFR 200.332. DHS does not have adequate controls in place to properly monitor subrecipients to ensure the contractual obligations are met. Effect: DHS is not in compliance with the monitoring requirements for this program. Therefore, subrecipients may not administer federal funds in accordance with program requirements. Recommendation: We recommend DHS further modify its subrecipient agreements and related documentation to ensure all required award information is provided and that any additional requirements imposed by DHS in their subrecipient agreements are complied with. Further, the contract should explicitly state the program duties to be performed by the subrecipient. Additionally, we recommend DHS perform risk assessments on all subrecipients at the start of the fiscal year to determine the level of monitoring necessary. Criteria: 45 CFR §75.303(a) states in part: “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).” Per 2 CFR §200.1 Definitions defines subaward as “Subaward means 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 [emphasis added].” 2 CFR §200.332 Requirements for pass-through entities states in part “All pass-through entities must: … (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. 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 title and number; 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 for the passthrough entity to meet its responsibilities under the Federal award. This includes information and certifications (see § 200.415) required for submitting financial and performance reports that the pass-through entity must provide to the Federal agency; (4) Indirect cost rate: (i) An approved indirect cost rate negotiated between the subrecipient and the Federal Government. If no approved rate exists, a pass-through entity must determine the appropriate rate in collaboration with the subrecipient. (c) Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section, which may include consideration of such factors as: (1) The subrecipient's prior experience with the same or similar subawards; (2) The results of previous audits including whether or not the subrecipient receives a Single Audit in accordance with Subpart F of this part, and the extent to which the same or similar subaward has 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 awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a federal awarding agency) … (e) Monitor the activities of a subrecipient as necessary to ensure that the subrecipient complies with Federal statutes, regulations, and the terms and conditions of the subaward. The pass-through entity is responsible for monitoring the overall performance of a subrecipient to ensure that the goals and objectives of the subaward are achieved. In monitoring a subrecipient, a pass-through entity must: (1) Review financial and performance reports.” Paragraph 7 of the agency’s subrecipient contract states in part “Sub-Recipient will provide a cost allocation plan to OKDHS within thirty (30) calendar days of this Agreement being signed. In the event there are any changes to the Cost Allocation Methodology, Sub-Recipient will notify OKDHS of those changes before submitting any affected quarterly claim invoice. Views of Responsible Official(s) Contact Person: Kayla Urtz, Director of Internal Audit Anticipated Completion Date: 9/30/2026 Corrective Action Planned: The Department of Human Services agrees with the finding. Please see the corrective action plan located in the corrective action plan section of this report.
ALLOWABLE COSTS/COST PRINCIPLES – INDIRECT COSTS Repeat of finding 2023-010 Finding Type: Significant Deficiency in Internal Controls over Compliance ALN/CSFA and Program Title: 93.558 – Temporary Assistance for Needy Families, 93.658 – Foster Care - Title IV-E, 93.676- Unaccompanied Alien Children Program Federal/State Agency: U.S. Department of Health and Human Services Pass-Through Entity: Big Bend Community Based Care, Inc. dba NWF Health Network; Brevard Family Partnership; Children’s Network of Hillsborough; Children’s Network of Southwest Florida Social Services; Communities Connected for Kids; Community Partnership for Children; Embrace Families, Inc.; Family Support Services of North Florida, Inc.; Family Support Services of Suncoast; Heartland for Children; Kids Central, Inc.; Partnership for Strong Families; Safe Children Coalition, Inc., Liberty Wilderness Crossroads Camp Contract Number: 0299-22, C0900, PCM783, PCM788, 90ZU0501 Criteria: The Organization has elected to charge the de minimis rate of 10% of modified total direct costs (MTDC). 2 CFR 200.1 of the Uniform Guidance defines MTDC as all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each subaward (regardless of the period of performance of the subawards under the award). 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 $25,000. Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect costs, and with the approval of the cognizant agency for indirect costs. Additionally, 2 CFR 200.303(a) of the Uniform Guidance requires non-federal entities to establish and maintain effective internal control over federal awards 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, and Section 215.97(10), Florida Statutes, requires nonstate entities to have internal controls in place to provide reasonable assurance of compliance with the provisions of laws, regulations, and other rules, pertaining to state awards that have a material effect on each major state project. Condition: The Organization used total program expenses as the MTDC base for calculating the 10% de minimis indirect costs and did not exclude certain items that are required to be excluded, such as rental costs, equipment, and charges for patient care. Additionally, the Organization's internal controls do not require review of the indirect costs charged to programs. Cause: Management was unaware of the requirements for calculating the MTDC and procedures have not been established for reviewing the indirect cost allocations. Effect: While indirect costs charged to programs in the current year did not exceed the allowable amount, the use of direct costs excluded from MTDC in the calculation and lack of review may result in excess indirect costs charged. Questioned Costs: None Recommendation: We recommend management calculate the MTDC in accordance with Uniform Guidance and apply the indirect cost rate consistently for all programs. We also recommend a procedure be established for review of the indirect cost allocations performed. Views of Responsible Officials and Planned Corrective Actions: See management’s response and Corrective Action Plan on page 55.
