FINDING 2023-006 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 24 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context A School Nutrition Cooperative (Co-ops, Education Service Center, Group Purchasing Organization, etc.) that would like to be classified as a School Food Authority (SFA) Cooperative must complete a questionnaire and submit it to the Indiana Department of Education (IDOE). Once a questionnaire is received, the IDOE will review the answers to determine a Cooperative's classification. Only Cooperatives that submit the questionnaire and receive an SFA-only Cooperative classification from the IDOE in writing, will be considered an SFA only Cooperative for the purposes of the procurement process and procurement reviews. When the value of goods or services exceeds the simplified acquisition threshold, the proper purchasing method would be the bidding process, unless the purchase meets certain other qualifications. Federal regulations allow for informal procurement methods when the value of the procurement for goods 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 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. If it is determined a single source provider can be used for a small purchase, documentation must be retained supporting the determination. Two vendors were identified as falling within the small purchase threshold. Both vendors were selected for testing. Supporting documentation to show that an adequate number of price or rate quotations were obtained to ensure full and open competition could not be provided for audit. The lack of internal controls and noncompliance were systemic issues throughout the audit. 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 25 SHENANDOAH SCHOOL CORPORATION 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 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. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. 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 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, procurement procedures for goods and services were not adhered to. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls and develop policies and procedures to ensure there are appropriate procurement procedures for goods and services. INDIANA STATE BOARD OF ACCOUNTS 26 SHENANDOAH SCHOOL CORPORATION 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.
FINDING 2023-006 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 24 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context A School Nutrition Cooperative (Co-ops, Education Service Center, Group Purchasing Organization, etc.) that would like to be classified as a School Food Authority (SFA) Cooperative must complete a questionnaire and submit it to the Indiana Department of Education (IDOE). Once a questionnaire is received, the IDOE will review the answers to determine a Cooperative's classification. Only Cooperatives that submit the questionnaire and receive an SFA-only Cooperative classification from the IDOE in writing, will be considered an SFA only Cooperative for the purposes of the procurement process and procurement reviews. When the value of goods or services exceeds the simplified acquisition threshold, the proper purchasing method would be the bidding process, unless the purchase meets certain other qualifications. Federal regulations allow for informal procurement methods when the value of the procurement for goods 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 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. If it is determined a single source provider can be used for a small purchase, documentation must be retained supporting the determination. Two vendors were identified as falling within the small purchase threshold. Both vendors were selected for testing. Supporting documentation to show that an adequate number of price or rate quotations were obtained to ensure full and open competition could not be provided for audit. The lack of internal controls and noncompliance were systemic issues throughout the audit. 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 25 SHENANDOAH SCHOOL CORPORATION 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 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. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. 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 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, procurement procedures for goods and services were not adhered to. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls and develop policies and procedures to ensure there are appropriate procurement procedures for goods and services. INDIANA STATE BOARD OF ACCOUNTS 26 SHENANDOAH SCHOOL CORPORATION 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.
FINDING 2023-006 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 24 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context A School Nutrition Cooperative (Co-ops, Education Service Center, Group Purchasing Organization, etc.) that would like to be classified as a School Food Authority (SFA) Cooperative must complete a questionnaire and submit it to the Indiana Department of Education (IDOE). Once a questionnaire is received, the IDOE will review the answers to determine a Cooperative's classification. Only Cooperatives that submit the questionnaire and receive an SFA-only Cooperative classification from the IDOE in writing, will be considered an SFA only Cooperative for the purposes of the procurement process and procurement reviews. When the value of goods or services exceeds the simplified acquisition threshold, the proper purchasing method would be the bidding process, unless the purchase meets certain other qualifications. Federal regulations allow for informal procurement methods when the value of the procurement for goods 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 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. If it is determined a single source provider can be used for a small purchase, documentation must be retained supporting the determination. Two vendors were identified as falling within the small purchase threshold. Both vendors were selected for testing. Supporting documentation to show that an adequate number of price or rate quotations were obtained to ensure full and open competition could not be provided for audit. The lack of internal controls and noncompliance were systemic issues throughout the audit. 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 25 SHENANDOAH SCHOOL CORPORATION 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 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. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. 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 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, procurement procedures for goods and services were not adhered to. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls and develop policies and procedures to ensure there are appropriate procurement procedures for goods and services. INDIANA STATE BOARD OF ACCOUNTS 26 SHENANDOAH SCHOOL CORPORATION 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.
Condition: During the test of 100% of projects, thirty-five (35) projects, for the Coronavirus and Local Fiscal Recovery Funds, the following noncompliance with the Reporting compliance requirement was noted: • Eighteen (18) projects were coded as revenue loss and were a subrecipient relationship. • Seventeen (17) projects were coded as revenue loss and should have been coded to an Administrative code. • Four (4) projects were coded as a subrecipient and should not have been. After the review of the quarterly reports, the following exceptions were noted: • The second quarter report was over reported by $643,303, • 911 Trust Authority reported $195,398 in cumulative expenditures on the report; however, no disbursements were made in fiscal year 2022 or fiscal year 2023. • North West Rogers County Fire Protection District reported $171,219 in cumulative expenditures; however, no disbursements were made in fiscal year 2022 and fiscal year 2023. • Emergency Management reported $333,169 in cumulative expenditures; however, there were only expenditures totaling $18,313. • School Resource Officers reported $135,778 in cumulative expenditures; however, there were only expenditures totaled $41,447. • Expenditures for the jail security electronics upgrade was not reported; however, there were expenditures totaling $132,501. 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.
FINDING NO: 2023-033 (Repeat #2022-051) STATE AGENCY: Oklahoma Employment Security Commission FEDERAL AGENCY: U.S. Department of Labor ALN: 17.225 FEDERAL PROGRAM NAME: Unemployment Insurance FEDERAL AWARD NUMBER: UI340792055A40, UI356692155A40, UI372442255A40, UI393432355A40 FEDERAL AWARD YEAR: 2020, 2021, 2022, 2023 CONTROL CATEGORY: Special Tests and Provisions – Benefit Accuracy Measurement QUESTIONED COSTS: $0 Criteria: As documented in the Unemployment Insurance Program Letter (UIPL) No. 02-12, Public Law 112-40 enacted on October 21, 2011, and effective October 21, 2013, amended sections 303(a) and 453A of the Social Security Act and sections 3303, 3304, and 3309 of FUTA. Section 4. of the UIPL states in part, “Section 251(a) of the TAAEA [Trade Adjustment Assistance Extension Act of 2011] amends section 303(a), SSA, by adding a new paragraph (11). As a condition of receiving a Federal grant to administer its UC law, a state that has determined that an improper payment from its unemployment fund was made to an individual due to fraud committed by such individual must assess a monetary penalty of not less than 15 percent of the amount of the erroneous payment against that individual. The 15 percent penalty amount is the minimum amount required; states may impose a greater penalty.” UIPL No. 02-12, Section 4. States in part, “A. Requirements: Section 303(a)(11), SSA, further requires that the state immediately deposit receipts of the Federally-mandated penalty amounts into the unemployment fund of the state….When a recovery with respect to a fraudulent overpayment is made, the state is encouraged to apply any recovery to the principal amount of the overpayment first, to the Federally-mandated penalty amount second and finally to any other amounts due (e.g., additional penalties and/or interest). However, the order of the recovery is determined by state law.” See UIPL No. 02-12 at https://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=6707. 40 O.S. §2-613 (1) states, “Fraud overpayment: in which an individual intentionally makes a false statement or representation or fails to disclose a material fact, and has received any sum as benefits to which the individual was not entitled. The individual shall be liable to repay this sum, plus a penalty of twenty-five percent (25%) of the amount of the original overpayment and interest at the rate of one percent (1%) per month on the unpaid balance of the overpayment, to the Oklahoma Employment Security Commission. Three-fifths (3/5) of the penalty amount collected shall be deposited in the Unemployment Trust Fund for the State of Oklahoma and the remaining two-fifths (2/5) shall be deposited in the Oklahoma Employment Security Commission Revolving Fund. The interest shall cease to accrue when the total accrued interest equals the amount of the overpayment. If an overpayment is modified, the interest shall ease to accrue when the total accrued interest equals the amount of the modified overpayment. The Commission shall deduct the principal sum from any future benefits payable to the individual.” Oklahoma Administrate Code (OAC) 240:10-3-28 (b) states, “All payments or amounts collected in processes other than offset or recoupment of current unemployment benefit payments – When a payment is made or a collection of funds is accomplished to repay an indebtedness created by a previous overpayment of unemployment benefits established pursuant to 40 O.S.§2-613 (1) or (2), the payment or the amount collected shall be applied in the following manner: (1) First, to the fees that have been charged to the debtor in the earliest established overpayment until all fees for that overpayment are paid. (2) Second, to accrued penalties in the earliest established overpayment until all penalties for that overpayment are paid. (3) Third, to the accrued interest in the earliest established overpayment until all interest for that overpayment is paid. (4) Fourth, to the principal amount in the earliest established overpayment until the principal amount is paid in full. (5) After the payment or amount collected has been applied in the manner described in paragraphs 1 through 4 of this subsection and the earliest established overpayment is paid in full, any money left over, and all future payments or amounts collected, shall be applied in the same manner to the overpayment established next in time, and this procedure shall be repeated until all overpayments are repaid.” 2 CFR §200.1 “Internal controls”, states in part, “Internal controls non-Federal entities means 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.” The Government Accountability Office (GAO) Standards for Internal Control in the Federal Government Design of the Entity’s Information System, states in part: “11.03 Management designs the entity’s information system to obtain and process information to meet each operational process’s information requirements and to respond to the entity’s objectives and risks. An information system is the people, processes, data, and technology that Federal Internal Control Standards management organizes to obtain, communicate, or dispose of information…. 11.04 Management designs the entity’s information system and the use of information technology by considering the defined information requirements for each of the entity’s operational processes…. Although information technology implies specific types of control activities, information technology is not a “standalone” control consideration. It is an integral part of most control activities. 11.05 Management also evaluates information processing objectives to meet the defined information requirements. Information processing objectives may include the following: • Completeness - Transactions that occur are recorded and not understated. • Accuracy - Transactions are recorded at the correct amount in the right account (and on a timely basis) at each stage of processing. • Validity - Recorded transactions represent economic events that actually occurred and were executed according to prescribed procedures.” Condition and Context: When OESC receives a reimbursement (recovery) for a fraudulent overpayment, the OESC Bull Mainframe is to apply the recovery in the order prescribed in OAC 240:10-3-28(b). While performing testwork on SFY 2023 recoveries of fraudulent Unemployment Insurance (UI) overpayments, penalties were applicable to 7 repayments of 60 claimants’ sampled. Of the 7 repayments subject to penalties, the system did not apply penalties before principal/interest on 42.9% (3/7). Cause: During SFY 2023, the Bull Mainframe system was applying overpayment recoupments to principal/interest before penalties. Effect: Penalties totaling $843 were not applied to recoveries. Further, $506 (3/5 of $843) from the omitted penalties was not deposited to the Unemployment Trust fund and $337 (2/5 of $843) was not deposited to the Oklahoma Employment Security Commission Revolving Fund. Recommendation: OESC stated the underlying programming issue was resolved in February 2023; therefore, we recommend OESC IT continue to monitor and, as needed, strengthen the programming relating to recovery allocations to ensure recoveries are properly applied in the following order: fees, penalty, interest, and then principal. Views of Responsible Official(s) Contact Person: Christopher O’Brien, Vice President - OESC UI Anticipated Completion Date: Completed in February 2023 Corrective Action Planned: OESC concurs with the audit finding and agrees with the recommendation. Please see the corrective action plan located in the corrective action plan section of this report.
FINDING NO: 2023-035 (Repeat #2022-077) STATE AGENCY: Oklahoma Employment Security Commission FEDERAL AGENCY: U.S. Department of Labor ALN: 17.225 FEDERAL PROGRAM NAME: Unemployment Insurance Program FEDERAL AWARD NUMBER: UI359652160A40, UI380002260A40, 23A60UR000033 FEDERAL AWARD YEAR: 2022-2023 CONTROL CATEGORY: Special Tests and Provisions – Reemployment Services and Eligibility Assessments (RESEA) QUESTIONED COSTS: $0 Criteria: 42 USC § 506(b) – Grants to States for reemployment services and eligibility assessments states in part, “The purposes of this section are to accomplish the following goals: (1) To improve employment outcomes of individuals that receive unemployment compensation and to reduce the average duration of receipt of such compensation through employment. (2) To strengthen program integrity and reduce improper payments of unemployment compensation by States through the detection and prevention of such payments to individuals who are not eligible for such compensation. (3) To promote alignment with the broader vision of the Workforce Innovation and Opportunity Act (29 U.S.C. 3101 et seq.) of increased program integration and service delivery for job seekers, including claimants for unemployment compensation. (4) To establish reemployment services and eligibility assessments as an entry point for individuals receiving unemployment compensation into other workforce system partner programs.” U.S. Department of Labor, Unemployment Insurance Program Letter No. 10-22, Number 4. Program Operations, d. states in part, “i. UI staff must be engaged in the administration of the RESEA program. This includes, but is not limited to: • Participating in the planning, administration, and oversight of the RESEA program; • Providing all appropriate staff training on UC eligibility requirements; • Ensuring accurate data are provided in the RESEA-required reports; and • Conducting eligibility determinations and redeterminations resulting from issues identified through RESEA participation.” 2 CFR §421 – Failure to Participate in Reemployment Services through Profiling states in part, “The Oklahoma Employment Security Commission shall establish and utilize a system of Re-employment Services and Eligibility Assessment selection for all ex-military service claimants and for unemployment benefit claimants who will be likely to exhaust unemployment benefits and who will need job-search assistance services to make a successful transition to new employment. Any claimant who has been referred to re-employment services pursuant to the selection system and who fails to participate in the re-employment services made available to the claimant, shall be disqualified to receive benefits for each week in which the failure occurs, unless the Commission determines that:1. The claimant has previously completed the re-employment services within the benefit year; or 2. There is good cause for the claimant's failure to participate in re-employment services.” The RESEA Instructions and Procedures, 07/17/2017 revision and 06/06/2023 revision, Summary of Documentation states in part, “the RESEA process will be documented by the following - Required services: 1. Reemployment Services & Eligibility Assessment – RESEA (placeholder service) 2. Reemployment Needs Inventory & Eligibility Review 3. Resume Assistance 4. Referral to WIOA Services 5. OKJM Registration 6. Job Search Planning 7. Individual Reemployment Plan 8. Custom Labor Market Information 9. RESEA – Follow-up • Completing the Individual Reemployment Plan according to procedures. • Uploading 3 required forms to OKJM: 1. Reemployment Needs Inventory & Eligibility Review, OES 802 2. RESEA Follow-Up, OES 251(Must be completed and uploaded during the initial appointment.) 3. Unemployment Eligibility Review Questionnaire for follow-up appointment, OES 173” The RESEA Instructions and Procedures, 07/17/2017 revision, Notifying UI and the Adjudication Process states in part, “Adjudication Process. Once all notifications have been sent to the OKC Claims Adjudication Unit, the adjudication process follows these general steps: Local office staff report the claimant as a NO SHOW by emailing the OES 842E to PRF/JSW/POE@oesc.state.ok.us. A 2-421 code will be placed on the claim.” The RESEA Instructions and Procedures, 06/06/2023 revision, Notifying UI and the Adjudication Process states in part, “Adjudication Process. Once all notifications have been sent to the OKC Claims Adjudication Unit, the adjudication process follows these general steps: 1. Local office staff report the claimant as a NO SHOW by emailing the OES-842E to PRF/JSW/POE@oesc.ok.gov. A 2-421 code will be placed on the claim and benefits will be denied until attend and no back weeks will be paid. 2.If the claimant reschedules and attends the same week they were a no show the, local office staff email the OES-842E to PRF/JSW/POE@oesc.ok.gov and: The 2-421 is deleted; and the claimants will receive their weekly benefits. 3. If the Claimant reschedules and attends any time after the same week, they were a no show the Local office staff will report the claimant as attended after denial by emailing the OES-842E to PRF/JSW/POE@oesc.ok.gov. The 2-421 issue will be released that week and no back benefits will be paid. 4. If the claimant calls to say he will not be able to attend the RESEA appointment because he has returned to fulltime work, local office staff will enter the start date, employer name, salary, and employment status full time or part time in OKJM and the CRC. Then email PRF/JSW/POE@oesc.ok.gov advising of the date so it can be added to the claim. If a determination has been issued for 2-421, let it stand.” 2 CFR §200.1 “Internal controls” 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: (iv) Effectiveness and efficiency of operations; (v) Reliability of reporting for internal and external use; and (vi) Compliance with applicable laws and regulations.” The Government Accountability Office (GAO) Standards for Internal Control in the Federal Government 14.03 states, “Management communicates quality information down and across reporting lines to enable personnel to perform key roles in achieving objectives, addressing risks, and supporting the internal control system. In these communications, management assigns the internal control responsibilities for key roles.” 2 CFR §200.334 Retention requirements for records states in part, “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….” Condition and Context: The Reemployment Services and Eligibility Assessment (RESEA) provides reemployment services to unemployment claimants who are unlikely to return to their previous industry or occupation and who are considered likely to use up benefits. The Department of Labor’s Employment and Training Administration (ETA) 9128 report provides quarterly information on the RESEA activities of claimants selected to participate in the RESEA program. The data on this report allows for evaluation and monitoring of the RESEA program. We tested 60 Unemployment Insurance claimants that were profiled for the RESEA program during State Fiscal Year (SFY) 2023 and noted the following exceptions: • 10 (16.7%) had no RESEA Notification Letters in DocuShare. • 12 (20.0%) were missing an OES 842E Adjudication Form in OKJobMatch when the claimant did not report for follow-up. • 7 (11.7%) were missing documentation for at least one of the nine required RESEA steps. Cause: During SFY 2023, the Oklahoma Employment Security Commission did not have adequate controls, along with timely and/or effective communication of RESEA procedures, including instructions on how to properly retain documentation. Further, RESEA Quality Control reviews were suspended throughout SFY 2023 due to system malfunctions. Effect: RESEA program evaluation and monitoring may not have been based on correct information and the ETA 9128 performance report may be incomplete and unreliable. RESEA participants may not have received notice regarding their required participation in the RESEA program and may have received benefits for a longer period than necessary. Recommendation: The Oklahoma Employment Security Commission revised the RESEA procedures in the last month of SFY 2023. We recommend the Oklahoma Employment Security Commission continue implementing the new procedures to ensure all documents are properly completed and retained. Additionally, when the Quality Control program resumes, we recommend follow-up on all Quality Control findings and training to ensure employees are aware of and understand proper procedures for completing appropriate forms and retaining records to prevent future errors. Views of Responsible Official(s) Contact Person: Tammy Wood, RESEA/TAA Program Manager Anticipated Completion Date: Ongoing until modernization of RESEA tools is complete Corrective Action Planned: The agency concurs with the findings and agrees with the recommendation. Please see the corrective action plan located in the corrective action plan section of this report.
