Lack of Documentation Related to Reporting (prior two years 2020-104 and 2019-106) (initially reported 2018) Assistance Listing Number: 93.224 and 93.527 Name of Federal Agency: Department of Health and Human Services, HRSA Program Title: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) and Grants for New and Expanded Services Under the Health Center Program Compliance Requirement: Reporting Pass-through Entity: N/A Federal Grant/Contract Number and Grant Year: H80CS06452-15 (2020), H80CS06452-16 (2021) and COVID-19 ARP H8FCS40324 -01(2021) Finding Type: Significant Deficiency in Internal Control Known Questioned Costs: $0 Condition: The Organization did not maintain proper documentation in support of reporting requirements. Criteria: 2 CFR section 200.303 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Also under compliance requirements for reporting 2 CFR 200.328 states that information must be collected with the frequency required by the terms and conditions of the federal award for effective monitoring of the federal awards. Cause: Supporting records used to populate the Uniform Data System (UDS) report were not retained by the Organization. Effect: The Organization could submit incorrect information. Recommendation: Documentation should be prepared, reviewed, and retained to support the reporting. The documentation should clearly document who prepared the information, who reviewed the information, and that the reviewer considered whether the information was complete and accurate. Views of Responsible Officials and Planned Corrective Action: The Organization has hired a new Chief Financial Officer, as of March 2022, as well as additional supporting staff within the finance department. The Organization has reviewed and updated its grant drawdown procedures to included only actual cost and for the request to be reviewed and approved by someone other than the preparer prior to submission. The corrective action for this finding has been approved and implemented by the Organization
Lack of Internal Controls over the Application of the Sliding Fee Scale (prior two years 2020-101 and 2019-103) (initially reported 2014) Assistance Listing Number: 93.224 and 93.527 Name of Federal Agency: Department of Health and Human Services, HRSA Program Title: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) and Grants for New and Expanded Services Under the Health Center Program Compliance Requirement: Special Tests and Provisions – Sliding Fee Discounts Pass-through Entity: N/A Federal Grant/Contract Number and Grant Year: H80CS06452-15 (2020), H80CS06452-16 (2021) and COVID-19 ARP H8FCS40324-01 (2021) Finding Type: Material Weakness in Internal Control Known Questioned Costs: $0 Condition: The Organization lacks consistently applied processes and procedures related to the application of the sliding fee scale. The Organization also lacks a clear review process related to the sliding fee scale to identify errors quickly to allow for corrections to be made in a timely manner. - Sliding fee scales were not used for the agreement that the Organization has in place with the local school district in which they provide services to students. The agreement specifically does not allow the Organization to obtain information related to household size and income as needed to appropriately place the family on the sliding fee scale. The agreement also indicates no amounts can be collected from the students, except when that student has insurance which allows the Organization to bill the insurance company for a portion of the fees. - Sliding fee scales are not used in the disaster recovery bus program that does not charge the patients for services. - Six of the thirty-two encounters sampled where the sliding scale was used had the wrong sliding fee scale applied based on information obtained about the patient’s family size and income. Criteria: 2 CFR section 200.303 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Health centers must prepare and apply a sliding fee discount schedule, so that the amounts owed for health center services by eligible patients are adjusted based on the patient's ability to pay ( 42 U.S.C 254b(k)(3)(G)(i)). The patient's ability to pay is based on the official poverty guidelines, as revised annually by the U.S. Department of Health and Human Services (42 U.S.C 9902(2)). Cause: Failure to apply the sliding fee correctly, as noted in six of the encounters above, was due to improper staff training or failure to properly monitor the process. Failure to apply the sliding fee scales due to the requirements of the agreement with the local school district and procedures applied to the disaster recovery bus program do not follow the written procedures of the Organization for use of the sliding fee scale. Effect: The Organization could be incorrectly billing for services and maintaining customer account balances at incorrect amounts. Recommendation: Staff should be consistently trained in how patients should complete the intake forms, including the sliding fee scale application, and require patients complete the form appropriately, including refusal to provide information, if applicable. Staff should also be consistently trained on what documentation is considered sufficient to support income identified as well as verify the application is consistent with the documentation and, when needed, clearly document the reasons for inconsistency. Staff should make every effort to obtain documentation of patient income in accordance with internal policies and procedures. Patients should be billed the usual and customer billing rates for all services until all documentation is received or policies are adjusted to allow for self-determination by patients in certain situations. A process should be put in place to track patients in order to attempt further collection of the necessary data that would allow for adjustment of the bill after the fact when necessary. These exceptions should be tracked each month with the monthly review by the regional operations managers. The reviews by the regional operations managers should be documented and retained including the results and corrective action of the follow-up on deficiencies noted. The Organization should discuss with HRSA what could be done to either adjust policies and procedures used during the school visits to be compliant or obtain a waiver from HRSA to indicate their knowledge and approval of the school visits and disaster bus program visits not being compliant with the application of the sliding fee scale requirements. Views of Responsible Officials and Planned Corrective Actions: The Organization has hired a new Chief Financial Officer as well as additional supporting staff within the finance department. The Organization’s policies for the sliding fee scale were recently updated during fiscal year 2022, by management, based on findings during the monitoring by HRSA performed in 2022, but management will consider discussing potential improvements to their policy with the grantor to potentially update it to allow for certain exceptions. The Organization will also consider discussing the agreement with the local school district in more detail with the grantor to either structure their policies to allow for these visits to have different requirements or to see if the grantor would be willing to provide a waiver with regards to theses visits not being technically in compliance with other regular clinic visits. The planned corrective action for this finding is currently in the process of development, approval, and implementation. The Organization expects to have the corrective action implemented by July 1, 2024. The Organization will continue to engage the consulting services of the professional certified accounting firm to assist in this process through completion.