Finding 2024-011 – Internal Controls and Noncompliance Over Major Federal Program – Local Assistance and Tribal Consistency Fund PASS-THROUGH GRANTOR: Direct Grant FEDERAL AGENCY: U.S. Department of the Treasury ASSISTANCE LISTING: 21.032 FEDERAL PROGRAM NAME: Local Assistance and Tribal Consistency Fund FEDERAL AWARD YEAR: 2024 CONTROL CATEGORY: Reporting QUESTIONED COSTS: $-0- Condition: The annual report for the Local Assistance and Tribal Consistency Fund (LATCF) incorrectly reported $442,815 for cumulative obligations, cumulative expenditures, and current period expenditures; and incorrectly reported $0 in current period obligations. The correct amount for each of these expenditure and obligation categories was $457,559. A variance was noted in each expenditure and obligation category. Cumulative Obligations Cumulative Expenditures Current Period Obligations Current Period Expenditures As Reported $442,815 $442,815 $0 $442,815 Correct Amount $457,559 $457,559 $457,559 $457,559 Variance ($14,744) ($14,744) ($457,559) ($14,744) 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 design and implement internal controls to ensure compliance with these requirements. Management Response: Chairman Board of County Commissioners: The current Board of County Commissioners acknowledges the finding. The Board will continue working with county officials, consultants, and auditors involved in grant administration to improve reconciliation and reporting procedures. Additional review steps will be performed to ensure obligations and expenditures reported to federal agencies are supported by county records and accurately reported. County Clerk: The County Clerk will work with the Board of County Commissioners to adopt policies and procedures for federal awards. County Treasurer: The County Treasurer acknowledges the finding. The Treasurer's Office will continue providing accurate financial information from county accounting records and will assist county officials responsible for grant reporting by providing financial data necessary to reconcile reported expenditures and obligations. 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 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 2024-012 – Noncompliance with Reporting Over Major Federal Program – Coronavirus State and Local Fiscal Recovery Funds 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: 2024 CONTROL CATEGORY: Reporting QUESTIONED COSTS: $-0- Condition: During the review of the annual report for calendar year 2023, consisting of seventeen (17) projects for the Coronavirus State and Local Fiscal Recovery Funds, it was noted that the annual report submitted incorrectly reported obligations and expenditures as noted below:36 Current Period Obligations Cumulative Obligations Current Period Expenditure Cumulative Expenditure As Reported $3,598,291 $5,560,331 $2,407,964 $5,085,117 Correct $2,223,500 $6,398,069 $3,053,280 $4,538,934 Variance $1,374,791 ($837,738) ($645,316) $546,183 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 design and implement internal controls to ensure compliance with these requirements. Management Response: Chairman Board of County Commissioners: The BOCC acknowledges the finding, and I will improve reconciliation and review procedures used in preparing federal reports. County officials involved in grant reporting will work together to ensure repotted obligations and expenditures are reconciled to supporting records before submission. County Clerk: The County Clerk will work with the Board of County Commissioners to adopt policies and procedures for federal awards. County Treasurer: The County Treasurer acknowledges the finding. The Treasurer's Office will continue maintaining accurate accounting records and providing financial information used in federal reporting. The Treasurer's Office will work with county officials and reporting personnel to encourage additional review and reconciliation procedures prior to submission of federal reports. 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 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.