FINDING NO: 2023-033 (Repeat #2022-051) STATE AGENCY: Oklahoma Employment Security Commission FEDERAL AGENCY: U.S. Department of Labor ALN: 17.225 FEDERAL PROGRAM NAME: Unemployment Insurance FEDERAL AWARD NUMBER: UI340792055A40, UI356692155A40, UI372442255A40, UI393432355A40 FEDERAL AWARD YEAR: 2020, 2021, 2022, 2023 CONTROL CATEGORY: Special Tests and Provisions – Benefit Accuracy Measurement QUESTIONED COSTS: $0 Criteria: As documented in the Unemployment Insurance Program Letter (UIPL) No. 02-12, Public Law 112-40 enacted on October 21, 2011, and effective October 21, 2013, amended sections 303(a) and 453A of the Social Security Act and sections 3303, 3304, and 3309 of FUTA. Section 4. of the UIPL states in part, “Section 251(a) of the TAAEA [Trade Adjustment Assistance Extension Act of 2011] amends section 303(a), SSA, by adding a new paragraph (11). As a condition of receiving a Federal grant to administer its UC law, a state that has determined that an improper payment from its unemployment fund was made to an individual due to fraud committed by such individual must assess a monetary penalty of not less than 15 percent of the amount of the erroneous payment against that individual. The 15 percent penalty amount is the minimum amount required; states may impose a greater penalty.” UIPL No. 02-12, Section 4. States in part, “A. Requirements: Section 303(a)(11), SSA, further requires that the state immediately deposit receipts of the Federally-mandated penalty amounts into the unemployment fund of the state….When a recovery with respect to a fraudulent overpayment is made, the state is encouraged to apply any recovery to the principal amount of the overpayment first, to the Federally-mandated penalty amount second and finally to any other amounts due (e.g., additional penalties and/or interest). However, the order of the recovery is determined by state law.” See UIPL No. 02-12 at https://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=6707. 40 O.S. §2-613 (1) states, “Fraud overpayment: in which an individual intentionally makes a false statement or representation or fails to disclose a material fact, and has received any sum as benefits to which the individual was not entitled. The individual shall be liable to repay this sum, plus a penalty of twenty-five percent (25%) of the amount of the original overpayment and interest at the rate of one percent (1%) per month on the unpaid balance of the overpayment, to the Oklahoma Employment Security Commission. Three-fifths (3/5) of the penalty amount collected shall be deposited in the Unemployment Trust Fund for the State of Oklahoma and the remaining two-fifths (2/5) shall be deposited in the Oklahoma Employment Security Commission Revolving Fund. The interest shall cease to accrue when the total accrued interest equals the amount of the overpayment. If an overpayment is modified, the interest shall ease to accrue when the total accrued interest equals the amount of the modified overpayment. The Commission shall deduct the principal sum from any future benefits payable to the individual.” Oklahoma Administrate Code (OAC) 240:10-3-28 (b) states, “All payments or amounts collected in processes other than offset or recoupment of current unemployment benefit payments – When a payment is made or a collection of funds is accomplished to repay an indebtedness created by a previous overpayment of unemployment benefits established pursuant to 40 O.S.§2-613 (1) or (2), the payment or the amount collected shall be applied in the following manner: (1) First, to the fees that have been charged to the debtor in the earliest established overpayment until all fees for that overpayment are paid. (2) Second, to accrued penalties in the earliest established overpayment until all penalties for that overpayment are paid. (3) Third, to the accrued interest in the earliest established overpayment until all interest for that overpayment is paid. (4) Fourth, to the principal amount in the earliest established overpayment until the principal amount is paid in full. (5) After the payment or amount collected has been applied in the manner described in paragraphs 1 through 4 of this subsection and the earliest established overpayment is paid in full, any money left over, and all future payments or amounts collected, shall be applied in the same manner to the overpayment established next in time, and this procedure shall be repeated until all overpayments are repaid.” 2 CFR §200.1 “Internal controls”, states in part, “Internal controls non-Federal entities means 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.” The Government Accountability Office (GAO) Standards for Internal Control in the Federal Government Design of the Entity’s Information System, states in part: “11.03 Management designs the entity’s information system to obtain and process information to meet each operational process’s information requirements and to respond to the entity’s objectives and risks. An information system is the people, processes, data, and technology that Federal Internal Control Standards management organizes to obtain, communicate, or dispose of information…. 11.04 Management designs the entity’s information system and the use of information technology by considering the defined information requirements for each of the entity’s operational processes…. Although information technology implies specific types of control activities, information technology is not a “standalone” control consideration. It is an integral part of most control activities. 11.05 Management also evaluates information processing objectives to meet the defined information requirements. Information processing objectives may include the following: • Completeness - Transactions that occur are recorded and not understated. • Accuracy - Transactions are recorded at the correct amount in the right account (and on a timely basis) at each stage of processing. • Validity - Recorded transactions represent economic events that actually occurred and were executed according to prescribed procedures.” Condition and Context: When OESC receives a reimbursement (recovery) for a fraudulent overpayment, the OESC Bull Mainframe is to apply the recovery in the order prescribed in OAC 240:10-3-28(b). While performing testwork on SFY 2023 recoveries of fraudulent Unemployment Insurance (UI) overpayments, penalties were applicable to 7 repayments of 60 claimants’ sampled. Of the 7 repayments subject to penalties, the system did not apply penalties before principal/interest on 42.9% (3/7). Cause: During SFY 2023, the Bull Mainframe system was applying overpayment recoupments to principal/interest before penalties. Effect: Penalties totaling $843 were not applied to recoveries. Further, $506 (3/5 of $843) from the omitted penalties was not deposited to the Unemployment Trust fund and $337 (2/5 of $843) was not deposited to the Oklahoma Employment Security Commission Revolving Fund. Recommendation: OESC stated the underlying programming issue was resolved in February 2023; therefore, we recommend OESC IT continue to monitor and, as needed, strengthen the programming relating to recovery allocations to ensure recoveries are properly applied in the following order: fees, penalty, interest, and then principal. Views of Responsible Official(s) Contact Person: Christopher O’Brien, Vice President - OESC UI Anticipated Completion Date: Completed in February 2023 Corrective Action Planned: OESC concurs with the audit finding and agrees with the recommendation. Please see the corrective action plan located in the corrective action plan section of this report.
FINDING NO: 2023-035 (Repeat #2022-077) STATE AGENCY: Oklahoma Employment Security Commission FEDERAL AGENCY: U.S. Department of Labor ALN: 17.225 FEDERAL PROGRAM NAME: Unemployment Insurance Program FEDERAL AWARD NUMBER: UI359652160A40, UI380002260A40, 23A60UR000033 FEDERAL AWARD YEAR: 2022-2023 CONTROL CATEGORY: Special Tests and Provisions – Reemployment Services and Eligibility Assessments (RESEA) QUESTIONED COSTS: $0 Criteria: 42 USC § 506(b) – Grants to States for reemployment services and eligibility assessments states in part, “The purposes of this section are to accomplish the following goals: (1) To improve employment outcomes of individuals that receive unemployment compensation and to reduce the average duration of receipt of such compensation through employment. (2) To strengthen program integrity and reduce improper payments of unemployment compensation by States through the detection and prevention of such payments to individuals who are not eligible for such compensation. (3) To promote alignment with the broader vision of the Workforce Innovation and Opportunity Act (29 U.S.C. 3101 et seq.) of increased program integration and service delivery for job seekers, including claimants for unemployment compensation. (4) To establish reemployment services and eligibility assessments as an entry point for individuals receiving unemployment compensation into other workforce system partner programs.” U.S. Department of Labor, Unemployment Insurance Program Letter No. 10-22, Number 4. Program Operations, d. states in part, “i. UI staff must be engaged in the administration of the RESEA program. This includes, but is not limited to: • Participating in the planning, administration, and oversight of the RESEA program; • Providing all appropriate staff training on UC eligibility requirements; • Ensuring accurate data are provided in the RESEA-required reports; and • Conducting eligibility determinations and redeterminations resulting from issues identified through RESEA participation.” 2 CFR §421 – Failure to Participate in Reemployment Services through Profiling states in part, “The Oklahoma Employment Security Commission shall establish and utilize a system of Re-employment Services and Eligibility Assessment selection for all ex-military service claimants and for unemployment benefit claimants who will be likely to exhaust unemployment benefits and who will need job-search assistance services to make a successful transition to new employment. Any claimant who has been referred to re-employment services pursuant to the selection system and who fails to participate in the re-employment services made available to the claimant, shall be disqualified to receive benefits for each week in which the failure occurs, unless the Commission determines that:1. The claimant has previously completed the re-employment services within the benefit year; or 2. There is good cause for the claimant's failure to participate in re-employment services.” The RESEA Instructions and Procedures, 07/17/2017 revision and 06/06/2023 revision, Summary of Documentation states in part, “the RESEA process will be documented by the following - Required services: 1. Reemployment Services & Eligibility Assessment – RESEA (placeholder service) 2. Reemployment Needs Inventory & Eligibility Review 3. Resume Assistance 4. Referral to WIOA Services 5. OKJM Registration 6. Job Search Planning 7. Individual Reemployment Plan 8. Custom Labor Market Information 9. RESEA – Follow-up • Completing the Individual Reemployment Plan according to procedures. • Uploading 3 required forms to OKJM: 1. Reemployment Needs Inventory & Eligibility Review, OES 802 2. RESEA Follow-Up, OES 251(Must be completed and uploaded during the initial appointment.) 3. Unemployment Eligibility Review Questionnaire for follow-up appointment, OES 173” The RESEA Instructions and Procedures, 07/17/2017 revision, Notifying UI and the Adjudication Process states in part, “Adjudication Process. Once all notifications have been sent to the OKC Claims Adjudication Unit, the adjudication process follows these general steps: Local office staff report the claimant as a NO SHOW by emailing the OES 842E to PRF/JSW/POE@oesc.state.ok.us. A 2-421 code will be placed on the claim.” The RESEA Instructions and Procedures, 06/06/2023 revision, Notifying UI and the Adjudication Process states in part, “Adjudication Process. Once all notifications have been sent to the OKC Claims Adjudication Unit, the adjudication process follows these general steps: 1. Local office staff report the claimant as a NO SHOW by emailing the OES-842E to PRF/JSW/POE@oesc.ok.gov. A 2-421 code will be placed on the claim and benefits will be denied until attend and no back weeks will be paid. 2.If the claimant reschedules and attends the same week they were a no show the, local office staff email the OES-842E to PRF/JSW/POE@oesc.ok.gov and: The 2-421 is deleted; and the claimants will receive their weekly benefits. 3. If the Claimant reschedules and attends any time after the same week, they were a no show the Local office staff will report the claimant as attended after denial by emailing the OES-842E to PRF/JSW/POE@oesc.ok.gov. The 2-421 issue will be released that week and no back benefits will be paid. 4. If the claimant calls to say he will not be able to attend the RESEA appointment because he has returned to fulltime work, local office staff will enter the start date, employer name, salary, and employment status full time or part time in OKJM and the CRC. Then email PRF/JSW/POE@oesc.ok.gov advising of the date so it can be added to the claim. If a determination has been issued for 2-421, let it stand.” 2 CFR §200.1 “Internal controls” 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: (iv) Effectiveness and efficiency of operations; (v) Reliability of reporting for internal and external use; and (vi) Compliance with applicable laws and regulations.” The Government Accountability Office (GAO) Standards for Internal Control in the Federal Government 14.03 states, “Management communicates quality information down and across reporting lines to enable personnel to perform key roles in achieving objectives, addressing risks, and supporting the internal control system. In these communications, management assigns the internal control responsibilities for key roles.” 2 CFR §200.334 Retention requirements for records states in part, “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….” Condition and Context: The Reemployment Services and Eligibility Assessment (RESEA) provides reemployment services to unemployment claimants who are unlikely to return to their previous industry or occupation and who are considered likely to use up benefits. The Department of Labor’s Employment and Training Administration (ETA) 9128 report provides quarterly information on the RESEA activities of claimants selected to participate in the RESEA program. The data on this report allows for evaluation and monitoring of the RESEA program. We tested 60 Unemployment Insurance claimants that were profiled for the RESEA program during State Fiscal Year (SFY) 2023 and noted the following exceptions: • 10 (16.7%) had no RESEA Notification Letters in DocuShare. • 12 (20.0%) were missing an OES 842E Adjudication Form in OKJobMatch when the claimant did not report for follow-up. • 7 (11.7%) were missing documentation for at least one of the nine required RESEA steps. Cause: During SFY 2023, the Oklahoma Employment Security Commission did not have adequate controls, along with timely and/or effective communication of RESEA procedures, including instructions on how to properly retain documentation. Further, RESEA Quality Control reviews were suspended throughout SFY 2023 due to system malfunctions. Effect: RESEA program evaluation and monitoring may not have been based on correct information and the ETA 9128 performance report may be incomplete and unreliable. RESEA participants may not have received notice regarding their required participation in the RESEA program and may have received benefits for a longer period than necessary. Recommendation: The Oklahoma Employment Security Commission revised the RESEA procedures in the last month of SFY 2023. We recommend the Oklahoma Employment Security Commission continue implementing the new procedures to ensure all documents are properly completed and retained. Additionally, when the Quality Control program resumes, we recommend follow-up on all Quality Control findings and training to ensure employees are aware of and understand proper procedures for completing appropriate forms and retaining records to prevent future errors. Views of Responsible Official(s) Contact Person: Tammy Wood, RESEA/TAA Program Manager Anticipated Completion Date: Ongoing until modernization of RESEA tools is complete Corrective Action Planned: The agency concurs with the findings and agrees with the recommendation. Please see the corrective action plan located in the corrective action plan section of this report.