Lack of Cash Management Documentation (prior two years 2020-102 and 2019-104) (initially reported 2016) Assistance Listing Number: 93.224 and 93.527 Name of Federal Agency: Department of Health and Human Services, HRSA Program Title: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) and Grants for New and Expanded Services Under the Health Center Program Compliance Requirement: Cash Management Pass-through Entity: N/A Federal Grant/Contract Number and Grant Year: H80CS06452-15 (2020), H80CS06452-16 (2021) and COVID-19 ARP H8FCS40324-01 (2021) Finding Type: Significant Deficiency in Internal Control Known Questioned Costs: $0 Condition: The Organization made drawdowns after month-end based on budgeted period expenditures and therefore could not be agreed to the actual approved wages paid prior to the reimbursement request. Insufficient documentation was kept to clearly document that the amount requested was reviewed for accuracy. Criteria: 2 CFR section 200.303 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Based on grant compliance requirements related to cash management for grants and cooperative agreements to nonfederal entities that are paid on a reimbursement basis, supporting documentation should include the actual costs for which reimbursement was requested and were paid prior to the date of the reimbursement request. Cause: Reimbursement was requested based on the budgeted payroll expenses made for a particular period, adjusted to exclude certain employees that are not related to the grant or are highly paid employees to be conservative in the calculation. No indication of a review process involved beyond the CFO preparing a calculation to request reimbursement and making the request from the grantor. Effect: The Organization could request funds that may not have adequate supporting documentation and were paid prior to the reimbursement request. These errors could lead to the Organization losing funding under this program. Recommendation: Documentation should be based on actual and not budgeted payroll and it should be prepared and reviewed by someone other than the preparer. Also, it should directly link the amount requested to the related expenses to clearly document those funds are being used in a timely manner, that more was not requested than was expended, specifically what expenses are being considered expended through these funds, and that funds were requested and applied to the correct period. Update policies and procedures as needed to reflect changes, as applicable. Views of Responsible Officials and Planned Corrective Actions: The Organization has hired a new Chief Financial Officer as well as additional supporting staff within the finance department. The Organizations policy and procedures related to support documentation retention has been evaluated and updated. Supporting documentation for all drawdown requests are retained by grant. The corrective action for this finding has been approved and implemented by the Organization.
Use of Budgeted Versus Actual Costs for Reimbursements (prior year 2020-106) (initially reported 2020) Assistance Listing Number: 93.224, 93.527 and 93.498 Name of Federal Agency: Department of Health and Human Services, HRSA Program Title: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) , Grants for New and Expanded Services Under the Health Center Program and COVID-19 Provider Relief Fund Compliance Requirement: Allowable Activities, Allowable Costs and Period of Performance Pass-through Entity: N/A Federal Grant/Contract Number and Grant Year: H80CS06452-15 (2020), H80CS06452-16 (2021), COVID-19 ARP H8FCS40324 -01(2021) and COVID-19 Provider Relief Fund (2020) Finding Type: Material Weakness in Internal Control Known Questioned Costs: $0 Condition: The Organization made drawdowns after month-end based on budgeted period expenses rather than actual salary expenses to support the amounts being requested for reimbursement. Criteria: 2 CFR section 200.303 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. In addition, based on grant compliance requirements related to allowable activities costs and period of performance, direct costs are those costs that can be specifically identified with a particular actual cost. Cause: Reimbursement was requested based on the budgeted payroll expenditures made for a particular period, adjusted to exclude certain employees that are not related to the grant or are highly paid employees to be conservative in the calculation. Adequate documentation was not maintained and no indication of a review process involved beyond the CFO preparing the calculation to request reimbursement and making the request from the grantor. Effect: The Organization could request funds that may not have adequate supporting documentation. These errors could lead to the Organization losing funding under this program. Recommendation: Documentation should be provided that directly links the amount requested to the related expenditures to clearly document those funds are being used in a timely manner, that more was not requested than was expended, specifically what expenditures are being considered expended through these funds, and that funds requested applied to the correct period. Update policies and procedures as needed to reflect changes, if applicable. Views of Responsible Officials and Planned Corrective Actions: The Organization has hired a new Chief Financial Officer as well as additional supporting staff within the finance department. The Organization has reviewed and updated its grant drawdown procedures to included only actual cost and for the request to be reviewed and approved by someone other than the preparer prior to submission. The corrective action for this finding has been approved and implemented by the Organization.
Missing Documentation to Support Payroll Authorizations (prior year 2019-101, not testable during 2020) (initially reported 2019) Assistance Listing Number: 93.224, 93.527 and 93.498 Name of Federal Agency: Department of Health and Human Services, HRSA Program Title: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) , Grants for New and Expanded Services Under the Health Center Program and COVID-19 Provider Relief Fund Compliance Requirement: Allowable Activities and Costs Pass-through Entity: N/A Federal Grant/Contract Number and Grant Year: H80CS06452-15 (2020), H80CS06452-16 (2021), COVID-19 ARP H8FCS40324 -01(2021) and COVID-19 Provider Relief Fund (2020) Finding Type: Significant Deficiency in Internal Control Known Questioned Costs: $0 Condition: The Organization could not provide one salary authorization form for sample selection of 40 employees under ALN #93.224 and 93.527 Health Care Center. The Organization could not provide one salary authorization form for sample selection of eight employees under ALN #93.498 COVID-19 Provider Relief Fund. Criteria: 2 CFR section 200.303 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Under compliance requirements for allowable activities and costs, management should ensure that costs can be supported by underlying accounting documentation. Cause: Filing errors resulting in staff being unable to provide the requested authorizations. Effect: The Organization would not be able to provide the related documentation to support allowable activities and costs under the program which could lead to a loss of grant funding. Recommendation: The Organization should put in a process to appropriately retain documentation to support allowable activities and costs under applicable grant programs. Views of Responsible Officials and Planned Corrective Action: The Organization continues to engage the consulting services of a professional certified accounting firm. The Organization has hired a new Chief Financial Officer, as of March 2022, as well as additional supporting staff within the finance department. The Organization will implement additional review procedures related to the salary authorization forms to verify accuracy of the information and review our procedures related to retention of documentation. The Organization will consider implementing additional procedures associated with employees agreeing to the salary as well as specifically identifying the revenue sources (e.g. specific grants, local funds, etc.) when applicable. The Organization implemented this corrective action during fiscal year 2023.
Lack of Documentation Related to Reporting (prior two years 2020-104 and 2019-106) (initially reported 2018) Assistance Listing Number: 93.224 and 93.527 Name of Federal Agency: Department of Health and Human Services, HRSA Program Title: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) and Grants for New and Expanded Services Under the Health Center Program Compliance Requirement: Reporting Pass-through Entity: N/A Federal Grant/Contract Number and Grant Year: H80CS06452-15 (2020), H80CS06452-16 (2021) and COVID-19 ARP H8FCS40324 -01(2021) Finding Type: Significant Deficiency in Internal Control Known Questioned Costs: $0 Condition: The Organization did not maintain proper documentation in support of reporting requirements. Criteria: 2 CFR section 200.303 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Also under compliance requirements for reporting 2 CFR 200.328 states that information must be collected with the frequency required by the terms and conditions of the federal award for effective monitoring of the federal awards. Cause: Supporting records used to populate the Uniform Data System (UDS) report were not retained by the Organization. Effect: The Organization could submit incorrect information. Recommendation: Documentation should be prepared, reviewed, and retained to support the reporting. The documentation should clearly document who prepared the information, who reviewed the information, and that the reviewer considered whether the information was complete and accurate. Views of Responsible Officials and Planned Corrective Action: The Organization has hired a new Chief Financial Officer, as of March 2022, as well as additional supporting staff within the finance department. The Organization has reviewed and updated its grant drawdown procedures to included only actual cost and for the request to be reviewed and approved by someone other than the preparer prior to submission. The corrective action for this finding has been approved and implemented by the Organization
Lack of Controls Related to Filing Reports (initially reported 2021) Assistance Listing Number: 93.498 Name of Federal Agency: Department of Health and Human Services, HRSA Program Title: COVID-19 Provider Relief Fund Compliance Requirement: Reporting Pass-through Entity: N/A Federal Grant/Contract Number and Grant Year: COVID-19 Provider Relief Fund (2020) Finding Type: Significant Deficiency in Internal Control Known Questioned Costs: $0 Condition: The Organization did not maintain proper documentation to support the review of the report prior to submission to the grantor, other than the review done by the preparer. Criteria: 2 CFR section 200.303 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Also under compliance requirements for reporting 2 CFR 200.328 states that information must be collected with the frequency required by the terms and conditions of the federal award for effective monitoring of the federal awards. Cause: The Organization did not have a process in place for review of the data being reported on the HRSA website for the funds being expensed under the Provider Relief Fund program. Effect: The Organization could submit incorrect information. Recommendation: The documentation should be kept that clearly documents who prepared the information, who reviewed the information, and that the reviewer considered whether the information was complete and accurate. Views of Responsible Officials and Planned Corrective Actions: The Organization has hired a new Chief Financial Officer as well as additional supporting staff within the finance department. The Organization has reviewed and updated its reporting policy and implemented the changes. The corrective action for this finding has been approved and implemented by the Organization.
Use of Budgeted Versus Actual Costs for Reimbursements (prior year 2020-106) (initially reported 2020) Assistance Listing Number: 93.224, 93.527 and 93.498 Name of Federal Agency: Department of Health and Human Services, HRSA Program Title: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) , Grants for New and Expanded Services Under the Health Center Program and COVID-19 Provider Relief Fund Compliance Requirement: Allowable Activities, Allowable Costs and Period of Performance Pass-through Entity: N/A Federal Grant/Contract Number and Grant Year: H80CS06452-15 (2020), H80CS06452-16 (2021), COVID-19 ARP H8FCS40324 -01(2021) and COVID-19 Provider Relief Fund (2020) Finding Type: Material Weakness in Internal Control Known Questioned Costs: $0 Condition: The Organization made drawdowns after month-end based on budgeted period expenses rather than actual salary expenses to support the amounts being requested for reimbursement. Criteria: 2 CFR section 200.303 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. In addition, based on grant compliance requirements related to allowable activities costs and period of performance, direct costs are those costs that can be specifically identified with a particular actual cost. Cause: Reimbursement was requested based on the budgeted payroll expenditures made for a particular period, adjusted to exclude certain employees that are not related to the grant or are highly paid employees to be conservative in the calculation. Adequate documentation was not maintained and no indication of a review process involved beyond the CFO preparing the calculation to request reimbursement and making the request from the grantor. Effect: The Organization could request funds that may not have adequate supporting documentation. These errors could lead to the Organization losing funding under this program. Recommendation: Documentation should be provided that directly links the amount requested to the related expenditures to clearly document those funds are being used in a timely manner, that more was not requested than was expended, specifically what expenditures are being considered expended through these funds, and that funds requested applied to the correct period. Update policies and procedures as needed to reflect changes, if applicable. Views of Responsible Officials and Planned Corrective Actions: The Organization has hired a new Chief Financial Officer as well as additional supporting staff within the finance department. The Organization has reviewed and updated its grant drawdown procedures to included only actual cost and for the request to be reviewed and approved by someone other than the preparer prior to submission. The corrective action for this finding has been approved and implemented by the Organization.
Missing Documentation to Support Payroll Authorizations (prior year 2019-101, not testable during 2020) (initially reported 2019) Assistance Listing Number: 93.224, 93.527 and 93.498 Name of Federal Agency: Department of Health and Human Services, HRSA Program Title: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) , Grants for New and Expanded Services Under the Health Center Program and COVID-19 Provider Relief Fund Compliance Requirement: Allowable Activities and Costs Pass-through Entity: N/A Federal Grant/Contract Number and Grant Year: H80CS06452-15 (2020), H80CS06452-16 (2021), COVID-19 ARP H8FCS40324 -01(2021) and COVID-19 Provider Relief Fund (2020) Finding Type: Significant Deficiency in Internal Control Known Questioned Costs: $0 Condition: The Organization could not provide one salary authorization form for sample selection of 40 employees under ALN #93.224 and 93.527 Health Care Center. The Organization could not provide one salary authorization form for sample selection of eight employees under ALN #93.498 COVID-19 Provider Relief Fund. Criteria: 2 CFR section 200.303 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Under compliance requirements for allowable activities and costs, management should ensure that costs can be supported by underlying accounting documentation. Cause: Filing errors resulting in staff being unable to provide the requested authorizations. Effect: The Organization would not be able to provide the related documentation to support allowable activities and costs under the program which could lead to a loss of grant funding. Recommendation: The Organization should put in a process to appropriately retain documentation to support allowable activities and costs under applicable grant programs. Views of Responsible Officials and Planned Corrective Action: The Organization continues to engage the consulting services of a professional certified accounting firm. The Organization has hired a new Chief Financial Officer, as of March 2022, as well as additional supporting staff within the finance department. The Organization will implement additional review procedures related to the salary authorization forms to verify accuracy of the information and review our procedures related to retention of documentation. The Organization will consider implementing additional procedures associated with employees agreeing to the salary as well as specifically identifying the revenue sources (e.g. specific grants, local funds, etc.) when applicable. The Organization implemented this corrective action during fiscal year 2023.
Federal Program Information U.S. Department of Housing and Urban Development Housing Trust Fund (ALN: 14.275) Criteria or specific requirement The Uniform Guidance 2 CFR section 200.303 states, “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).” The Uniform Guidance 2 CFR section 200.510 states, “(b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of federal awards (SEFA) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with §200.502 Basis for determining Federal awards expended.” Condition The Agency omitted federally-funded expenditures required to be reported as part of the Schedule for the year ended October 31, 2021. Cause The Agency’s internal controls in place over the preparation of the Schedule were not sufficient to accurately report all expenditures of federal awards. Effect The omission of expenditures resulted in a major program not being identified in a timely manner. Section III –Federal Awards Findings and Questioned Costs (continued) Questioned Costs None. Context Expenditures for ALN 14.275 Housing Trust Fund were understated by $53.3 million. Identification as a Repeat Finding, if applicable The finding is a repeat finding – Finding 2019-001 and Finding 2020-001. Recommendation The Agency should review its internal controls over the process of accumulating and reporting expenditures of federal awards. Views of Responsible Officials The Agency agrees with the finding and has developed internal controls to ensure accurate and complete reporting of federal expenditures.