FINDING NO: 2023-094 (Repeat finding 2022-076) STATE AGENCY: State of Oklahoma and Office of Management and Enterprise Services (OMES) FEDERAL AGENCY: US Department of the Treasury ALN: 21.019 FEDERAL PROGRAM NAME: Coronavirus Relief Fund (CRF) FEDERAL AWARD NUMBER: N/A FEDERAL AWARD YEAR: 2023 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance QUESTIONED COSTS: $184,129 Criteria: 2 CFR §200.1 defines Financial obligations as “orders placed for property and services, contracts and subawards made, and similar transactions that require payment by a recipient or subrecipient under a Federal award that will result in expenditures by a recipient or subrecipient under a Federal award.” 2 CFR §200.303 - Internal controls provides that 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.” The Department of the Treasury Federal Register, Vol. 86, No. 10 from January 15, 2021, states in part, “The CARES [Coronavirus Aid, Relief, & Economic Security] Act provides that payments from the Fund may only be used to cover costs that— 1. are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19); 2. were not accounted for in the budget most recently approved as of March 27, 2020 (the date of enactment of the CARES Act) for the State or government; and 3. were incurred during the period that begins on March 1, 2020, and ends on December 31, 2021.” Treasury Federal Register, Vol. 86, No. 10 also states in part, “for a cost to be considered to have been incurred, performance or delivery must occur during the covered period, but payment of funds need not be made during that time.” Revision to Guidance Regarding When a Cost is Considered Incurred states from December 14, 2021, states in part, “The CARES Act provides that payments from the Fund may only be used to cover costs that were incurred during the period that begins on March 1, 2020, and ends on December 31, 2021 (the “covered period”). A cost associated with a necessary expenditure incurred due to the public health emergency is considered to have been incurred by December 31, 2021, if the recipient has incurred an obligation with respect to such cost by December 31, 2021. Treasury defines obligation for this purpose as an order placed for property and services and entry into contracts, subawards, and similar transactions that require payment. Recipients are required to expend their funds received from the CRF to cover these obligations by September 30, 2022.” Applicable State Rules and Regulations 74 O.S. §85.42 Certain Contracts Prohibited - Contract Limitations - Certain Contracts Allowed states in part, “A. 1. Except as otherwise provided for in this section or other applicable law, any agency, whether or not such agency is subject to the Oklahoma Central Purchasing Act, is prohibited from entering into a sole source contract or a contract for professional services with or for the services of any person, who has terminated employment with or who has been terminated by that agency for one (1) year after the termination date of the employee from the agency. … C. As used in this section, person is defined as any state official or employee of a department, board, bureau, commission, agency, trusteeship, authority, council, committee, trust, school district, fair board, court, executive office, advisory group, task force, study group, supported in whole or in part by public funds or entrusted with the expenditure of public funds or administering or operating public property, and all committees, or subcommittees thereof, judges, justices and state legislators.” Condition and Context: In testing a non-statistical random sample of 15 of 24 state agency reimbursed claims totaling $248,328.44, we noted the following: • For six (40%) of the fifteen claims tested, the reimbursement was approved by an appropriate authority. However, it appears the CARES FORWARD1 review process to determine whether expenditures qualified for reimbursement from CRF consisted of only a summary level cost reimbursement spreadsheet and attestations, including that the expenditure had not been accounted for in a prior budget, signed by the agencies. We noted invoices for the consulting services team the state engaged with do not detail the progress of work performed. Also, there was no support for the number of hours detailing time spent for services performed. Therefore, we are unable to determine what work was performed. [Questioned Costs - $184,129] • For nine (60%) of the fifteen claims tested, the State of Oklahoma utilized the Financial Progress Report to the federal government to constitute if an expenditure had been obligated by December 31, 2021. However, we didn’t see the support for what the U.S. Treasury calls an "obligation", which was an order placed for property and services, entering contract, subawards, or similar transactions that require payment. However, the payments were allowable, and were liquidated within the period of performance Cause: CARES FORWARD failed to perform a detailed review of transactions at the time of reimbursement to ensure the costs were for a necessary and allowable COVID-19 expenditure due to the public health emergency. OMES did not have proper controls in place to ensure State purchasing rules were followed for CRF consulting contracts. OMES did not ensure that individuals responsible for procurement of services did not have conflicts of interest with parties they contracted with. Effect: CARES FORWARD may have reimbursed unallowable costs to the contractor. In addition, because CARES FORWARD did not require a detailed breakout of consulting services and hours performed related to the CRF consulting contract, we are unable to determine whether the consultant met the requirements of the contract, and therefore the requirements of the federal award. Recommendation: We recommend CARES FORWARD review, and require supporting documentation for, all reimbursement requests to ensure all relevant supporting documentation is present to support allowability of the expenditure and to prevent potential recoupment by the Department of the Treasury. Views of Responsible Official(s) Contact Person: Brandy Manek Anticipated Completion Date: September 2022 Corrective Action Planned: The State of Oklahoma/Office of Management and Enterprise Services partially agrees with this finding. See corrective action plan located in the corrective action plan section of the report. Auditor Response: We recommend the CARES FORWARD team design and implement appropriate controls to ensure expenditures are incurred, per the Department of Treasury guidance, prior to reimbursement approval. Additionally, we recommend CARES FORWARD review all reimbursements and ensure that relevant documentation is present to support allowability of the expenditure and to prevent potential recoupment by the Department of the Treasury. We recommend that OMES ensure all employees responsible for the administration of federal awards provide adequate oversight of any contracted services applicable to those federal awards. Lastly, we recommend that OMES provide training to all employees involved in the procurement of consulting service contracts to ensure compliance with State Statutes.
FINDING NO: 2023-098 STATE AGENCY: State of Oklahoma and Office of Management and Enterprise Services (OMES) FEDERAL AGENCY: US Department of the Treasury ALN: 21.019 FEDERAL PROGRAM NAME: Coronavirus Relief Fund (CRF) FEDERAL AWARD NUMBER: N/A FEDERAL AWARD YEAR: 2023 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance; Reporting QUESTIONED COSTS: $157,186 Criteria: 2 CFR §200.1 defines Financial obligations as “orders placed for property and services, contracts and subawards made, and similar transactions that require payment by a recipient or subrecipient under a Federal award that will result in expenditures by a recipient or subrecipient under a Federal award.” 2 CFR §200.303 - Internal controls provides that 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.” Treasury Federal Register, Vol. 86, No. 10 also states in part, “for a cost to be considered to have been incurred, performance or delivery must occur during the covered period, but payment of funds need not be made during that time.” Treasury Federal Register, Vol. 86, No. 10 also states in part, “As previously stated in FAQ B.11, recipients are permitted to use payments from the Fund to cover the expenses of an audit conducted under the Single Audit Act, subject to the limitations set forth in 2 CFR 200.425. Pursuant to that provision of the Uniform Guidance, recipients and subrecipients subject to the Single Audit Act may use payments from the Fund to cover a reasonably proportionate share of the costs of audits attributable to the Fund. To the extent a cost is incurred by December 31, 2021, for an eligible use consistent with section 601 of the Social Security Act and Treasury's guidance, a necessary administrative compliance expense that relates to such underlying cost may be incurred after December 31, 2021. Such an expense would include, for example, expenses incurred to comply with the Single Audit Act and reporting and recordkeeping requirements imposed by the Office of Inspector General. A recipient with such necessary administrative expenses, such as an ongoing audit continuing past December 31, 2021, that relates to Fund expenditures incurred during the covered period, must report to the Treasury Office of Inspector General by the quarter ending September 2022 an estimate of the amount of such necessary administrative expenses. Revision to Guidance Regarding When a Cost is Considered Incurred December 14, 2021, states in part, “The CARES Act provides that payments from the Fund may only be used to cover costs that were incurred during the period that begins on March 1, 2020, and ends on December 31, 2021 (the “covered period”). A cost associated with a necessary expenditure incurred due to the public health emergency is considered to have been incurred by December 31, 2021, if the recipient has incurred an obligation with respect to such cost by December 31, 2021. Treasury defines obligation for this purpose as an order placed for property and services and entry into contracts, subawards, and similar transactions that require payment. Recipients are required to expend their funds received from the CRF to cover these obligations by September 30, 2022.” Condition and Context: The State of Oklahoma recorded $867,541.99 in final administrative closeout costs per 2023 Schedule of Expenditures of Federal Awards (SEFA), since this was the last year of the grant. The expenses were shown as cash basis expenditures. However, these costs were not paid by 6/30/2023, and therefore should have been recorded as an Accounts Payable expense. Finally, only $652,141.40 has been paid out to date for final administrative closeout costs. These expenses were a result of the interest revenue earned over the entirety of CRF grant. Upon review of the final closeout administrative costs totaling $652,141.40 the State of Oklahoma CARES FORWARD3 team expended related to the CRF grant in SFY 2023, we noted: training costs of $7,871.54 that had already been recorded as a CRF expenditure in a prior period a payment of $116,402.36 for software license was made on 4/10/2023, which was outside of the liquidation period of the grant, was not an administrative closeout expenditure; therefore, it was not a necessary or allowable expenditure due to the public health emergency two payments to the State Auditor and Inspector’s Office totaling $32,912.50 related to the SFY 2023 Annual Comprehensive Financial Report (ACFR), and therefore not incurred for necessary and allowable expenditures due to the public health emergency for CRF program. Cause: OMES did not have proper controls in place over their SEFA to ensure costs were reported on the correct basis of accounting. CARES FORWARD failed to perform an adequate review of transactions at the time of reimbursement to ensure the costs were for necessary administrative closeout expenses that were also allowable COVID-19 expenditures due to the public health emergency. Effect: CARES FORWARD reimbursed unallowable CRF costs totaling $157,186.40. Also, the final administrative closeout costs per OMES’s SEFA were reported on the wrong basis of accounting. Recommendation: We recommend CARES FORWARD strengthen its review process to ensure all relevant supporting documentation is present to support allowability of the administrative closeout expenditures, and to prevent potential recoupment by the Department of the Treasury. In addition, we recommend the State of Oklahoma strengthen its review process over SEFA to ensure expenditures are recorded under the correct basis of accounting. Views of Responsible Official(s) Contact Person: Brandy Manek Anticipated Completion Date: September 2022 Corrective Action Planned: The State of Oklahoma/Office of Management and Enterprise Services agrees with this finding. See corrective action plan located in the corrective action plan section of the report.
FINDING NO: 2023-094 (Repeat finding 2022-076) STATE AGENCY: State of Oklahoma and Office of Management and Enterprise Services (OMES) FEDERAL AGENCY: US Department of the Treasury ALN: 21.019 FEDERAL PROGRAM NAME: Coronavirus Relief Fund (CRF) FEDERAL AWARD NUMBER: N/A FEDERAL AWARD YEAR: 2023 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance QUESTIONED COSTS: $184,129 Criteria: 2 CFR §200.1 defines Financial obligations as “orders placed for property and services, contracts and subawards made, and similar transactions that require payment by a recipient or subrecipient under a Federal award that will result in expenditures by a recipient or subrecipient under a Federal award.” 2 CFR §200.303 - Internal controls provides that 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.” The Department of the Treasury Federal Register, Vol. 86, No. 10 from January 15, 2021, states in part, “The CARES [Coronavirus Aid, Relief, & Economic Security] Act provides that payments from the Fund may only be used to cover costs that— 1. are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19); 2. were not accounted for in the budget most recently approved as of March 27, 2020 (the date of enactment of the CARES Act) for the State or government; and 3. were incurred during the period that begins on March 1, 2020, and ends on December 31, 2021.” Treasury Federal Register, Vol. 86, No. 10 also states in part, “for a cost to be considered to have been incurred, performance or delivery must occur during the covered period, but payment of funds need not be made during that time.” Revision to Guidance Regarding When a Cost is Considered Incurred states from December 14, 2021, states in part, “The CARES Act provides that payments from the Fund may only be used to cover costs that were incurred during the period that begins on March 1, 2020, and ends on December 31, 2021 (the “covered period”). A cost associated with a necessary expenditure incurred due to the public health emergency is considered to have been incurred by December 31, 2021, if the recipient has incurred an obligation with respect to such cost by December 31, 2021. Treasury defines obligation for this purpose as an order placed for property and services and entry into contracts, subawards, and similar transactions that require payment. Recipients are required to expend their funds received from the CRF to cover these obligations by September 30, 2022.” Applicable State Rules and Regulations 74 O.S. §85.42 Certain Contracts Prohibited - Contract Limitations - Certain Contracts Allowed states in part, “A. 1. Except as otherwise provided for in this section or other applicable law, any agency, whether or not such agency is subject to the Oklahoma Central Purchasing Act, is prohibited from entering into a sole source contract or a contract for professional services with or for the services of any person, who has terminated employment with or who has been terminated by that agency for one (1) year after the termination date of the employee from the agency. … C. As used in this section, person is defined as any state official or employee of a department, board, bureau, commission, agency, trusteeship, authority, council, committee, trust, school district, fair board, court, executive office, advisory group, task force, study group, supported in whole or in part by public funds or entrusted with the expenditure of public funds or administering or operating public property, and all committees, or subcommittees thereof, judges, justices and state legislators.” Condition and Context: In testing a non-statistical random sample of 15 of 24 state agency reimbursed claims totaling $248,328.44, we noted the following: • For six (40%) of the fifteen claims tested, the reimbursement was approved by an appropriate authority. However, it appears the CARES FORWARD1 review process to determine whether expenditures qualified for reimbursement from CRF consisted of only a summary level cost reimbursement spreadsheet and attestations, including that the expenditure had not been accounted for in a prior budget, signed by the agencies. We noted invoices for the consulting services team the state engaged with do not detail the progress of work performed. Also, there was no support for the number of hours detailing time spent for services performed. Therefore, we are unable to determine what work was performed. [Questioned Costs - $184,129] • For nine (60%) of the fifteen claims tested, the State of Oklahoma utilized the Financial Progress Report to the federal government to constitute if an expenditure had been obligated by December 31, 2021. However, we didn’t see the support for what the U.S. Treasury calls an "obligation", which was an order placed for property and services, entering contract, subawards, or similar transactions that require payment. However, the payments were allowable, and were liquidated within the period of performance Cause: CARES FORWARD failed to perform a detailed review of transactions at the time of reimbursement to ensure the costs were for a necessary and allowable COVID-19 expenditure due to the public health emergency. OMES did not have proper controls in place to ensure State purchasing rules were followed for CRF consulting contracts. OMES did not ensure that individuals responsible for procurement of services did not have conflicts of interest with parties they contracted with. Effect: CARES FORWARD may have reimbursed unallowable costs to the contractor. In addition, because CARES FORWARD did not require a detailed breakout of consulting services and hours performed related to the CRF consulting contract, we are unable to determine whether the consultant met the requirements of the contract, and therefore the requirements of the federal award. Recommendation: We recommend CARES FORWARD review, and require supporting documentation for, all reimbursement requests to ensure all relevant supporting documentation is present to support allowability of the expenditure and to prevent potential recoupment by the Department of the Treasury. Views of Responsible Official(s) Contact Person: Brandy Manek Anticipated Completion Date: September 2022 Corrective Action Planned: The State of Oklahoma/Office of Management and Enterprise Services partially agrees with this finding. See corrective action plan located in the corrective action plan section of the report. Auditor Response: We recommend the CARES FORWARD team design and implement appropriate controls to ensure expenditures are incurred, per the Department of Treasury guidance, prior to reimbursement approval. Additionally, we recommend CARES FORWARD review all reimbursements and ensure that relevant documentation is present to support allowability of the expenditure and to prevent potential recoupment by the Department of the Treasury. We recommend that OMES ensure all employees responsible for the administration of federal awards provide adequate oversight of any contracted services applicable to those federal awards. Lastly, we recommend that OMES provide training to all employees involved in the procurement of consulting service contracts to ensure compliance with State Statutes.
FINDING NO: 2023-098 STATE AGENCY: State of Oklahoma and Office of Management and Enterprise Services (OMES) FEDERAL AGENCY: US Department of the Treasury ALN: 21.019 FEDERAL PROGRAM NAME: Coronavirus Relief Fund (CRF) FEDERAL AWARD NUMBER: N/A FEDERAL AWARD YEAR: 2023 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance; Reporting QUESTIONED COSTS: $157,186 Criteria: 2 CFR §200.1 defines Financial obligations as “orders placed for property and services, contracts and subawards made, and similar transactions that require payment by a recipient or subrecipient under a Federal award that will result in expenditures by a recipient or subrecipient under a Federal award.” 2 CFR §200.303 - Internal controls provides that 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.” Treasury Federal Register, Vol. 86, No. 10 also states in part, “for a cost to be considered to have been incurred, performance or delivery must occur during the covered period, but payment of funds need not be made during that time.” Treasury Federal Register, Vol. 86, No. 10 also states in part, “As previously stated in FAQ B.11, recipients are permitted to use payments from the Fund to cover the expenses of an audit conducted under the Single Audit Act, subject to the limitations set forth in 2 CFR 200.425. Pursuant to that provision of the Uniform Guidance, recipients and subrecipients subject to the Single Audit Act may use payments from the Fund to cover a reasonably proportionate share of the costs of audits attributable to the Fund. To the extent a cost is incurred by December 31, 2021, for an eligible use consistent with section 601 of the Social Security Act and Treasury's guidance, a necessary administrative compliance expense that relates to such underlying cost may be incurred after December 31, 2021. Such an expense would include, for example, expenses incurred to comply with the Single Audit Act and reporting and recordkeeping requirements imposed by the Office of Inspector General. A recipient with such necessary administrative expenses, such as an ongoing audit continuing past December 31, 2021, that relates to Fund expenditures incurred during the covered period, must report to the Treasury Office of Inspector General by the quarter ending September 2022 an estimate of the amount of such necessary administrative expenses. Revision to Guidance Regarding When a Cost is Considered Incurred December 14, 2021, states in part, “The CARES Act provides that payments from the Fund may only be used to cover costs that were incurred during the period that begins on March 1, 2020, and ends on December 31, 2021 (the “covered period”). A cost associated with a necessary expenditure incurred due to the public health emergency is considered to have been incurred by December 31, 2021, if the recipient has incurred an obligation with respect to such cost by December 31, 2021. Treasury defines obligation for this purpose as an order placed for property and services and entry into contracts, subawards, and similar transactions that require payment. Recipients are required to expend their funds received from the CRF to cover these obligations by September 30, 2022.” Condition and Context: The State of Oklahoma recorded $867,541.99 in final administrative closeout costs per 2023 Schedule of Expenditures of Federal Awards (SEFA), since this was the last year of the grant. The expenses were shown as cash basis expenditures. However, these costs were not paid by 6/30/2023, and therefore should have been recorded as an Accounts Payable expense. Finally, only $652,141.40 has been paid out to date for final administrative closeout costs. These expenses were a result of the interest revenue earned over the entirety of CRF grant. Upon review of the final closeout administrative costs totaling $652,141.40 the State of Oklahoma CARES FORWARD3 team expended related to the CRF grant in SFY 2023, we noted: training costs of $7,871.54 that had already been recorded as a CRF expenditure in a prior period a payment of $116,402.36 for software license was made on 4/10/2023, which was outside of the liquidation period of the grant, was not an administrative closeout expenditure; therefore, it was not a necessary or allowable expenditure due to the public health emergency two payments to the State Auditor and Inspector’s Office totaling $32,912.50 related to the SFY 2023 Annual Comprehensive Financial Report (ACFR), and therefore not incurred for necessary and allowable expenditures due to the public health emergency for CRF program. Cause: OMES did not have proper controls in place over their SEFA to ensure costs were reported on the correct basis of accounting. CARES FORWARD failed to perform an adequate review of transactions at the time of reimbursement to ensure the costs were for necessary administrative closeout expenses that were also allowable COVID-19 expenditures due to the public health emergency. Effect: CARES FORWARD reimbursed unallowable CRF costs totaling $157,186.40. Also, the final administrative closeout costs per OMES’s SEFA were reported on the wrong basis of accounting. Recommendation: We recommend CARES FORWARD strengthen its review process to ensure all relevant supporting documentation is present to support allowability of the administrative closeout expenditures, and to prevent potential recoupment by the Department of the Treasury. In addition, we recommend the State of Oklahoma strengthen its review process over SEFA to ensure expenditures are recorded under the correct basis of accounting. Views of Responsible Official(s) Contact Person: Brandy Manek Anticipated Completion Date: September 2022 Corrective Action Planned: The State of Oklahoma/Office of Management and Enterprise Services agrees with this finding. See corrective action plan located in the corrective action plan section of the report.
FINDING NO: 2023-094 (Repeat finding 2022-076) STATE AGENCY: State of Oklahoma and Office of Management and Enterprise Services (OMES) FEDERAL AGENCY: US Department of the Treasury ALN: 21.019 FEDERAL PROGRAM NAME: Coronavirus Relief Fund (CRF) FEDERAL AWARD NUMBER: N/A FEDERAL AWARD YEAR: 2023 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance QUESTIONED COSTS: $184,129 Criteria: 2 CFR §200.1 defines Financial obligations as “orders placed for property and services, contracts and subawards made, and similar transactions that require payment by a recipient or subrecipient under a Federal award that will result in expenditures by a recipient or subrecipient under a Federal award.” 2 CFR §200.303 - Internal controls provides that 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.” The Department of the Treasury Federal Register, Vol. 86, No. 10 from January 15, 2021, states in part, “The CARES [Coronavirus Aid, Relief, & Economic Security] Act provides that payments from the Fund may only be used to cover costs that— 1. are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19); 2. were not accounted for in the budget most recently approved as of March 27, 2020 (the date of enactment of the CARES Act) for the State or government; and 3. were incurred during the period that begins on March 1, 2020, and ends on December 31, 2021.” Treasury Federal Register, Vol. 86, No. 10 also states in part, “for a cost to be considered to have been incurred, performance or delivery must occur during the covered period, but payment of funds need not be made during that time.” Revision to Guidance Regarding When a Cost is Considered Incurred states from December 14, 2021, states in part, “The CARES Act provides that payments from the Fund may only be used to cover costs that were incurred during the period that begins on March 1, 2020, and ends on December 31, 2021 (the “covered period”). A cost associated with a necessary expenditure incurred due to the public health emergency is considered to have been incurred by December 31, 2021, if the recipient has incurred an obligation with respect to such cost by December 31, 2021. Treasury defines obligation for this purpose as an order placed for property and services and entry into contracts, subawards, and similar transactions that require payment. Recipients are required to expend their funds received from the CRF to cover these obligations by September 30, 2022.” Applicable State Rules and Regulations 74 O.S. §85.42 Certain Contracts Prohibited - Contract Limitations - Certain Contracts Allowed states in part, “A. 1. Except as otherwise provided for in this section or other applicable law, any agency, whether or not such agency is subject to the Oklahoma Central Purchasing Act, is prohibited from entering into a sole source contract or a contract for professional services with or for the services of any person, who has terminated employment with or who has been terminated by that agency for one (1) year after the termination date of the employee from the agency. … C. As used in this section, person is defined as any state official or employee of a department, board, bureau, commission, agency, trusteeship, authority, council, committee, trust, school district, fair board, court, executive office, advisory group, task force, study group, supported in whole or in part by public funds or entrusted with the expenditure of public funds or administering or operating public property, and all committees, or subcommittees thereof, judges, justices and state legislators.” Condition and Context: In testing a non-statistical random sample of 15 of 24 state agency reimbursed claims totaling $248,328.44, we noted the following: • For six (40%) of the fifteen claims tested, the reimbursement was approved by an appropriate authority. However, it appears the CARES FORWARD1 review process to determine whether expenditures qualified for reimbursement from CRF consisted of only a summary level cost reimbursement spreadsheet and attestations, including that the expenditure had not been accounted for in a prior budget, signed by the agencies. We noted invoices for the consulting services team the state engaged with do not detail the progress of work performed. Also, there was no support for the number of hours detailing time spent for services performed. Therefore, we are unable to determine what work was performed. [Questioned Costs - $184,129] • For nine (60%) of the fifteen claims tested, the State of Oklahoma utilized the Financial Progress Report to the federal government to constitute if an expenditure had been obligated by December 31, 2021. However, we didn’t see the support for what the U.S. Treasury calls an "obligation", which was an order placed for property and services, entering contract, subawards, or similar transactions that require payment. However, the payments were allowable, and were liquidated within the period of performance Cause: CARES FORWARD failed to perform a detailed review of transactions at the time of reimbursement to ensure the costs were for a necessary and allowable COVID-19 expenditure due to the public health emergency. OMES did not have proper controls in place to ensure State purchasing rules were followed for CRF consulting contracts. OMES did not ensure that individuals responsible for procurement of services did not have conflicts of interest with parties they contracted with. Effect: CARES FORWARD may have reimbursed unallowable costs to the contractor. In addition, because CARES FORWARD did not require a detailed breakout of consulting services and hours performed related to the CRF consulting contract, we are unable to determine whether the consultant met the requirements of the contract, and therefore the requirements of the federal award. Recommendation: We recommend CARES FORWARD review, and require supporting documentation for, all reimbursement requests to ensure all relevant supporting documentation is present to support allowability of the expenditure and to prevent potential recoupment by the Department of the Treasury. Views of Responsible Official(s) Contact Person: Brandy Manek Anticipated Completion Date: September 2022 Corrective Action Planned: The State of Oklahoma/Office of Management and Enterprise Services partially agrees with this finding. See corrective action plan located in the corrective action plan section of the report. Auditor Response: We recommend the CARES FORWARD team design and implement appropriate controls to ensure expenditures are incurred, per the Department of Treasury guidance, prior to reimbursement approval. Additionally, we recommend CARES FORWARD review all reimbursements and ensure that relevant documentation is present to support allowability of the expenditure and to prevent potential recoupment by the Department of the Treasury. We recommend that OMES ensure all employees responsible for the administration of federal awards provide adequate oversight of any contracted services applicable to those federal awards. Lastly, we recommend that OMES provide training to all employees involved in the procurement of consulting service contracts to ensure compliance with State Statutes.
FINDING NO: 2023-098 STATE AGENCY: State of Oklahoma and Office of Management and Enterprise Services (OMES) FEDERAL AGENCY: US Department of the Treasury ALN: 21.019 FEDERAL PROGRAM NAME: Coronavirus Relief Fund (CRF) FEDERAL AWARD NUMBER: N/A FEDERAL AWARD YEAR: 2023 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance; Reporting QUESTIONED COSTS: $157,186 Criteria: 2 CFR §200.1 defines Financial obligations as “orders placed for property and services, contracts and subawards made, and similar transactions that require payment by a recipient or subrecipient under a Federal award that will result in expenditures by a recipient or subrecipient under a Federal award.” 2 CFR §200.303 - Internal controls provides that 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.” Treasury Federal Register, Vol. 86, No. 10 also states in part, “for a cost to be considered to have been incurred, performance or delivery must occur during the covered period, but payment of funds need not be made during that time.” Treasury Federal Register, Vol. 86, No. 10 also states in part, “As previously stated in FAQ B.11, recipients are permitted to use payments from the Fund to cover the expenses of an audit conducted under the Single Audit Act, subject to the limitations set forth in 2 CFR 200.425. Pursuant to that provision of the Uniform Guidance, recipients and subrecipients subject to the Single Audit Act may use payments from the Fund to cover a reasonably proportionate share of the costs of audits attributable to the Fund. To the extent a cost is incurred by December 31, 2021, for an eligible use consistent with section 601 of the Social Security Act and Treasury's guidance, a necessary administrative compliance expense that relates to such underlying cost may be incurred after December 31, 2021. Such an expense would include, for example, expenses incurred to comply with the Single Audit Act and reporting and recordkeeping requirements imposed by the Office of Inspector General. A recipient with such necessary administrative expenses, such as an ongoing audit continuing past December 31, 2021, that relates to Fund expenditures incurred during the covered period, must report to the Treasury Office of Inspector General by the quarter ending September 2022 an estimate of the amount of such necessary administrative expenses. Revision to Guidance Regarding When a Cost is Considered Incurred December 14, 2021, states in part, “The CARES Act provides that payments from the Fund may only be used to cover costs that were incurred during the period that begins on March 1, 2020, and ends on December 31, 2021 (the “covered period”). A cost associated with a necessary expenditure incurred due to the public health emergency is considered to have been incurred by December 31, 2021, if the recipient has incurred an obligation with respect to such cost by December 31, 2021. Treasury defines obligation for this purpose as an order placed for property and services and entry into contracts, subawards, and similar transactions that require payment. Recipients are required to expend their funds received from the CRF to cover these obligations by September 30, 2022.” Condition and Context: The State of Oklahoma recorded $867,541.99 in final administrative closeout costs per 2023 Schedule of Expenditures of Federal Awards (SEFA), since this was the last year of the grant. The expenses were shown as cash basis expenditures. However, these costs were not paid by 6/30/2023, and therefore should have been recorded as an Accounts Payable expense. Finally, only $652,141.40 has been paid out to date for final administrative closeout costs. These expenses were a result of the interest revenue earned over the entirety of CRF grant. Upon review of the final closeout administrative costs totaling $652,141.40 the State of Oklahoma CARES FORWARD3 team expended related to the CRF grant in SFY 2023, we noted: training costs of $7,871.54 that had already been recorded as a CRF expenditure in a prior period a payment of $116,402.36 for software license was made on 4/10/2023, which was outside of the liquidation period of the grant, was not an administrative closeout expenditure; therefore, it was not a necessary or allowable expenditure due to the public health emergency two payments to the State Auditor and Inspector’s Office totaling $32,912.50 related to the SFY 2023 Annual Comprehensive Financial Report (ACFR), and therefore not incurred for necessary and allowable expenditures due to the public health emergency for CRF program. Cause: OMES did not have proper controls in place over their SEFA to ensure costs were reported on the correct basis of accounting. CARES FORWARD failed to perform an adequate review of transactions at the time of reimbursement to ensure the costs were for necessary administrative closeout expenses that were also allowable COVID-19 expenditures due to the public health emergency. Effect: CARES FORWARD reimbursed unallowable CRF costs totaling $157,186.40. Also, the final administrative closeout costs per OMES’s SEFA were reported on the wrong basis of accounting. Recommendation: We recommend CARES FORWARD strengthen its review process to ensure all relevant supporting documentation is present to support allowability of the administrative closeout expenditures, and to prevent potential recoupment by the Department of the Treasury. In addition, we recommend the State of Oklahoma strengthen its review process over SEFA to ensure expenditures are recorded under the correct basis of accounting. Views of Responsible Official(s) Contact Person: Brandy Manek Anticipated Completion Date: September 2022 Corrective Action Planned: The State of Oklahoma/Office of Management and Enterprise Services agrees with this finding. See corrective action plan located in the corrective action plan section of the report.