2021-003 Department of Health and Human Services CFDA #93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year – Period 1 TIN #381649577 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Reporting Material Weakness in Internal Control Over Compliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. The Organization claimed expenses based on specifically identified COVID related expenses and general and administrative expenses. Condition: The Organization’s final expenditure listing identified as eligible and claimed under the Provider Relief Fund program as well as the prepared lost revenue calculation were not reviewed and approved by a separate individual outside of the preparer. Cause: The Organization did not have an internal control process in place to ensure a secondary review and approval of the lost revenue calculation or of eligible expenditures that were summarized from the underlying supporting spreadsheets to the final expenditure listing was formally documented. The summary spreadsheet was used to claim allowable costs under the federal program. In addition, the review and approval of the report submitted to the Department of Health and Human Services for Period 1 was not performed by someone other than the preparer of the report. Effect: Without a secondary review and approval, there is a possibility that ineligible expenditures or lost revenue may have been claimed under the program and the report may not have been accurately completed. Questioned Costs: None reported. Context/Sampling: A nonstatistical sample of 65 ($92,432) out of 993 expenditures ($1,198,401) was tested for activities allowed or unallowed and allowable costs/cost principles. Lost revenue was reviewed as submitted in the special report. Additional key line items were tested on the Period 1 Department of Health and Human Services special report submitted. Repeat Finding from Prior Years: No Recommendation: We recommend the Organization implement a control process which includes a secondary review and approval of the summarized final expenditure listing and lost revenue calculation used to claim the allowable costs under the federal program and a secondary review and approval of required reports to be submitted to the federal agency. Views of Responsible Officials: Management agrees with the finding.
2021-004 Department of Health and Human Services CFDA #93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year – Period 1 TIN #381649577 Reporting Material Weakness in Internal Control Over Compliance and Material Noncompliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. Condition: The Organization’s final lost revenue calculation identified as eligible and claimed under the Provider Relief Fund program did not agree to the amount claimed in the report submitted to the Department of Health and Human Services for Period 1. Cause: The Organization recalculated lost revenue and noted multiple adjustments to the amount that could be claimed. Effect: The difference in what was accurately calculated compared to what was reported led to an incorrect filing and a claim of more support for lost revenue than was needed. Questioned Costs: None reported. Context: Lost revenue claimed in the report to the Department of Health and Human Services totaled $3,161,203. After corrections were made to the lost revenue support calculation, lost revenues should have been $3,278,318 for a difference of $117,115. Repeat Finding from Prior Years: No Recommendation: We recommend that management reviewed their process and procedures to include monitoring over amounts reported relating to lost revenue amounts and the related calculation. Views of Responsible Officials: Management agrees with the finding.
2021-005 Department of Health and Human Services CFDA #93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year – Period 1 TIN #381649577 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Reporting Material Weakness in Internal Control Over Compliance and Material Noncompliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. Condition: The Organization claimed expenses that were reimbursed by other funding sources. These expenses were improperly included in the HHS Special Report which caused the report to be inaccurate. Cause: The Organization submitted expenses that were to be reimbursed by other funding sources (i.e., Medicare). The Organization did not have an adequate internal control policy in place to ensure review and approval of cash disbursements claimed under the federal programs were documented and to ensure that expenses claimed in the Special Report were complete and accurate. Effect: The lack of adequate policies governing expenses and preparation and submission of the Report increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. The Organization submitted expenses over their actual allowable expenses. Questioned Costs: $186,061 which was reimbursed from other sources and an additional $35,521 that was unsupported. Context: A nonstatistical sample of 65 expenditures was selected for testing, which accounted for $92,432 of $1,198,401 of direct program expenditures. Repeat Finding from Prior Years: No Recommendation: We recommend that the Organization enhance internal control policies to ensure all amounts reimbursed by other funding sources are adequately documented and reduced from the eligible expenditure listing and are properly recorded in the Special Report required to be submitted to the federal agency. We also recommend the Organization enhance internal control policies to ensure that the required Reports are properly reviewed prior to submission to ensure all key line items are necessary, correct, meet the requirements of the federal program, and are properly recorded in the Special Reports required to be submitted to the federal agency. Views of Responsible Officials: Management agrees with the finding.
The Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance) 2 CFR 200.303 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 the Federal statutes, regulations, and the terms and conditions of the Federal award. The Compliance Requirements for the Coronavirus Relief Fund require funding to be used to cover the costs of necessary expenditures incurred due to the public health emergency with respect to COVID-19. The Commission submitted reimbursement requests to the State to receive their share of Coronavirus Relief Funds, including reimbursements for leave paid on behalf of employees in accordance with the Families First Coronavirus Response Act. Testing revealed that the Commission requested and received duplicate reimbursements for leave totaling $11,042.44. Additionally, reimbursements were submitted and received for taxes withheld from employees totaling $62,372.97 which were not considered expenses of the Commission. Controls were not in place to ensure all reimbursement requests for Coronavirus Relief Funds were calculated and reported correctly. As a result, the Commission received reimbursements from Coronavirus Relief Funds in excess of what was allowable.
2021‐001 – Internal Controls over Activities Allowed and Allowable Costs – Significant Deficiency in Internal Controls over Compliance Federal Program Information: Funding Agency: U.S. Department of Health and Human Services Title: Provider Relief Fund CFDA Number: 93.498 Federal Award Identification number Award Year: 2020‐21 Condition: There were 2 samples that the Entity could not provide supporting documentation and 21 samples that the employee was not paid the approved pay rate. Criteria: Per 2 CFR section 200.303(a) the 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 section 200.403(g) – in order to be allowable under Federal awards, costs must be adequately documented and Per 2 CFR section 200.430(i) – Compensation – personal services – Standards for Documentation of Personnel Expenses, Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Questioned costs: Employee paid a rate other than the approved pay rate. Total dollar amount of $874 was divided by the total payroll population tested to get a 7% error and then multiplied by the total payroll expenditures of the program to get a questioned costs of $6,848. Effect: The Entity paid employees time at a rate not approved. In addition the Entity did not retain supporting documentation. Cause: The Entity did not retain supporting documentation for expenditures paid with federal funding and did not have approved pay rate documentation to support the pay rate employee was paid. Auditors’ Recommendation: The Auditor recommends that the Entity implement controls for documenting and retaining information on expenditures charged to federal awards to follow the requirements over 2 CFR Section 200.430(g)(i) and in addition the Entity is properly paying employees at the approved pay rate. Views of Responsible Officials and Planned Corrective Action: See Corrective Action Plan.