FINDING NO: 2023-094 (Repeat finding 2022-076) STATE AGENCY: State of Oklahoma and Office of Management and Enterprise Services (OMES) FEDERAL AGENCY: US Department of the Treasury ALN: 21.019 FEDERAL PROGRAM NAME: Coronavirus Relief Fund (CRF) FEDERAL AWARD NUMBER: N/A FEDERAL AWARD YEAR: 2023 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance QUESTIONED COSTS: $184,129 Criteria: 2 CFR §200.1 defines Financial obligations as “orders placed for property and services, contracts and subawards made, and similar transactions that require payment by a recipient or subrecipient under a Federal award that will result in expenditures by a recipient or subrecipient under a Federal award.” 2 CFR §200.303 - Internal controls provides that 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.” The Department of the Treasury Federal Register, Vol. 86, No. 10 from January 15, 2021, states in part, “The CARES [Coronavirus Aid, Relief, & Economic Security] Act provides that payments from the Fund may only be used to cover costs that— 1. are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19); 2. were not accounted for in the budget most recently approved as of March 27, 2020 (the date of enactment of the CARES Act) for the State or government; and 3. were incurred during the period that begins on March 1, 2020, and ends on December 31, 2021.” Treasury Federal Register, Vol. 86, No. 10 also states in part, “for a cost to be considered to have been incurred, performance or delivery must occur during the covered period, but payment of funds need not be made during that time.” Revision to Guidance Regarding When a Cost is Considered Incurred states from December 14, 2021, states in part, “The CARES Act provides that payments from the Fund may only be used to cover costs that were incurred during the period that begins on March 1, 2020, and ends on December 31, 2021 (the “covered period”). A cost associated with a necessary expenditure incurred due to the public health emergency is considered to have been incurred by December 31, 2021, if the recipient has incurred an obligation with respect to such cost by December 31, 2021. Treasury defines obligation for this purpose as an order placed for property and services and entry into contracts, subawards, and similar transactions that require payment. Recipients are required to expend their funds received from the CRF to cover these obligations by September 30, 2022.” Applicable State Rules and Regulations 74 O.S. §85.42 Certain Contracts Prohibited - Contract Limitations - Certain Contracts Allowed states in part, “A. 1. Except as otherwise provided for in this section or other applicable law, any agency, whether or not such agency is subject to the Oklahoma Central Purchasing Act, is prohibited from entering into a sole source contract or a contract for professional services with or for the services of any person, who has terminated employment with or who has been terminated by that agency for one (1) year after the termination date of the employee from the agency. … C. As used in this section, person is defined as any state official or employee of a department, board, bureau, commission, agency, trusteeship, authority, council, committee, trust, school district, fair board, court, executive office, advisory group, task force, study group, supported in whole or in part by public funds or entrusted with the expenditure of public funds or administering or operating public property, and all committees, or subcommittees thereof, judges, justices and state legislators.” Condition and Context: In testing a non-statistical random sample of 15 of 24 state agency reimbursed claims totaling $248,328.44, we noted the following: • For six (40%) of the fifteen claims tested, the reimbursement was approved by an appropriate authority. However, it appears the CARES FORWARD1 review process to determine whether expenditures qualified for reimbursement from CRF consisted of only a summary level cost reimbursement spreadsheet and attestations, including that the expenditure had not been accounted for in a prior budget, signed by the agencies. We noted invoices for the consulting services team the state engaged with do not detail the progress of work performed. Also, there was no support for the number of hours detailing time spent for services performed. Therefore, we are unable to determine what work was performed. [Questioned Costs - $184,129] • For nine (60%) of the fifteen claims tested, the State of Oklahoma utilized the Financial Progress Report to the federal government to constitute if an expenditure had been obligated by December 31, 2021. However, we didn’t see the support for what the U.S. Treasury calls an "obligation", which was an order placed for property and services, entering contract, subawards, or similar transactions that require payment. However, the payments were allowable, and were liquidated within the period of performance Cause: CARES FORWARD failed to perform a detailed review of transactions at the time of reimbursement to ensure the costs were for a necessary and allowable COVID-19 expenditure due to the public health emergency. OMES did not have proper controls in place to ensure State purchasing rules were followed for CRF consulting contracts. OMES did not ensure that individuals responsible for procurement of services did not have conflicts of interest with parties they contracted with. Effect: CARES FORWARD may have reimbursed unallowable costs to the contractor. In addition, because CARES FORWARD did not require a detailed breakout of consulting services and hours performed related to the CRF consulting contract, we are unable to determine whether the consultant met the requirements of the contract, and therefore the requirements of the federal award. Recommendation: We recommend CARES FORWARD review, and require supporting documentation for, all reimbursement requests to ensure all relevant supporting documentation is present to support allowability of the expenditure and to prevent potential recoupment by the Department of the Treasury. Views of Responsible Official(s) Contact Person: Brandy Manek Anticipated Completion Date: September 2022 Corrective Action Planned: The State of Oklahoma/Office of Management and Enterprise Services partially agrees with this finding. See corrective action plan located in the corrective action plan section of the report. Auditor Response: We recommend the CARES FORWARD team design and implement appropriate controls to ensure expenditures are incurred, per the Department of Treasury guidance, prior to reimbursement approval. Additionally, we recommend CARES FORWARD review all reimbursements and ensure that relevant documentation is present to support allowability of the expenditure and to prevent potential recoupment by the Department of the Treasury. We recommend that OMES ensure all employees responsible for the administration of federal awards provide adequate oversight of any contracted services applicable to those federal awards. Lastly, we recommend that OMES provide training to all employees involved in the procurement of consulting service contracts to ensure compliance with State Statutes.
FINDING NO: 2023-098 STATE AGENCY: State of Oklahoma and Office of Management and Enterprise Services (OMES) FEDERAL AGENCY: US Department of the Treasury ALN: 21.019 FEDERAL PROGRAM NAME: Coronavirus Relief Fund (CRF) FEDERAL AWARD NUMBER: N/A FEDERAL AWARD YEAR: 2023 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance; Reporting QUESTIONED COSTS: $157,186 Criteria: 2 CFR §200.1 defines Financial obligations as “orders placed for property and services, contracts and subawards made, and similar transactions that require payment by a recipient or subrecipient under a Federal award that will result in expenditures by a recipient or subrecipient under a Federal award.” 2 CFR §200.303 - Internal controls provides that 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.” Treasury Federal Register, Vol. 86, No. 10 also states in part, “for a cost to be considered to have been incurred, performance or delivery must occur during the covered period, but payment of funds need not be made during that time.” Treasury Federal Register, Vol. 86, No. 10 also states in part, “As previously stated in FAQ B.11, recipients are permitted to use payments from the Fund to cover the expenses of an audit conducted under the Single Audit Act, subject to the limitations set forth in 2 CFR 200.425. Pursuant to that provision of the Uniform Guidance, recipients and subrecipients subject to the Single Audit Act may use payments from the Fund to cover a reasonably proportionate share of the costs of audits attributable to the Fund. To the extent a cost is incurred by December 31, 2021, for an eligible use consistent with section 601 of the Social Security Act and Treasury's guidance, a necessary administrative compliance expense that relates to such underlying cost may be incurred after December 31, 2021. Such an expense would include, for example, expenses incurred to comply with the Single Audit Act and reporting and recordkeeping requirements imposed by the Office of Inspector General. A recipient with such necessary administrative expenses, such as an ongoing audit continuing past December 31, 2021, that relates to Fund expenditures incurred during the covered period, must report to the Treasury Office of Inspector General by the quarter ending September 2022 an estimate of the amount of such necessary administrative expenses. Revision to Guidance Regarding When a Cost is Considered Incurred December 14, 2021, states in part, “The CARES Act provides that payments from the Fund may only be used to cover costs that were incurred during the period that begins on March 1, 2020, and ends on December 31, 2021 (the “covered period”). A cost associated with a necessary expenditure incurred due to the public health emergency is considered to have been incurred by December 31, 2021, if the recipient has incurred an obligation with respect to such cost by December 31, 2021. Treasury defines obligation for this purpose as an order placed for property and services and entry into contracts, subawards, and similar transactions that require payment. Recipients are required to expend their funds received from the CRF to cover these obligations by September 30, 2022.” Condition and Context: The State of Oklahoma recorded $867,541.99 in final administrative closeout costs per 2023 Schedule of Expenditures of Federal Awards (SEFA), since this was the last year of the grant. The expenses were shown as cash basis expenditures. However, these costs were not paid by 6/30/2023, and therefore should have been recorded as an Accounts Payable expense. Finally, only $652,141.40 has been paid out to date for final administrative closeout costs. These expenses were a result of the interest revenue earned over the entirety of CRF grant. Upon review of the final closeout administrative costs totaling $652,141.40 the State of Oklahoma CARES FORWARD3 team expended related to the CRF grant in SFY 2023, we noted: training costs of $7,871.54 that had already been recorded as a CRF expenditure in a prior period a payment of $116,402.36 for software license was made on 4/10/2023, which was outside of the liquidation period of the grant, was not an administrative closeout expenditure; therefore, it was not a necessary or allowable expenditure due to the public health emergency two payments to the State Auditor and Inspector’s Office totaling $32,912.50 related to the SFY 2023 Annual Comprehensive Financial Report (ACFR), and therefore not incurred for necessary and allowable expenditures due to the public health emergency for CRF program. Cause: OMES did not have proper controls in place over their SEFA to ensure costs were reported on the correct basis of accounting. CARES FORWARD failed to perform an adequate review of transactions at the time of reimbursement to ensure the costs were for necessary administrative closeout expenses that were also allowable COVID-19 expenditures due to the public health emergency. Effect: CARES FORWARD reimbursed unallowable CRF costs totaling $157,186.40. Also, the final administrative closeout costs per OMES’s SEFA were reported on the wrong basis of accounting. Recommendation: We recommend CARES FORWARD strengthen its review process to ensure all relevant supporting documentation is present to support allowability of the administrative closeout expenditures, and to prevent potential recoupment by the Department of the Treasury. In addition, we recommend the State of Oklahoma strengthen its review process over SEFA to ensure expenditures are recorded under the correct basis of accounting. Views of Responsible Official(s) Contact Person: Brandy Manek Anticipated Completion Date: September 2022 Corrective Action Planned: The State of Oklahoma/Office of Management and Enterprise Services agrees with this finding. See corrective action plan located in the corrective action plan section of the report.
FINDING NO: 2023-006 (Repeat Finding 2022-018) STATE AGENCY: Oklahoma Department of Human Services FEDERAL AGENCY: Department of Health and Human Services ALN: 93.658 FEDERAL PROGRAM NAME: Foster Care – Title IV-E FEDERAL AWARD NUMBER: 2201OKFOST and 2301OKFOST FEDERAL AWARD YEAR: 2022 and 2023 CONTROL CATEGORY: Subrecipient Monitoring QUESTIONED COSTS: $0 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, “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: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal award identification. (i) Subrecipient name (which must match the name associated with its unique entity identifier); (ii) Subrecipient's unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency; (v) Subaward Period of Performance Start and End Date; (vi) Subaward Budget Period Start and End Date; (vii) Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; (x) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; (xii) Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; (xiii) Identification of whether the award is R&D; and (xiv) Indirect cost rate for the Federal award (including if the de minimis rate is charged) per § 200.414. (2) All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award; (b) 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 and Context: We tested 10 of the 10 subrecipient contracts and we noted the following exceptions: • Two of ten (20%) subawards, did not contain the subrecipient’s unique entity identifier, federal award identification number, and federal award date. • One of 10 (10%) subawards, did not include the period of performance in the subaward contract. • One of 10 (10%) subawards, did not include the AL# on the contract. • Ten of ten (100%) subawards did not include the indirect cost rate, or if the indirect cost rate was federally recognized. • Ten of Ten (100%) subawards, did not contain all the information required in accordance with 2CFR section 200.332(a) (1) & (2). For a sample of 2 of the 10 subrecipients, management confirmed the subrecipient risk assessments were not completed until after the end of the fiscal year and thus were not utilized to determine the appropriate subrecipient monitoring to be performed during the fiscal year for those subrecipients. Cause: This is a prior audit finding dating back to SFY2017; DHS Management showed some corrective action has been implemented to address identifying the award and applicable requirements or monitoring as required in 2 CFR 200.332. Management does not properly understand the program requirements. Effect: OKDHS is not in compliance with the monitoring requirements for this program. Therefore, subrecipients may not be spending federal funds in accordance with program requirements. Recommendation: We recommend OKDHS further modify its subrecipient agreements and related documentation to ensure all required award identification is provided. Additionally, we recommend OKDHS perform risk assessments on all subrecipients at the start of the fiscal year to determine the level of monitoring necessary. Views of Responsible Official(s) Contact Person: Kevin Haddock Anticipated Completion Date: February 2025 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: During audit work, program personnel informed SAI staff, that risk assessments are completed at the fiscal year end when they have final draw amounts. There is no date on the risk assessment so we had to rely on the information provided by program personnel.
FINDING NO: 2023-006 (Repeat Finding 2022-018) STATE AGENCY: Oklahoma Department of Human Services FEDERAL AGENCY: Department of Health and Human Services ALN: 93.658 FEDERAL PROGRAM NAME: Foster Care – Title IV-E FEDERAL AWARD NUMBER: 2201OKFOST and 2301OKFOST FEDERAL AWARD YEAR: 2022 and 2023 CONTROL CATEGORY: Subrecipient Monitoring QUESTIONED COSTS: $0 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, “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: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal award identification. (i) Subrecipient name (which must match the name associated with its unique entity identifier); (ii) Subrecipient's unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency; (v) Subaward Period of Performance Start and End Date; (vi) Subaward Budget Period Start and End Date; (vii) Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; (x) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; (xii) Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; (xiii) Identification of whether the award is R&D; and (xiv) Indirect cost rate for the Federal award (including if the de minimis rate is charged) per § 200.414. (2) All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award; (b) 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 and Context: We tested 10 of the 10 subrecipient contracts and we noted the following exceptions: • Two of ten (20%) subawards, did not contain the subrecipient’s unique entity identifier, federal award identification number, and federal award date. • One of 10 (10%) subawards, did not include the period of performance in the subaward contract. • One of 10 (10%) subawards, did not include the AL# on the contract. • Ten of ten (100%) subawards did not include the indirect cost rate, or if the indirect cost rate was federally recognized. • Ten of Ten (100%) subawards, did not contain all the information required in accordance with 2CFR section 200.332(a) (1) & (2). For a sample of 2 of the 10 subrecipients, management confirmed the subrecipient risk assessments were not completed until after the end of the fiscal year and thus were not utilized to determine the appropriate subrecipient monitoring to be performed during the fiscal year for those subrecipients. Cause: This is a prior audit finding dating back to SFY2017; DHS Management showed some corrective action has been implemented to address identifying the award and applicable requirements or monitoring as required in 2 CFR 200.332. Management does not properly understand the program requirements. Effect: OKDHS is not in compliance with the monitoring requirements for this program. Therefore, subrecipients may not be spending federal funds in accordance with program requirements. Recommendation: We recommend OKDHS further modify its subrecipient agreements and related documentation to ensure all required award identification is provided. Additionally, we recommend OKDHS perform risk assessments on all subrecipients at the start of the fiscal year to determine the level of monitoring necessary. Views of Responsible Official(s) Contact Person: Kevin Haddock Anticipated Completion Date: February 2025 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: During audit work, program personnel informed SAI staff, that risk assessments are completed at the fiscal year end when they have final draw amounts. There is no date on the risk assessment so we had to rely on the information provided by program personnel.
FINDING NO: 2023-006 (Repeat Finding 2022-018) STATE AGENCY: Oklahoma Department of Human Services FEDERAL AGENCY: Department of Health and Human Services ALN: 93.658 FEDERAL PROGRAM NAME: Foster Care – Title IV-E FEDERAL AWARD NUMBER: 2201OKFOST and 2301OKFOST FEDERAL AWARD YEAR: 2022 and 2023 CONTROL CATEGORY: Subrecipient Monitoring QUESTIONED COSTS: $0 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, “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: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal award identification. (i) Subrecipient name (which must match the name associated with its unique entity identifier); (ii) Subrecipient's unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency; (v) Subaward Period of Performance Start and End Date; (vi) Subaward Budget Period Start and End Date; (vii) Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; (x) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; (xii) Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; (xiii) Identification of whether the award is R&D; and (xiv) Indirect cost rate for the Federal award (including if the de minimis rate is charged) per § 200.414. (2) All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award; (b) 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 and Context: We tested 10 of the 10 subrecipient contracts and we noted the following exceptions: • Two of ten (20%) subawards, did not contain the subrecipient’s unique entity identifier, federal award identification number, and federal award date. • One of 10 (10%) subawards, did not include the period of performance in the subaward contract. • One of 10 (10%) subawards, did not include the AL# on the contract. • Ten of ten (100%) subawards did not include the indirect cost rate, or if the indirect cost rate was federally recognized. • Ten of Ten (100%) subawards, did not contain all the information required in accordance with 2CFR section 200.332(a) (1) & (2). For a sample of 2 of the 10 subrecipients, management confirmed the subrecipient risk assessments were not completed until after the end of the fiscal year and thus were not utilized to determine the appropriate subrecipient monitoring to be performed during the fiscal year for those subrecipients. Cause: This is a prior audit finding dating back to SFY2017; DHS Management showed some corrective action has been implemented to address identifying the award and applicable requirements or monitoring as required in 2 CFR 200.332. Management does not properly understand the program requirements. Effect: OKDHS is not in compliance with the monitoring requirements for this program. Therefore, subrecipients may not be spending federal funds in accordance with program requirements. Recommendation: We recommend OKDHS further modify its subrecipient agreements and related documentation to ensure all required award identification is provided. Additionally, we recommend OKDHS perform risk assessments on all subrecipients at the start of the fiscal year to determine the level of monitoring necessary. Views of Responsible Official(s) Contact Person: Kevin Haddock Anticipated Completion Date: February 2025 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: During audit work, program personnel informed SAI staff, that risk assessments are completed at the fiscal year end when they have final draw amounts. There is no date on the risk assessment so we had to rely on the information provided by program personnel.
ALLOWABLE COSTS/COST PRINCIPLES - INDIRECT COSTS Finding Type: Significant Deficiency in Internal Controls over Compliance, Noncompliance ALN/CSFA and Program Title: 93.658 – Foster Care - Title IV-E, 93.676, Unaccompanied Alien Children Program, 60.074 – Out-of-Home Supports Federal/State Agency: U.S. Department of Health and Human Services, Florida Department of Children and Families 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.; Families First Network, 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, PCM776, N/A (Emergency Shelter), 90ZU0362 (direct), 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 nonfederal 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: More indirect costs may have been charged to the programs than were allowable. 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 57.
Federal Agency: United States Department of Housing and Urban Development Federal Program: CDBG – Disaster Recovery Grants – Pub. L. No. 113-2 Cluster (14.269, 14.272) Federal Award Number: B13DS360001 Federal Award Years: 2013 State Agency: Housing Trust Fund Corporation and Governor’s Office of Storm Recovery Reference: 2023-006 Criteria Special Reporting for Federal Funding Accountability and Transparency Act Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252, herein referred to as the "Transparency Act" that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Aspects of the Transparency Act that relate to subaward reporting (1) under grants and cooperative agreements were implemented in OMB in 2 CFR Part 170 and (2) under contracts, by the regulatory agencies responsible for the Federal Acquisition Regulation (FAR at 5 FR 39414 et seq., July 8, 2010). The requirements pertain to recipients (i.e., direct recipients) of grants or cooperative agreements who make first-tier subawards and contractors (i.e., prime contractors) that award first-tier subcontracts. Title 2 U.S. Code of Federal Regulations Part 200 (2 CFR 200) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, section 200.1 defines Subaward as an award provided by a pass-through entity to a subrecipient for the subrecipient to carry out part of a federal award received by the pass-through entity. It does not include payments to a contractor or payments to an individual that is a beneficiary of a federal program. A subaward may be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract. Further, 2 CFR 200.1 defines Subrecipient as a non-federal entity that receives a subaward from a passthrough entity to carry out part of a federal program; but does not include an individual that is a beneficiary of such program. A subrecipient may also be a recipient of other federal awards directly from a federal awarding agency. 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 statues, 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 Housing Trust Fund Corporation (HTFC) did not report awards granted to subrecipients for the CDBG – Disaster Recovery Grants program for the period April 2022 through March 2023 as required by FFATA. FFATA requires the State to report certain identifying information related to awards made to subrecipients in amounts greater than or equal to $30,000. Of the information to be reported, the following key data elements are required to be audited: 1. Subawardee name 2. Subawardee DUNS number 3. Amount of subaward 4. Subaward obligation/action date 5. Date of report submission 6. Subaward number 7. Subaward project description 8. Subawardee names and compensation of highly compensated officers During our testing, we noted that HTFC did not establish control procedures to submit FFATA reports for all subawards as required by federal regulations. During our testwork of 7 subawards and 6 amendments, we noted the following exceptions: *For the 5 of 7 sampled subawards, the subaward amounts of $191,367,261 were incorrectly reported in FSRS as $7,757,484,755. **For one of the 7 sampled subawards the obligation date did not agree to FSRS and 7 of 7 subawards were missing the date of report submission (key data element). Cause The condition found was due to HTFC not reporting any amounts passed-through to subrecipients for the period April 2022 – March 2023 because the responsibility for FFATA reporting was not transferred between employees. Possible Asserted Effect Failure to submit all subaward amounts passed-through to subrecipients and subcontractors under subawards as defined by 2 CFR 200.1 in HTFC’s FFATA reporting could result in HTFC reporting inaccurate and incomplete amounts to the federal government. Questioned Costs None Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend that HTFC review and enhance its policies, procedures, and internal controls to ensure that all amounts passed-through to subrecipients and subcontractors under subawards as defined in 2 CFR 200.1 are reported in accordance with the FFATA federal regulations. In addition, we recommend that HTFC use obligation date for FFATA reporting.
Federal Agency: United States Department of Housing and Urban Development Federal Program: CDBG – Disaster Recovery Grants – Pub. L. No. 113-2 Cluster (14.269, 14.272) Federal Award Number: B13DS360001 Federal Award Years: 2013 State Agency: Housing Trust Fund Corporation and Governor’s Office of Storm Recovery Reference: 2023-006 Criteria Special Reporting for Federal Funding Accountability and Transparency Act Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252, herein referred to as the "Transparency Act" that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Aspects of the Transparency Act that relate to subaward reporting (1) under grants and cooperative agreements were implemented in OMB in 2 CFR Part 170 and (2) under contracts, by the regulatory agencies responsible for the Federal Acquisition Regulation (FAR at 5 FR 39414 et seq., July 8, 2010). The requirements pertain to recipients (i.e., direct recipients) of grants or cooperative agreements who make first-tier subawards and contractors (i.e., prime contractors) that award first-tier subcontracts. Title 2 U.S. Code of Federal Regulations Part 200 (2 CFR 200) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, section 200.1 defines Subaward as an award provided by a pass-through entity to a subrecipient for the subrecipient to carry out part of a federal award received by the pass-through entity. It does not include payments to a contractor or payments to an individual that is a beneficiary of a federal program. A subaward may be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract. Further, 2 CFR 200.1 defines Subrecipient as a non-federal entity that receives a subaward from a passthrough entity to carry out part of a federal program; but does not include an individual that is a beneficiary of such program. A subrecipient may also be a recipient of other federal awards directly from a federal awarding agency. 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 statues, 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 Housing Trust Fund Corporation (HTFC) did not report awards granted to subrecipients for the CDBG – Disaster Recovery Grants program for the period April 2022 through March 2023 as required by FFATA. FFATA requires the State to report certain identifying information related to awards made to subrecipients in amounts greater than or equal to $30,000. Of the information to be reported, the following key data elements are required to be audited: 1. Subawardee name 2. Subawardee DUNS number 3. Amount of subaward 4. Subaward obligation/action date 5. Date of report submission 6. Subaward number 7. Subaward project description 8. Subawardee names and compensation of highly compensated officers During our testing, we noted that HTFC did not establish control procedures to submit FFATA reports for all subawards as required by federal regulations. During our testwork of 7 subawards and 6 amendments, we noted the following exceptions: *For the 5 of 7 sampled subawards, the subaward amounts of $191,367,261 were incorrectly reported in FSRS as $7,757,484,755. **For one of the 7 sampled subawards the obligation date did not agree to FSRS and 7 of 7 subawards were missing the date of report submission (key data element). Cause The condition found was due to HTFC not reporting any amounts passed-through to subrecipients for the period April 2022 – March 2023 because the responsibility for FFATA reporting was not transferred between employees. Possible Asserted Effect Failure to submit all subaward amounts passed-through to subrecipients and subcontractors under subawards as defined by 2 CFR 200.1 in HTFC’s FFATA reporting could result in HTFC reporting inaccurate and incomplete amounts to the federal government. Questioned Costs None Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend that HTFC review and enhance its policies, procedures, and internal controls to ensure that all amounts passed-through to subrecipients and subcontractors under subawards as defined in 2 CFR 200.1 are reported in accordance with the FFATA federal regulations. In addition, we recommend that HTFC use obligation date for FFATA reporting.
Federal Agency: United States Department of Housing and Urban Development Federal Program: CDBG – Disaster Recovery Grants – Pub. L. No. 113-2 Cluster (14.269, 14.272) Federal Award Number: B13DS360001 Federal Award Years: 2013 State Agency: Housing Trust Fund Corporation and Governor’s Office of Storm Recovery Reference: 2023-006 Criteria Special Reporting for Federal Funding Accountability and Transparency Act Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252, herein referred to as the "Transparency Act" that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Aspects of the Transparency Act that relate to subaward reporting (1) under grants and cooperative agreements were implemented in OMB in 2 CFR Part 170 and (2) under contracts, by the regulatory agencies responsible for the Federal Acquisition Regulation (FAR at 5 FR 39414 et seq., July 8, 2010). The requirements pertain to recipients (i.e., direct recipients) of grants or cooperative agreements who make first-tier subawards and contractors (i.e., prime contractors) that award first-tier subcontracts. Title 2 U.S. Code of Federal Regulations Part 200 (2 CFR 200) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, section 200.1 defines Subaward as an award provided by a pass-through entity to a subrecipient for the subrecipient to carry out part of a federal award received by the pass-through entity. It does not include payments to a contractor or payments to an individual that is a beneficiary of a federal program. A subaward may be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract. Further, 2 CFR 200.1 defines Subrecipient as a non-federal entity that receives a subaward from a passthrough entity to carry out part of a federal program; but does not include an individual that is a beneficiary of such program. A subrecipient may also be a recipient of other federal awards directly from a federal awarding agency. 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 statues, 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 Housing Trust Fund Corporation (HTFC) did not report awards granted to subrecipients for the CDBG – Disaster Recovery Grants program for the period April 2022 through March 2023 as required by FFATA. FFATA requires the State to report certain identifying information related to awards made to subrecipients in amounts greater than or equal to $30,000. Of the information to be reported, the following key data elements are required to be audited: 1. Subawardee name 2. Subawardee DUNS number 3. Amount of subaward 4. Subaward obligation/action date 5. Date of report submission 6. Subaward number 7. Subaward project description 8. Subawardee names and compensation of highly compensated officers During our testing, we noted that HTFC did not establish control procedures to submit FFATA reports for all subawards as required by federal regulations. During our testwork of 7 subawards and 6 amendments, we noted the following exceptions: *For the 5 of 7 sampled subawards, the subaward amounts of $191,367,261 were incorrectly reported in FSRS as $7,757,484,755. **For one of the 7 sampled subawards the obligation date did not agree to FSRS and 7 of 7 subawards were missing the date of report submission (key data element). Cause The condition found was due to HTFC not reporting any amounts passed-through to subrecipients for the period April 2022 – March 2023 because the responsibility for FFATA reporting was not transferred between employees. Possible Asserted Effect Failure to submit all subaward amounts passed-through to subrecipients and subcontractors under subawards as defined by 2 CFR 200.1 in HTFC’s FFATA reporting could result in HTFC reporting inaccurate and incomplete amounts to the federal government. Questioned Costs None Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend that HTFC review and enhance its policies, procedures, and internal controls to ensure that all amounts passed-through to subrecipients and subcontractors under subawards as defined in 2 CFR 200.1 are reported in accordance with the FFATA federal regulations. In addition, we recommend that HTFC use obligation date for FFATA reporting.
Federal Agency: United States Department of Housing and Urban Development Federal Program: CDBG – Disaster Recovery Grants – Pub. L. No. 113-2 Cluster (14.269, 14.272) Federal Award Number: B13DS360001 Federal Award Years: 2013 State Agency: Housing Trust Fund Corporation and Governor’s Office of Storm Recovery Reference: 2023-006 Criteria Special Reporting for Federal Funding Accountability and Transparency Act Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252, herein referred to as the "Transparency Act" that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Aspects of the Transparency Act that relate to subaward reporting (1) under grants and cooperative agreements were implemented in OMB in 2 CFR Part 170 and (2) under contracts, by the regulatory agencies responsible for the Federal Acquisition Regulation (FAR at 5 FR 39414 et seq., July 8, 2010). The requirements pertain to recipients (i.e., direct recipients) of grants or cooperative agreements who make first-tier subawards and contractors (i.e., prime contractors) that award first-tier subcontracts. Title 2 U.S. Code of Federal Regulations Part 200 (2 CFR 200) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, section 200.1 defines Subaward as an award provided by a pass-through entity to a subrecipient for the subrecipient to carry out part of a federal award received by the pass-through entity. It does not include payments to a contractor or payments to an individual that is a beneficiary of a federal program. A subaward may be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract. Further, 2 CFR 200.1 defines Subrecipient as a non-federal entity that receives a subaward from a passthrough entity to carry out part of a federal program; but does not include an individual that is a beneficiary of such program. A subrecipient may also be a recipient of other federal awards directly from a federal awarding agency. 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 statues, 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 Housing Trust Fund Corporation (HTFC) did not report awards granted to subrecipients for the CDBG – Disaster Recovery Grants program for the period April 2022 through March 2023 as required by FFATA. FFATA requires the State to report certain identifying information related to awards made to subrecipients in amounts greater than or equal to $30,000. Of the information to be reported, the following key data elements are required to be audited: 1. Subawardee name 2. Subawardee DUNS number 3. Amount of subaward 4. Subaward obligation/action date 5. Date of report submission 6. Subaward number 7. Subaward project description 8. Subawardee names and compensation of highly compensated officers During our testing, we noted that HTFC did not establish control procedures to submit FFATA reports for all subawards as required by federal regulations. During our testwork of 7 subawards and 6 amendments, we noted the following exceptions: *For the 5 of 7 sampled subawards, the subaward amounts of $191,367,261 were incorrectly reported in FSRS as $7,757,484,755. **For one of the 7 sampled subawards the obligation date did not agree to FSRS and 7 of 7 subawards were missing the date of report submission (key data element). Cause The condition found was due to HTFC not reporting any amounts passed-through to subrecipients for the period April 2022 – March 2023 because the responsibility for FFATA reporting was not transferred between employees. Possible Asserted Effect Failure to submit all subaward amounts passed-through to subrecipients and subcontractors under subawards as defined by 2 CFR 200.1 in HTFC’s FFATA reporting could result in HTFC reporting inaccurate and incomplete amounts to the federal government. Questioned Costs None Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend that HTFC review and enhance its policies, procedures, and internal controls to ensure that all amounts passed-through to subrecipients and subcontractors under subawards as defined in 2 CFR 200.1 are reported in accordance with the FFATA federal regulations. In addition, we recommend that HTFC use obligation date for FFATA reporting.
2 CFR § 1000 gives regulatory effect to the Department of the Treasury for 2 CFR Part 200. 2 CFR § 200.1 states, in part, that the term “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. 2 CFR § 200.211(b)(5) states, in part, that the Federal awarding agency must include the following general Federal award information in each Federal award the Period of Performance Start and End Date. The period of performance for the award under the Coronavirus State and Local Fiscal Recovery begins on the date the awards are issued (i.e., the date funds are disbursed to recipients) and ends on December 31, 2026. Recipients may only use funds to cover costs incurred after March 3, 2021, and ending on December 31, 2024. Recipients must liquidate all obligations incurred by December 31, 2024, under the award no later than December 31, 2026, which is the end of the period of performance. 2021 Treasury SLFRF Compliance Supplement Addendum 1, 21.027; 2022 OMB Compliance Supplement, Part 4, 21.027. The County reimbursed payroll for all of fiscal year 2021 General Fund gross wages, using Coronavirus State and Local Fiscal Recovery funds, which included pay dates prior to March 3, 2021. The total gross wages reimbursed prior to March 3, 2021, was $993,575. Expenditures paid from federal funds outside the period of performance could result in federal questioned costs and follow-up action taken by the grantor agency, which may result in loss of future federal funding. The County should establish and implement procedures to verify that only expenditures incurred during the period of performance are charged to federal awards. Noncompliance with grant requirements could have an adverse effect on future grant awards by the awarding agency in addition to an inaccurate assessment of major federal programs that would be subjected to audit. County management should review all grant award documents in order to execute policies and procedures which help ensure compliance with grant requirements, including Schedule reporting requirements. The County should implement a system to track all federal expenditures and related information separately from other expenditures and report federal expenditures with proper support including, but not limited to, grant agreements, calculation of the expenditures, and any federal reporting requirements. This will help ensure the County is in compliance with grant requirements, the Schedule is complete and accurate, and major federal programs are accurately identified for audit.