Condition and Context: As noted in findings 2021-001, 2021-003, and 2021-004, ITCN’s internal control over financial reporting and grants management was insufficient to provide the level of assurance necessary to demonstrate compliance with the federal awards. Criteria: 2 CFR §200.303, Internal Controls, requires that non-federal entities 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 comply 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). Cause and Effect: The cause is a lack of resources and oversight of the accounting and financial reporting process. The effect is that ITCN’s financial management system was insufficient to provide accurate financial information with reasonable assurance that ITCN is managing its awards in compliance with federal statutes, regulations and terms and conditions of its federal awards. Recommendation: We recommend that ITCN implement the recommendations noted in findings 2021-001, 2021-003, and 2021-004. Management’s Response: ITCN’s responsible officials’ views and planned corrective action are in its corrective action plan at the end of the report.
Condition and Context: As noted in findings 2021-001, 2021-003, and 2021-004, ITCN’s internal control over financial reporting and grants management was insufficient to provide the level of assurance necessary to demonstrate compliance with the federal awards. Criteria: 2 CFR §200.303, Internal Controls, requires that non-federal entities 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 comply 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). Cause and Effect: The cause is a lack of resources and oversight of the accounting and financial reporting process. The effect is that ITCN’s financial management system was insufficient to provide accurate financial information with reasonable assurance that ITCN is managing its awards in compliance with federal statutes, regulations and terms and conditions of its federal awards. Recommendation: We recommend that ITCN implement the recommendations noted in findings 2021-001, 2021-003, and 2021-004. Management’s Response: ITCN’s responsible officials’ views and planned corrective action are in its corrective action plan at the end of the report.
Condition and Context: As noted in findings 2021-001, 2021-003, and 2021-004, ITCN’s internal control over financial reporting and grants management was insufficient to provide the level of assurance necessary to demonstrate compliance with the federal awards. Criteria: 2 CFR §200.303, Internal Controls, requires that non-federal entities 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 comply 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). Cause and Effect: The cause is a lack of resources and oversight of the accounting and financial reporting process. The effect is that ITCN’s financial management system was insufficient to provide accurate financial information with reasonable assurance that ITCN is managing its awards in compliance with federal statutes, regulations and terms and conditions of its federal awards. Recommendation: We recommend that ITCN implement the recommendations noted in findings 2021-001, 2021-003, and 2021-004. Management’s Response: ITCN’s responsible officials’ views and planned corrective action are in its corrective action plan at the end of the report.
Condition and Context: As noted in findings 2021-001, 2021-003, and 2021-004, ITCN’s internal control over financial reporting and grants management was insufficient to provide the level of assurance necessary to demonstrate compliance with the federal awards. Criteria: 2 CFR §200.303, Internal Controls, requires that non-federal entities 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 comply 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). Cause and Effect: The cause is a lack of resources and oversight of the accounting and financial reporting process. The effect is that ITCN’s financial management system was insufficient to provide accurate financial information with reasonable assurance that ITCN is managing its awards in compliance with federal statutes, regulations and terms and conditions of its federal awards. Recommendation: We recommend that ITCN implement the recommendations noted in findings 2021-001, 2021-003, and 2021-004. Management’s Response: ITCN’s responsible officials’ views and planned corrective action are in its corrective action plan at the end of the report.
Condition and Context: As noted in findings 2021-001, 2021-003, and 2021-004, ITCN’s internal control over financial reporting and grants management was insufficient to provide the level of assurance necessary to demonstrate compliance with the federal awards. Criteria: 2 CFR §200.303, Internal Controls, requires that non-federal entities 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 comply 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). Cause and Effect: The cause is a lack of resources and oversight of the accounting and financial reporting process. The effect is that ITCN’s financial management system was insufficient to provide accurate financial information with reasonable assurance that ITCN is managing its awards in compliance with federal statutes, regulations and terms and conditions of its federal awards. Recommendation: We recommend that ITCN implement the recommendations noted in findings 2021-001, 2021-003, and 2021-004. Management’s Response: ITCN’s responsible officials’ views and planned corrective action are in its corrective action plan at the end of the report.
Finding 2021-001 Federal Program Title – Airport Improvement Program and COVID-19 Airport Improvement Program Assistance Listing No. – 20.106 Federal Agency – U.S. Department of Transportation – Direct Program Federal Award Number – 30601270472020 Grant Award Periods – May 7, 2020 to May 6, 2024 Compliance Requirement – Reporting Criteria: As set forth in 2 CFR 200.328, the Federal Financial Report, SF 425, must be collected with the frequency required by the terms and conditions of the federal award, but no less frequently than annually nor more frequently than quarterly except in unusual circumstances. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Conditions Found: The City did not have an effective system of internal control in place to ensure the reports that are required to be submitted to the U.S. Department of Transportation were accurate. We selected a sample of nine reports and determined that one report omitted $18.4 million in payroll and payroll-related costs of which $3.6 million are costs incurred during the fiscal year ended September 30, 2021. Questioned Costs: There are no questioned costs. Context: The City is required to submit annual federal financial reports related to the Airport Improvement Program that include all disbursements for direct charges for property and services; the amount of indirect expense incurred; and the net increase or decrease in the amounts owed by the recipient for (1) goods and other property received; (2) services performed by employees, contractors, subrecipients, and other payees; and (3) programs for which no current services or performance are required. Cause and Effect: City management indicated that interpretation of the reporting requirements was that payments made to employees for services provided were required to be omitted from the SF 425 report. As a result, the reports submitted omitted $18.4 million in payroll and payroll-related costs. Repeat Finding: A similar finding was not reported in the prior-year audit. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the City strengthen processes and internal controls to ensure the City has an effective internal control in place to ensure that reports are complete and accurate prior to submitting to the U.S. Department of Transportation as required. View of Responsible Official: The subject Airport Improvement Program (AIP) grant for COVID-19 related funding was used solely for internal City payroll-related expenditures and debt service payments, which is different from other previous AIP grants received by the Airport Department. The misinterpretation of reporting requirements for the new grant led to an error on the Federal Financial Report SF 425. The Airport Department will be providing more training to staff that are involved with the preparation, review and approval of the reports to reduce the risk of misinterpreting reporting requirements. The Airport Department will also strengthen internal controls by requiring at least two levels of review for Federal Financial Report SF 425, prior to submission. These improvements to the process will ensure that reports are complete and accurate.
Finding 2021-002 Federal Program: Transportation Infrastructure Finance and Innovation Act (TIFIA) Program ALN Number: 20.223 Federal Agency: U.S. Department of Transportation – Direct Program Federal Award Year: 2021 Grant number: N/A Compliance Requirement: Other – Inaccurate reporting of the Schedule of Expenditures of Federal Awards Criteria: According to 2 CFR 200.510(b), a recipient of federal awards is required to prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with 2 CFR 200.502. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure federal expenditures are accurately and completely reported on the SEFA. Conditions Found: The City did not have adequate internal controls related to the reporting of expenditures on the SEFA for the Transportation Infrastructure Finance and Innovation Act (TIFIA) Program. In 2007, the City completed plans for the reconstruction of the Gerald Desmond Bridge (Harbor Bridge), which was a $1.6 billion design, development, and construction project that included multiple funding sources, including federal, state, and private funds. During fiscal year 2014, the City entered into a loan agreement with the U.S. Department of Transportation for $325,000,000 of TIFIA Program funds. During fiscal year 2020, the loan agreement was modified for $500,000,000 of TIFIA Program funds. The executed loan agreement contained a clause that the TIFIA Program loan funds were not available to be drawn until the Harbor Bridge was certified as substantially complete. In January 2021 (fiscal year 2021) the Harbor Bridge was certified as substantially complete and the TIFIA Program loan was made. As a result, the City should have reported the $500,000,000 TIFIA Program loan on the SEFA for the year ended September 30, 2021. Cause and Effect: In discussing these conditions with the City, they stated the error was primarily due to the TIFIA Program not being a traditional federal award where expenses were reimbursed as incurred. When the City certified the substantial completion of the Harbor Bridge project and the TIFIA Program loan was made during fiscal year 2021, the City was not aware the TIFIA Program loan was reportable on the SEFA. Additionally, the management review controls in place over the completeness and accuracy of the SEFA were not designed to detect the error. Failure to establish effective internal controls regarding financial reporting for the preparation of the Schedule may prevent the City from completing an audit in accordance with the timelines of Uniform Guidance. Questioned Costs: Not applicable. Statistical Sampling: Not applicable. Repeat Finding: A similar finding was reported in the prior year report. Recommendation: We recommend the City implement a system of internal control that is designed and operating at a level of precision to ensure the Schedule is complete and accurate. View of Responsible Official: The Harbor Department was not aware that a TIFIA loan was required to be reported on the SEFA. Our understanding of the SEFA is to report the federal share of expenditures. TIFIA loan expenditures are comprised of the expenses for which no grant reimbursement was sought, therefore, these expenses are the cost share or local share, not the federal share. The Harbor Department now understands that all federal assistance including loans should be reported on the SEFA. KPMG has been the City’s auditor since 2001 and was aware of the TIFIA loan agreement in 2014 and the TIFIA loan draw down in 2021. KPMG did not inform us that the TIFIA loan was required to be reported on the SEFA when they performed the single audit in 2021.
Finding No.: 2021-003 Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34839-20-55-A-70 Area: Activities Allowed or Unallowed Questioned Costs: $11,820 Criteria: 1. In accordance with 2 CFR Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award Section 200.303, grant recipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 2. In accordance with applicable program requirements, funds may be used only for the payment of Pandemic Unemployment Assistance (PUA) benefits and for PUA-related state administrative costs. Condition: During the audit, the following matters were noted: 1. Internal control over the administration of activities allowed or unallowed requirements are not implemented. The Republic’s internal controls are unlikely to operate effectively, as we cannot verify the controls implemented in the program. This is due to the unavailability of the individuals responsible for performing these controls during the audit fieldwork. 2. For 9 (or 4%) of 60 transactions tested, aggregating $43,674 of $16.2 million in total program expenditures, deductions of $11,820 were deducted from PUA and FPUC benefits as follows: No. Claim ID Date PUA FPUC Total Benefits Withholding SS HCF ROP Cross Act Total Deductions Net Amount Disbursed Amount 1 43381 10/02/2020 $3,176 $4,800 7,976 $883 $559 $199 $200 $1,841 $6,135 $6,135 2 43562 10/16/2020 3,573 5,400 8,973 823 628 224 800 2,475 6,498 6,498 3 43825 11/13/2020 3,573 – 3,573 346 250 89 – 685 2,888 2,888 4 43701 11/13/2020 5,161 – 5,161 499 362 129 – 990 4,171 4,171 5 43882 11/17/2020 4,367 – 4,367 423 305 109 – 837 3,530 3,530 6 43967 11/20/2020 5,161 – 5,161 499 362 129 – 990 4,171 4,171 7 44077 12/02/2020 5,161 – 5,161 499 362 129 – 990 4,171 4,171 8 44127 12/11/2020 5,161 4,800 9,961 1,075 698 249 – 2,022 7,939 7,939 9 44268 12/23/2020 5,161 – 5,161 499 362 129 – 990 4,171 4,171 Total: $40,494 $15,000 $55,494 $5,546 $3,888 $1,386 $1,000 $11,820 $43,674 $43,674 Cause: The Republic did not maintain effective internal controls over management of the program or monitor compliance with applicable activities allowed or unallowed requirements. Effect: Condition 1: The Republic is not in compliance with applicable internal control requirements. This represents a material weakness, and the Compliance reports is modified accordingly. Condition 2: The Republic is in noncompliance with applicable activities allowed or unallowed requirements. The reportable questioned cost is $11,820. Recommendation: The Republic should establish and maintain internal controls over the administration of the program and effectively monitor program costs for compliance with allowable costs requirements. The Republic should establish and maintain internal controls and document roles and processes to address potential future personnel turnover. Views of Responsible Officials: The Republic’s Corrective Action Plan does not indicate disagreement and provides planned corrective action. The identified questioned costs were subsequently refunded in FY2022 and FY2023.
Finding Number: 2021-006 Prior Year Finding Number: 2020-007 Compliance Requirement: Reporting Program: U.S. Department of Commerce Economic Development Cluster ALN: 11.307 Award #: 01-01-14843, 01-01-14844 Award Year: 03/06/19 – 06/06/22 03/06/19 – 05/21/22 Criteria – Each non-Federal entity must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 5 (2 financial, 3 performance) out of the 12 reports (4 financial, 8 performance) required to be submitted during the fiscal year and noted that 2 performance reports tested did not contain evidence of proper segregation of duties. The same individual prepared and reviewed each report. Cause – It appears that policies and procedures, including review over reporting procedures, were not functioning as intended. Effect or Potential Effect – The lack of effective internal controls over compliance can potentially lead to the reporting of inaccurate or incomplete information to the Federal Government. Questioned Costs – None. Context – We tested a sample of 5 reports and found 2 exceptions, as noted in the condition. This is a condition identified per review of the Authority’s compliance with the specified requirements not using a statistically valid sample. Recommendation – We recommend that management implement procedures to ensure proper segregation of duties in the preparation and review of reports. Specifically, the individual responsible for preparing the report should not be the same person reviewing and approving it. Management should assign separate personnel for the preparation and independent review of all required reports, and maintain documentation evidencing both roles. Views of Responsible Officials - The Authority concurs with the auditor’s findings and recommendations. The Authority will implement measures to ensure proper monitoring and review of the required reports by an appropriate official. The planned corrective actions are presented in the Authority’s Corrective Action Plan, which is attached as Appendix B.