2 C.F.R. Subpart F 200.510(b) requires that the auditee prepare a Schedule of Expenditures of Federal Awards (the Schedule) for the period covered by the County's financial statements which must include the total federal awards expended as determined in accordance with 200.502. At a minimum, the schedule must: (1) List individual Federal programs by Federal Agency (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in 200.502 Basis for determining Federal awards expended, paragraph (b), identify in the notes to the schedule the balances outstanding at the end of the audit period. (6) Include notes that describe the significant accounting policies used in preparing the schedule, and note whether or not the auditee has elected to use the 10 percent de minimis cost rate as covered in 200.414 Indirect (F&A) costs. 2 CFR Part 170 "subaward" has the meaning given in 2 CFR 200.1 and 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. The County's Federal Schedule had the following error: Funds provided to subrecipients for the Coronavirus State and Local Fiscal Recovery Funds (AL 21.027) were understated by $3,000,000. Errors and omissions to the Schedule of Expenditures of Federal Awards could adversely affect future grant awards in addition to causing an inaccurate assessment of major federal programs that would be subjected to audit. Adjustments, to which management have agreed, are reflected in the accompanying Schedule. County management should review all grant and loan awards and be familiar with federal reporting requirements. The County should implement a system to track all federal expenditures and related information separately from other expenditures and report federal expenditures with proper support including, but not limited to, grant agreements, calculation of the expenditures, and any federal reporting requirements. This may help ensure the Schedule is complete and accurate and major federal programs are correctly identified for audit.
FINDING 2022-004 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): 2022 Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context The County had not properly implemented a system of internal controls, which would include appropriate segregation of duties that would likely be effective in preventing, or detecting and correcting, noncompliance. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the 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 Coronavirus State and Local Fiscal Recovery Funds (SLFRF) funding. 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. The County Auditor prepared and submitted the P&E report and the Deputy County Auditor observed. However, there is no documentation of the review or oversight process in place. In addition, the P&E report submitted was not properly supported by the County's records. The County incorrectly reported the amounts approved to be spent from the grant proceeds, $550,000, instead of the actual expenditures of $219,719 spent during the reporting period. 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 compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. . . ." 31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds, . . ." Cause A proper system of internal controls was not implemented by management of the County, 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 County's management 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, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the 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 that would provide a segregation of duties for the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the 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 2022-002 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Reporting Federal Agency: U.S. Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number or Year (or Other Identifying Number): ARP Act Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context The City had not properly designed or implemented a system of internal controls that would likely be effective in preventing, or detecting and correcting, noncompliance. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) Reports to the Department of 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 State and Local Fiscal Recovery Funds. 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 City submitted four quarterly P&E reports during the audit period. The reports were prepared by one knowledgeable employee and reviewed and submitted by another employee; however, the review process in place was not effective to prevent, or detect and correct, errors. Of the four reports filed, two reports were selected for testing. The two reports tested were the quarterly reports due on July 31, 2022, and October 31, 2022. Errors noted on the reports were as follows: Project and Expenditure Report: July 31, 2022: The report was not mathematically accurate and complete, nor was it supported by the unit's records. Additionally, data accumulated and summarized was not accurate and complete including information to support key line items. Of the four projects reported by the City the current period obligation was overstated for all four. The current period obligation was based on a budgeted amount per Resolution instead of an amount for the current period. In addition, the current period expenditures were incorrect for three of the four projects and the cumulative expenditures were incorrect for two of the four projects. Project and Expenditure Report: October 31, 2022: The report was not mathematically accurate and complete, nor was it supported by the unit's records. Additionally, data accumulated and summarized was not accurate and complete including information to support key line items. Of the five projects reported by the City the current period obligation one was overstated as it was based on a budgeted amount per Resolution instead of an amount for the current period and three were understated. In addition, the current period expenditures were incorrect for four of the five projects, and the cumulative expenditures were incorrect for two of the five projects. The lack of internal controls and noncompliance was systemic 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). . . ." 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. . . . (Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance) 31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds . . ." Cause A proper system of internal controls over the P&E report was not designed by management of the City. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management of what should be done to effect internal 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. 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 ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the City provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-004 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): FY22 Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context The City had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties that would likely be effective in preventing, or detecting and correcting, noncompliance. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the 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 had a population below 250,000 residents that received an allocation of less 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 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, a single employee prepared and submitted the P&E report without evidence of a review or oversight process in place to prevent, or detect and correct, errors. INDIANA STATE BOARD OF ACCOUNTS 20 CITY OF SULLIVAN SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The P&E report was not completed or supported by the City's ledger. The City's ledgers have expenses for projects of $65,282 as of March 31, 2022. However, the City's report had all zeros and no projects in the Project Overview Section. Additionally, as the report was zeros, there was no information input for the key line items of current period obligations, cumulative obligations, current period expenditures, or cumulative expenditures even though expenses occurred. 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 compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. . . ." 31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds." Cause A proper system of internal controls over the P&E report was not designed by management of the City, which would include segregation of key functions to ensure the City provided the Treasury with complete and accurate information related to the SLFRF awards. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management 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, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the City. INDIANA STATE BOARD OF ACCOUNTS 21 CITY OF SULLIVAN SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 a segregation of duties for the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the City provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-004 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): FY22 Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context The City had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties that would likely be effective in preventing, or detecting and correcting, noncompliance. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the 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 had a population below 250,000 residents that received an allocation of less 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 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, a single employee prepared and submitted the P&E report without evidence of a review or oversight process in place to prevent, or detect and correct, errors. INDIANA STATE BOARD OF ACCOUNTS 20 CITY OF SULLIVAN SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The P&E report was not completed or supported by the City's ledger. The City's ledgers have expenses for projects of $65,282 as of March 31, 2022. However, the City's report had all zeros and no projects in the Project Overview Section. Additionally, as the report was zeros, there was no information input for the key line items of current period obligations, cumulative obligations, current period expenditures, or cumulative expenditures even though expenses occurred. 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 compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. . . ." 31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds." Cause A proper system of internal controls over the P&E report was not designed by management of the City, which would include segregation of key functions to ensure the City provided the Treasury with complete and accurate information related to the SLFRF awards. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management 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, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the City. INDIANA STATE BOARD OF ACCOUNTS 21 CITY OF SULLIVAN SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 a segregation of duties for the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the City provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-002 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: FY2022 Compliance Requirement: Reporting Audit Findings: Significant Deficiency, Other Matters Condition and Context The County had not established an effective system of internal controls that would likely be effective in preventing, or detecting and correcting, noncompliance. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the 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 funding. 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. The Chief Deputy County Auditor was responsible for preparing and submitting the P&E report and the County Auditor reviewed and approved the report prior to submission; however, the review process in place was not effective and did not prevent, or detect and correct, errors. Due to the lack of effective internal controls one expenditure dated March 30, 2022, in the amount of $47,363 was omitted. 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 compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. . . ." 35 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds, . . ." Cause A proper system of internal controls over the P&E report was not designed by management of the County. 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 control, 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. 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 that would ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the County provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-005 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): FY2021 Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context The County had not properly designed a system of internal controls that would be effective in preventing, or detecting and correcting, noncompliance. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the 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 Tier 2 (Metropolitan cities and counties with a population below 250,000 residents which received more than $10 million in Coronavirus State and Local Fiscal Recovery Funds (SLFRF)) recipient. 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 were to cover one calendar quarter and must be submitted to the Treasury by the last day of the month following the end of the period covered. The County submitted four P&E reports during the audit period; however, the errors as identified below were noted on all four reports. Quarterly Report: March 3, 2021 to December 31, 2021 Current period expenditures were reported as $0 for all 44 projects identified in the report. However, 3 projects had current year expenditures. Quarterly Report: January 1, 2022 to March 31, 2022 Current period expenditures were reported as $0 for all 22 projects identified in the report. However, 5 projects had current year expenditures. In addition, 1 project reported total cumulative expenditures when in fact no expenditures had yet occurred. Quarterly Report: April 1, 2022 to June 30, 2022 Current period expenditures were reported as $0 for 20 of 22 projects identified in the report. However, 1 project, had current year expenditures. In addition, 1 project reported total cumulative expenditures when in fact no expenditures had yet occurred. Quarterly Report: July 1, 2022 to September 30, 2022 Current period expenditures were reported as $0 for 5 projects identified in the report. However, the 5 projects had current period expenditures. In addition, 5 projects identified in the report reported current period expenditures when in fact no expenditures had occurred in the reporting period. Finally total cumulative expenditures for 1 project could not be traced to the County's ledger. 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). . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, states in part: "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, compliance financial data, in accordance with appropriate accounting standards and principles. . . ." 31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds, . . ." Cause A proper system of internal controls over P&E reports was not implemented by the management of the County 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 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, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the 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 that would provide a segregation of duties for the preparation and review of federal reports to ensure appropriate reviews, approvals and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the 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 2022-003 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Reporting Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): FY 2022 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 2021-003. Condition and Context The County had not properly designed a system of internal controls that would be effective in preventing, or detecting and correcting, noncompliance. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the 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 Tier 5 (Metropolitan cities and counties with a population below 250,000 residents which received less than $10 million in Coronavirus State and Local Fiscal Recovery Funds) recipient. As such, the initial P&E report, covering from March 3, 2021 to March 31, 2022, was required to be submitted to the Treasury by April 30, 2022. The subsequent annual reports were to cover one calendar year and must be submitted to the Treasury by April 30. The County submitted one annual P&E report during the audit period. The report was prepared by the County Auditor and reviewed and certified by a designated County Commissioner; however, the review process in place was not effective and did not prevent or detect and correct errors. As a result, $0 was reported as the current expenditures and current obligations, when in fact there were current expenditures and current obligations of $639,824. 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 compiling and reporting accurate, compliance 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 accounting of the uses of funds, . . ." Cause A proper system of internal controls over the P&E report was not designed by management of the County. 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. 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 State and Local Fiscal Recovery Funds 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 that would ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the County provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-004 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 The County had not established a system of internal controls that would likely be effective in preventing, or detecting and correcting, noncompliance. Recipients are required to submit quarterly or annual Project and Expenditure (P&E) reports to the 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. 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 the P&E report by April 30, 2022, as required; however, the report was not mathematically accurate and complete, nor was it supported by the unit's records. Additionally, data accumulated and summarized was not accurate and complete. The key line items of "Cumulative Expenditures" and "Current Period Expenditures" as reported on the P&E report did not agree to the County's ledger. The amounts reported for the two key line items noted were understated as not all activity for the reporting period was properly included. 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). . . ." 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. . . . (Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance) 31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds." Cause A proper system of internal controls over the P&E report was not designed by management of the County. 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 view of what should be done to effect internal control, 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. 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 State and Local Fiscal Recovery Funds 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 establish a proper system of internal controls including strengthening its 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 2022-004 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): CY 2021 Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context The City had not properly designed or implemented a system of internal controls that would likely be effective in preventing, or detecting and correcting, noncompliance. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the 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 State and Local Fiscal Recovery Funds (SLFRF). As such, the initial P&E report, covering the 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 City submitted four P&E reports during the audit period; however, a single employee prepared and submitted each P&E report without a review or oversight process in place to prevent, or detect and correct, errors. All four of the quarterly reports filed during the audit period were selected for testing. The report due October 31, 2022, incorrectly reported the subrecipient key line item. A vendor was reported as a subrecipient, but should not have been classified as such. The lack of internal controls and the 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: " . . . Reporting. All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. . . ." 31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds, . . ." Cause A proper system of internal controls over the P&E report was not designed by management of the City. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management of what should be done to effect internal 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. 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 ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the City provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-004 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, Modified Opinion Condition and Context The County 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. A single employee prepared and submitted reports without a 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. 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 County submitted three P&E reports during the audit period as no expenditures existed for the period of October 1, 2021 to December 31, 2021, and, therefore, the County did not submit a report for that period. For the three reports submitted, 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, 2022 to March 31, 2022) 1. Total Cumulative Obligations and Total Cumulative Expenditures were overstated by $500,000. 2. Current Period Obligations and Current Period Expenditures were understated by $1,850,000. Quarter 2 report (April 1, 2022 to June 30, 2022) 1. Total Cumulative Obligations and Total Cumulative Expenditures were understated by $144. 2. Current Period Obligations and Current Period Expenditures were overstated by $1,849,856. Quarter 3 report (July 1, 2022 to September 30, 2022) 1. Total Cumulative Obligations and Total Cumulative Expenditures were understated by $316,080. 2. Current Period Obligations and Current Period Expenditures were overstated by $2,159,064. 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 compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. . . ." 31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds, . . ." Cause A proper system of internal controls over the P&E reports was not designed by management of the County. 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. 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 that would ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the County provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-005 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 2022 Compliance Requirement: Subrecipient Monitoring Audit Findings: Material Weakness, Modified Opinion 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: 1. Identify the award and the applicable requirements to each subrecipient. 2. Evaluate each subrecipient's risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward. 3. Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purpose, complies with the terms and conditions of the subaward, and achieves performance goals. Subawards, totaling $2,503,400, were provided to four different entities. Three of the subrecipient agreements associated with the subawards were selected for testing. For the three agreements tested, the following information was incomplete or missing: 1. The subrecipients unique entity identifier. 2. The federal award identification number (FAIN). 3. The federal award date of award to the recipient by the federal agency. 4. The name of the federal awarding agency, pass-through entity (auditee), and contact information for awarding official of the pass-through entity (auditee). 5. 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 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 200.331(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; (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. (iii) 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 management of the County was not properly designed, nor implemented. 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. The County was responsible for providing a subaward agreement, with all required elements, and monitoring the non-profit. 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 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.
2022-002 ? CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS ? NONCOMPLIANCE WITH SUBRECIPIENT GRANT AGREEMENT REQUIREMENTS ? ALN 21.027 ? OTHER NONCOMPLIANCE FINDING TYPE: Other Noncompliance Finding 2022-002 Federal Program: Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Federal Award Number(s) and Year(s): SLFRP1964, 2022 Federal Agency: U.S. Department of Treasury Questioned Cost: $0 Condition Burleigh County did not communicate and document all of the elements as outlined in 2 CFR 200.332(a) for the subrecipients of the Coronavirus State and Local Fiscal Recovery Funds program. During testing, we noted the following elements were not included: ? subrecipient's unique entity identifier ? federal award identification number ? federal award date (see definition of Federal award date ? 200.1) of award to the recipient by the Federal agency ? subaward period of performance start and end date ? name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity ? Assistance Listings number and Title ? identification of whether the award is Research and Development ? indirect cost rate for the Federal award (including if the de minimis rate is charged) per ?200.414 ? 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 appropriate terms and conditions concerning closeout of the subaward Effect Burleigh County did not comply with all elements of 2 CFR 200.332(a). Therefore, subrecipients may not have been aware of all necessary grant information and requirements. Cause Burleigh County was not aware of the requirements set forth in 2 CFR 200.332(a) that needed to be included in the grant agreements. Criteria 31 U.S.C 7502(f)(2)(A) states that each pass-through entity shall provide subrecipient the Federal requirements which govern the use of such awards. 2 CFR 200.332(a) states the required information that pass-through entities must disclose. This includes information related to federal award identification and period of performance, approved federally recognized indirect cost rate, requirement that the subrecipient allow access to records, and appropriate terms and conditions concerning closeout of the subaward. Repeat Finding Yes. Recommendation We recommend Burleigh County ensure that all elements as outlined in 2 CFR 200.332(a) are communicated and documented to the subrecipients of the Coronavirus State and Local Fiscal Recovery Funds program. Burleigh County?s Response See Corrective Action Plan
FINDING 2022-004 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 The County had not established a system of internal controls that would likely be effective in preventing, or detecting and correcting, noncompliance related to the reporting compliance requirement. 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 received an allocation of less than $10 million in State and Local Fiscal Recovery Funds. As such, the initial P&E report, covering the period from March 3, 2021 to March 31, 2022, was required to be submitted to the Treasury by April 30, 2022. The subsequent annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year. The County submitted the P&E report by April 30, 2022, as required; however, the report was not mathematically accurate and complete, nor was it supported by the County's records. Additionally, data accumulated and summarized was not accurate and complete. The key line items of "Total Cumulative Expenditures" and "Current Period Expenditures" as reported on the P&E report did not agree to the County's ledger. The amount reported for the "Total Cumulative Expenditures" line item was overstated by $5,408,166 due to listing the full amount of obligations instead of cumulative expenditures. The amount reported for the "Current Period Expenditures" was understated by $1,409,585 as not all activity for the reporting period was properly included due to the reported amount not including expenditures for March 3, 2021 to December 31, 2021. 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 compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. . . ." 31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds, . . ." Cause A proper system of internal controls over the reporting compliance requirement was not designed by management of the County. 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 view 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. 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 establish a proper system of internal controls over the Reporting compliance requirement, including strengthening their 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 2022-004 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, Modified Opinion Condition and Context The County had not properly designed or implemented a system of internal control, which would include appropriate segregation of duties that would likely be effective in preventing, or detecting and correcting, noncompliance. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based on the type of recipient and the recipient's population, as well as the recipient's allocation amount. Information to be reported includes projects funded, expenditures, and contracts for the appropriate reporting period. The County was classified as a metropolitan county with a population of below 250,000 residents that received an allocation of less than $10 million in State and Local Fiscal Recovery Funds. As such, the initial P& E report, covering the period from March 3, 2021 to March 31, 2022, was required to be submitted to the Treasury by April 30, 2022. The subsequent annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year. The County submitted one P&E report during the audit period, which we obtained from the Treasury's website; however, a single employee prepared and submitted the P&E report without a review or oversight process in place to prevent, or detect and correct, errors. In addition, the P&E report was not complete or properly supported by the County's records. The County reported no projects for the reporting period; however, the County's expenditures during the reporting period consisted of one project, totaling $311,286, for the support of broadband backbone services in the County. This project should have been reported in the key line items of current period obligations, cumulative obligations, current period expenditures, and cumulative expenditures. The lack of internal controls and noncompliance were isolated to the April 2022 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, . . ." Cause A proper system of internal controls over the P&E report was not designed by management of the County, which would include segregation of key functions to ensure the County provided the Treasury with complete and accurate information related to the SLFRF awards. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the 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, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the 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 that would provide a segregation of duties for the preparation and review of federal reports to ensure appropriate reviews, approvals and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the 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.