Finding Number: 2021-008 Prior Year Finding Number: 2020-008 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Transportation Airport Improvement Program ALN: 20.106 Award #: Various Award Year: Various Criteria – Per 2 CFR section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and conditions of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Further, a physical inventory of equipment should be taken at least once every 2 years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We noted that the Authority maintains an equipment listing for fixed assets purchased with federal funding. However, the Authority was unable to provide complete property records which met the stated requirements. Additionally, the Authority did not conduct a physical inventory count of equipment in the last two years. The most recent physical inventory count was performed during fiscal year 2017. Further, it does not appear that internal controls over compliance are operating at a level of precision to ensure compliance with the equipment management compliance requirements. Cause – The internal controls established for the records maintenance and physical inventory count did not fully operate as designed causing the Authority to fall out of compliance with the required timing of such physical inventory count. Effect or Potential Effect – There is a risk that inadequate monitoring of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Questioned Costs – None. Context – This is a condition identified per review of the Authority’s compliance with the specified requirements. Recommendation – We recommend that the Authority improve internal controls to ensure adherence to Federal regulations related to equipment record maintenance and physical inventory counts. There should be timely coordination and communication among all departments responsible for handling and managing such assets. Views of Responsible Officials - The Authority concurs with the auditor’s findings and recommendations. The Authority recognize the importance of maintaining accurate and complete property records for fixed assets purchased with federal funding. A complete fixed asset inventory was conducted in 2023 and is now performed annually. The planned corrective actions are presented in the Authority’s Corrective Action Plan, which is attached as Appendix B.
Finding Number: 2021-009 Prior Year Finding Number: 2020-009 Compliance Requirement: Reporting Program: U.S. Department of Transportation Airport Improvement Program ALN: 20.106 Award #: Various Award Year: Various Criteria – Each non-Federal entity must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 18 (10 financial and 8 performance) out of the 53 (31 financial and 22 performance) reports required to be submitted during the fiscal year and noted the following: • 8 performance reports did not contain evidence of review and approval. • 1 financial report and 8 performance reports did not contain evidence of submission. • 1 financial report was not submitted in a timely manner (206 days late). Cause – It appears that policies and procedures, including review over reporting procedures, were not functioning as intended. Effect or Potential Effect – The Authority is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Failure to submit required reports could result in reduction or disallowance of Federal funding. Questioned Costs – None. Context – We tested a sample of 18 reports and found 10 exceptions as noted in the condition. This is a condition identified per review of the Authority’s compliance with the specified requirements not using a statistically valid sample. Recommendation – We recommend that the Authority reevaluate its policies and procedures to ensure proper monitoring and review of the required reports by an appropriate official who would ensure the information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials - The Authority concurs with the auditor’s findings and recommendations. The Authority will implement measures to ensure proper monitoring and review of the required reports by an appropriate official. The planned corrective actions are presented in the Authority’s Corrective Action Plan, which is attached as Appendix B.
Finding Number: 2021-007 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed/Allowable Costs/Cost Principles Program: U.S. Department of Transportation COVID-19 Airport Improvement Program ALN: 20.106 Award #: 3-78-0001-043-2020 Award Period: 5/12/2020 – 5/12/2024 Criteria – Per the grant award, funds may be used to reimburse operational and maintenance expenses directly related to the Sponsor-owned and operated Airports, incurred no earlier than January 20, 2020. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal award. Condition – During our testing of payroll expenditures incurred throughout the year, we noted for one pay period, the Authority sought and received reimbursement for payroll activities unrelated to Sponsor-owned and operated Airports. The total reimbursement amount of $632,113 exceeded the actual payroll expenditures for Sponsor-owned and operated airports, which totaled $553,075. The difference of $79,038 was related to the operations of the Authority’s Marine division. Cause – The Authority does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles or to ensure that an appropriate level of review and approval is completed prior to charging costs to a federal program. Effect or Potential Effect – An ineffective control system for reviewing transactions to ensure that only allowable costs and allowable activities are allocated to federal programs can result in noncompliance with federal statutes, regulations, and the provisions of grant agreements, which could ultimately lead to disallowed costs for major programs. Questioned Costs – $79,038. Context – This is a condition identified per review of the Authority’s compliance with the specified requirements. The exception noted was not part of a statistically valid sample. Recommendation – We recommend that the Authority reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirements for expending and accounting for payroll, and to ensure proper and accurate allocation of payroll costs. Views of Responsible Officials - The Authority concurs with the auditor’s findings and recommendations. The Authority will implement measures to ensure proper monitoring and review are completed prior to charging costs to a federal program. The planned corrective actions are presented in the Authority’s Corrective Action Plan, which is attached as Appendix B.
Finding Number: 2021-008 Prior Year Finding Number: 2020-008 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Transportation Airport Improvement Program ALN: 20.106 Award #: Various Award Year: Various Criteria – Per 2 CFR section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and conditions of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Further, a physical inventory of equipment should be taken at least once every 2 years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We noted that the Authority maintains an equipment listing for fixed assets purchased with federal funding. However, the Authority was unable to provide complete property records which met the stated requirements. Additionally, the Authority did not conduct a physical inventory count of equipment in the last two years. The most recent physical inventory count was performed during fiscal year 2017. Further, it does not appear that internal controls over compliance are operating at a level of precision to ensure compliance with the equipment management compliance requirements. Cause – The internal controls established for the records maintenance and physical inventory count did not fully operate as designed causing the Authority to fall out of compliance with the required timing of such physical inventory count. Effect or Potential Effect – There is a risk that inadequate monitoring of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Questioned Costs – None. Context – This is a condition identified per review of the Authority’s compliance with the specified requirements. Recommendation – We recommend that the Authority improve internal controls to ensure adherence to Federal regulations related to equipment record maintenance and physical inventory counts. There should be timely coordination and communication among all departments responsible for handling and managing such assets. Views of Responsible Officials - The Authority concurs with the auditor’s findings and recommendations. The Authority recognize the importance of maintaining accurate and complete property records for fixed assets purchased with federal funding. A complete fixed asset inventory was conducted in 2023 and is now performed annually. The planned corrective actions are presented in the Authority’s Corrective Action Plan, which is attached as Appendix B.