Federal Agencies: Department of Health and Human Services Federal Assistance Listing Numbers: 93.110 Program: Maternal and Child Health Federal Consolidated Programs Pass-Through Entity Identifying Numbers: N/A Criteria: The Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR Section 200.414: ?In addition to the procedures outlined in the appendices in paragraph (e) of this section, any non-Federal entity that does not have a current negotiated (including provisional) rate, except for those non-Federal entities described in appendix VII to this part, paragraph D.1.b, may elect to charge a de minimis rate of 10% of modified total direct costs (MTDC) which may be used indefinitely. No documentation is required to justify the 10% de minimis indirect cost rate. As described in ? 200.403, costs must be consistently charged as either indirect or direct costs, but may not be double charged or inconsistently charged as both. If chosen, this methodology once elected must be used consistently for all Federal awards until such time as a non-Federal entity chooses to negotiate for a rate, which the non-Federal entity may apply to do at any time.? As defined by 2 CFR Section 200.1: ?Modified Total Direct Cost (MTDC) means 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.? Condition: We noted that the calculation for indirect costs utilized the incorrect base which was not the MTDC. Context: Safe & Sound utilizes the de minimis indirect rate of 10% of MTDC. The condition was identified in a recalculation of indirect costs based on MTDC for 2022. Cause: Safe & Sound did not have policies and procedures in place to ensure indirect cost rate is calculated based on the appropriate base, MTDC. Effect or Potential Effect: Without adequate controls in place to ensure indirect costs are calculated based on MTDC, Safe & Sound could incorrectly charge expenditures to the federal program, or not request appropriate reimbursement Safe & Sound is entitled to under the terms of the grant. Questioned Costs: Below reporting threshold. Identification as a Repeat Finding: Not Applicable. Recommendation: We recommend that Safe & Sound implement policies and procedures to review indirect cost calculations based on MTDC and provide training to staff. Views of Responsible Officials: Management agrees with the finding. Management will implement policies and procedures to appropriately calculate indirect costs.
2022-002 Material Weakness 93.558 Criteria 2 CFR section 200.303 requires that non-federal entities receiving federal awards establish and maintain internal controls. The objectives of internal control over compliance as found in 2 CFR section 200.1, are to ensure that transactions are properly recorded and accounted for in order to permit the preparation of reliable financial statements and federal reports. Condition As a result of our audit procedures in relation to the audit of the financial statements it was determined that amounts reported in the prior year on the schedule of expenditures of federal awards was understated by $433,027. A restatement of the prior period was required in the financial statements. Context The Organization has experienced high turnover in its fiscal department. Cause Due to turn over in the fiscal department grant claims for reimbursements of expenses incurred in accordance with grant agreements were not submitted timely or recorded in the period the conditions of the grant were met. Effect The Schedule of Expenditures of Federal Awards was materially misstated in the prior year. Recommendations We recommend that documented accounting procedures establish clear guidelines for revenue recognition and that monitoring be performed by management to ensure that grant claims are submitted timely. We also recommend that monthly reconciliations of revenue to expenditures be performed monthly and reviewed by management to ensure that expenditures of federal awards are complete and accurate.
FINDING 2022-004 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 Numbers): FY22 Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context The County had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the 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 had a population below 250,000 residents that received an allocation of less 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 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. The P&E report incorrectly reported amounts granted as subawards. As the County elected to receive the standard revenue loss allowance in which the Treasury determined that there are no subawards, the County should not have reported subawards. Additionally, a review of the County's spending plan, ledgers, and during discussions with the County, it was confirmed no amount was granted as a subaward. 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 compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. . . ." 31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds, . . ." Cause A proper system of internal controls over the P&E report was not designed by management of the County, which would include segregation of key functions to ensure the County provided the Treasury with complete and accurate information related to the SLFRF awards. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the County's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the 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 that would provide a segregation of duties for the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the 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 2022-006 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): FY2022 Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context The County had not properly implemented a system of internal controls, which would include appropriate segregation of duties that would likely be effective in preventing, or detecting and correcting, noncompliance. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the 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 Coronavirus State and Local Fiscal Recovery Funds (SLFRF) funding. 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. A member of the Board of County Commissioners was responsible for the terms and conditions of the grant. The County did not have any policies or procedures to ensure the required report was submitted timely and accurately. As such, the County failed to prepare and submit the P&E report that was due during the audit 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). . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, states in part: ". . . 10. Reporting. All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. . . ." 31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds, . . ." Cause A proper system of internal controls was not implemented by management of the County, 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 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, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the 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 that would provide segregation of duties for the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the County completes and provides to the Treasury the required 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 2022-006 Subject: COVID-19 - Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response - Period of Performance Federal Agency: Department of Health and Human Services Federal Program: COVID-19 - Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response Assistance Listings Number: 93.354 Federal Award Number and Year (or Other Identifying Number): 1NU90TP922179 Pass-Through Entity: Indiana State Department of Health Compliance Requirement: Period of Performance Audit Findings: Material Weakness, Modified Opinion Condition and Context The County had not designed, nor implemented a system of internal controls to ensure grant funds were expended during the grant's period of performance. A grant's period of performance is the time frame during which the grant funds may be expended. The period of performance for the grant was identified in the grant agreement. The County received $220,000 in advance funding for the grant with a period of performance beginning July 1, 2022. The entirety of the grant funds were receipted into the County's Supp PH Workforce GRT 93.354 fund (grant fund); however, the County disbursed $36,150 from the grant fund prior to the start of the grant's period of performance. As the grant did not allow for expenditures prior to the beginning of the period performance and approval from the grantor for the costs was not obtained, the total $36,150 was considered questioned costs. 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 200.1 states in part: ". . . 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. . . ." 2 CFR 200.458 states: "Pre-award costs are those incurred prior to the effective date of the Federal award or subaward directly pursuant to the negotiation and in anticipation of the Federal award where such costs are necessary for efficient and timely performance of the scope of work. Such costs are allowable only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. If charged to the award, these costs must be charged to the initial budget period of the award, unless otherwise specified by the Federal awarding agency or pass-through entity." Cause A proper system of internal controls was not designed by management of the County. 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, expenses were paid outside of the period of performance. 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 Questioned costs of $36,150 were identified as outlined in the Condition and Context. Recommendation We recommended that management of the County establish a proper system of internal controls and develop policies and procedures to ensure all expenditures are within the period of performance or appropriate approval is obtained for pre-award costs. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-006 Subject: CDBG - Entitlement Grants Cluster - Period of Performance Federal Agency: Department of Housing and Urban Development Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listings Number: 14.218 Federal Award Number and Year (or Other Identifying Number): B-22-MC-18-0015 Compliance Requirement: Period of Performance Audit Findings: Material Weakness, Other Matters Condition and Context A non-federal entity may charge to the federal award only allowable costs incurred during the period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity. Grant number B-22-MC-18-0015 had a period of performance which began on July 1, 2022. Two of the four claims tested, or 50 percent, were for services provided prior to the beginning of the period of performance. The City did not receive approval from the federal awarding agency to charge costs incurred before the period of performance to the federal grant. The lack of internal controls and noncompliance were isolated to grant B-22-MC-18-0015. 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 200.1 states in part: ". . . 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. . . ." Cause A proper system of internal controls was not designed by management of the City. 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 internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, costs incurred before the beginning of the period of performance were charged to the grant. 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. 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, including policies and procedures that would provide segregation of duties to ensure costs charged to the grant occur within the proper period of performance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 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 or Year (or Other Identifying Number): CY2021 Compliance Requirement: Subrecipient Monitoring Audit Findings: Material Weakness, Modified Opinion Condition and Context The City received a total State and Local Fiscal Recovery Funds (SLFRF) allocation of $18,042,360. The City enlisted a non-profit, Heart City Health Center, Inc., to assist with public health information and paid them $50,000. The payment was made under the Responding to Public Health and Economic Impacts of COVID-19 eligible use category. Documentation to support the payment included an invoice from the Heart City Health Center, Inc., Board of Works Resolution 21-R-19, and Ordinance 5861. The Board of Works approved Resolution 21-R-19 on December 28, 2021. The resolution states in part, "Heart City Health Center is a separate legal entity from the City of Elkhart and as a separate legal entity, requires the formation of a subrecipient agreement to transfer funds from the City's ARPA Coronavirus State and Local Fiscal Recovery Funds allocation to Heart City Health . . . now, therefore be it resolved, the Board of Public Works approves Heart City Health Center Inc. as a subrecipient of fifty thousand dollars in ARPA state and local fiscal recovery funds, and authorizes the Department of Law to prepare an appropriates subrecipient agreement for execution by the Board of Works and Heart City Health Center Inc. for the purposes approved herein . . ." The City provided SLFRF award funds to the Heart City Health Center, Inc. to carry out a program on the City's behalf, making the Heart City Health Center, Inc. a subrecipient of the City, as noted in their resolution, and, therefore, subject to subrecipient monitoring. The City was unable provide a copy of the subaward agreement or other supporting documentation to show evaluation of the subrecipient's risk of noncompliance or monitoring activities demonstrating compliance with the subrecipient monitoring requirement. 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 200.331(a) states in part: "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. . . . 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 . . ." 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; (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. (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 determining 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 passthrough 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 management of the City was not properly designed nor implemented. 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 internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. The City was responsible for providing a subaward agreement and monitoring the nonprofit. 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. 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 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 2022-004 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): 2022 Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context The County had not properly implemented a system of internal controls, which would include appropriate segregation of duties that would likely be effective in preventing, or detecting and correcting, noncompliance. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the 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 Coronavirus State and Local Fiscal Recovery Funds (SLFRF) funding. As such, the initial P&E report, covering the period from March 3, 2021 to March 31, 2022, was required to be submitted to the Treasury by April 30, 2022. The subsequent annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year. INDIANA STATE BOARD OF ACCOUNTS 21 JEFFERSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The County submitted one P&E report during the audit period; however, there was no documentation of a proper review or oversight process in place to ensure the report was accurate prior to being submitted. Per inquiry, the County Auditor prepared the report and the report was reviewed and submitted by the President of the Board of County Commissioners (President). However, source documents to adequately review the data in the report were not provided to the President, nor was there evidence to support the review or oversight process took place. Due to the lack of internal controls, the P&E report submitted was not properly supported by the County's records. The County incorrectly reported as total expenditures and total obligations the total allocation of their grant funds, $6,275,450, instead of the actual expenditures and obligations of $12,500 spent and obligated during the reporting period. 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 compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. . . ." Cause A proper system of internal controls was not implemented by management of the County, 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 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, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the 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. INDIANA STATE BOARD OF ACCOUNTS 22 JEFFERSON 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 that would provide a segregation of duties for the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the County provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. INDIANA STATE BOARD OF ACCOUNTS 23
Criteria: 2 CFR 200.332 notes, ?All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal award identification. (i) Subrecipient name (which must match the name associated with its unique entity identifier); (ii) Subrecipient's unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see the definition of Federal award date in ? 200.1 of this part) of award to the recipient by the Federal agency; (v) Subaward Period of Performance Start and End Date; (vi) Subaward Budget Period Start and End Date; (vii) Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; (x) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; (xii) Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; (xiii) Identification of whether the award is R&D; and (xiv) Indirect cost rate for the Federal award (including if the de minimis rate is charged) per ? 200.414. (2) All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award; ?? Condition: For all four subawards selected for testing, the identification of the award being Research and Development (R&D) was not noted. Further, two of the four subawards selected for testing, had information missing from the subaward including (1) Recipient DUNS number (2) Unique Federal Award Identification Number (FAIN) (3) Assistance Listing number (4) Indirect Cost Rate. Lastly, one subaward did not include the following information: (a) Period of Performance of subaward (b) Amount of federal funds obligated and awarded (c) General terms and conditions of subaward (d) Federal award project description (e) Name of Federal awarding agency. Condition (Continued): We consider this condition to be an instance of noncompliance relating to the Subrecipient Monitoring compliance requirement. Statistical sampling was not used in making sample selections. Questioned Costs: N/A. Cause and Effect: Without communication of the required information, subrecipients may overspend award amounts or incur unallowable expenses towards the grant. Recommendation: We recommend the Organization evaluates policies and procedures to ensure all required information is communication with the subrecipient. Views of Responsible Officials: Management agrees with this Single Audit Finding and response is included in the Corrective Action Plan.
Criteria: 2 CFR 200.332 notes, ?All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal award identification. (i) Subrecipient name (which must match the name associated with its unique entity identifier); (ii) Subrecipient's unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see the definition of Federal award date in ? 200.1 of this part) of award to the recipient by the Federal agency; (v) Subaward Period of Performance Start and End Date; (vi) Subaward Budget Period Start and End Date; (vii) Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; (x) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; (xii) Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; (xiii) Identification of whether the award is R&D; and (xiv) Indirect cost rate for the Federal award (including if the de minimis rate is charged) per ? 200.414. (2) All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award; ?? Condition: For all four subawards selected for testing, the identification of the award being Research and Development (R&D) was not noted. Further, two of the four subawards selected for testing, had information missing from the subaward including (1) Recipient DUNS number (2) Unique Federal Award Identification Number (FAIN) (3) Assistance Listing number (4) Indirect Cost Rate. Lastly, one subaward did not include the following information: (a) Period of Performance of subaward (b) Amount of federal funds obligated and awarded (c) General terms and conditions of subaward (d) Federal award project description (e) Name of Federal awarding agency. Condition (Continued): We consider this condition to be an instance of noncompliance relating to the Subrecipient Monitoring compliance requirement. Statistical sampling was not used in making sample selections. Questioned Costs: N/A. Cause and Effect: Without communication of the required information, subrecipients may overspend award amounts or incur unallowable expenses towards the grant. Recommendation: We recommend the Organization evaluates policies and procedures to ensure all required information is communication with the subrecipient. Views of Responsible Officials: Management agrees with this Single Audit Finding and response is included in the Corrective Action Plan.