Finding Number: 2021-009 Prior Year Finding Number: 2020-009 Compliance Requirement: Reporting Program: U.S. Department of Transportation Airport Improvement Program ALN: 20.106 Award #: Various Award Year: Various Criteria – Each non-Federal entity must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 18 (10 financial and 8 performance) out of the 53 (31 financial and 22 performance) reports required to be submitted during the fiscal year and noted the following: • 8 performance reports did not contain evidence of review and approval. • 1 financial report and 8 performance reports did not contain evidence of submission. • 1 financial report was not submitted in a timely manner (206 days late). Cause – It appears that policies and procedures, including review over reporting procedures, were not functioning as intended. Effect or Potential Effect – The Authority is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Failure to submit required reports could result in reduction or disallowance of Federal funding. Questioned Costs – None. Context – We tested a sample of 18 reports and found 10 exceptions as noted in the condition. This is a condition identified per review of the Authority’s compliance with the specified requirements not using a statistically valid sample. Recommendation – We recommend that the Authority reevaluate its policies and procedures to ensure proper monitoring and review of the required reports by an appropriate official who would ensure the information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials - The Authority concurs with the auditor’s findings and recommendations. The Authority will implement measures to ensure proper monitoring and review of the required reports by an appropriate official. The planned corrective actions are presented in the Authority’s Corrective Action Plan, which is attached as Appendix B.
Finding Number: 2021-011 Prior Year Finding Number: 2020-010 Compliance Requirement: Reporting Program: U.S. Department of Transportation National Infrastructure Investments ALN: 20.933 Award #: DTMA91G1600010 Award Year: 02/01/2017 - 03/31/2022 Criteria – Each non-Federal entity must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 7 (2 financial and 5 special reports) out of the 13 (4 financial and 9 special) reports required to be submitted during the fiscal year and noted the following: • 3 special reports were not submitted. • 2 special reports did not contain evidence of review and approval. • 2 special reports were not submitted in a timely manner (22 and 40 days late). Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Effect or Potential Effect – The Authority is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Failure to submit required reports could result in reduction or disallowance of Federal funding. Questioned Costs – None. Context – We tested a sample of 7 reports and found 5 exceptions as noted in the condition. This is a condition identified per review of the Authority’s compliance with the specified requirements not using a statistically valid sample. Recommendation – We recommend that the Authority reevaluate its policies and procedures to ensure proper monitoring and review of the required reports by an appropriate official who would ensure the information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials - The Authority concurs with the auditor’s findings and recommendations. The Authority will implement measures to ensure proper monitoring and review of the required reports by an appropriate official. The planned corrective actions are presented in the Authority’s Corrective Action Plan, which is attached as Appendix B.
2021-003 Department of Health and Human Services CFDA #93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year – Period 1 TIN #381649577 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Reporting Material Weakness in Internal Control Over Compliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. The Organization claimed expenses based on specifically identified COVID related expenses and general and administrative expenses. Condition: The Organization’s final expenditure listing identified as eligible and claimed under the Provider Relief Fund program as well as the prepared lost revenue calculation were not reviewed and approved by a separate individual outside of the preparer. Cause: The Organization did not have an internal control process in place to ensure a secondary review and approval of the lost revenue calculation or of eligible expenditures that were summarized from the underlying supporting spreadsheets to the final expenditure listing was formally documented. The summary spreadsheet was used to claim allowable costs under the federal program. In addition, the review and approval of the report submitted to the Department of Health and Human Services for Period 1 was not performed by someone other than the preparer of the report. Effect: Without a secondary review and approval, there is a possibility that ineligible expenditures or lost revenue may have been claimed under the program and the report may not have been accurately completed. Questioned Costs: None reported. Context/Sampling: A nonstatistical sample of 65 ($92,432) out of 993 expenditures ($1,198,401) was tested for activities allowed or unallowed and allowable costs/cost principles. Lost revenue was reviewed as submitted in the special report. Additional key line items were tested on the Period 1 Department of Health and Human Services special report submitted. Repeat Finding from Prior Years: No Recommendation: We recommend the Organization implement a control process which includes a secondary review and approval of the summarized final expenditure listing and lost revenue calculation used to claim the allowable costs under the federal program and a secondary review and approval of required reports to be submitted to the federal agency. Views of Responsible Officials: Management agrees with the finding.
2021-004 Department of Health and Human Services CFDA #93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year – Period 1 TIN #381649577 Reporting Material Weakness in Internal Control Over Compliance and Material Noncompliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. Condition: The Organization’s final lost revenue calculation identified as eligible and claimed under the Provider Relief Fund program did not agree to the amount claimed in the report submitted to the Department of Health and Human Services for Period 1. Cause: The Organization recalculated lost revenue and noted multiple adjustments to the amount that could be claimed. Effect: The difference in what was accurately calculated compared to what was reported led to an incorrect filing and a claim of more support for lost revenue than was needed. Questioned Costs: None reported. Context: Lost revenue claimed in the report to the Department of Health and Human Services totaled $3,161,203. After corrections were made to the lost revenue support calculation, lost revenues should have been $3,278,318 for a difference of $117,115. Repeat Finding from Prior Years: No Recommendation: We recommend that management reviewed their process and procedures to include monitoring over amounts reported relating to lost revenue amounts and the related calculation. Views of Responsible Officials: Management agrees with the finding.
2021-005 Department of Health and Human Services CFDA #93.498 COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Applicable Federal Award Number and Year – Period 1 TIN #381649577 Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Reporting Material Weakness in Internal Control Over Compliance and Material Noncompliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. Condition: The Organization claimed expenses that were reimbursed by other funding sources. These expenses were improperly included in the HHS Special Report which caused the report to be inaccurate. Cause: The Organization submitted expenses that were to be reimbursed by other funding sources (i.e., Medicare). The Organization did not have an adequate internal control policy in place to ensure review and approval of cash disbursements claimed under the federal programs were documented and to ensure that expenses claimed in the Special Report were complete and accurate. Effect: The lack of adequate policies governing expenses and preparation and submission of the Report increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. The Organization submitted expenses over their actual allowable expenses. Questioned Costs: $186,061 which was reimbursed from other sources and an additional $35,521 that was unsupported. Context: A nonstatistical sample of 65 expenditures was selected for testing, which accounted for $92,432 of $1,198,401 of direct program expenditures. Repeat Finding from Prior Years: No Recommendation: We recommend that the Organization enhance internal control policies to ensure all amounts reimbursed by other funding sources are adequately documented and reduced from the eligible expenditure listing and are properly recorded in the Special Report required to be submitted to the federal agency. We also recommend the Organization enhance internal control policies to ensure that the required Reports are properly reviewed prior to submission to ensure all key line items are necessary, correct, meet the requirements of the federal program, and are properly recorded in the Special Reports required to be submitted to the federal agency. Views of Responsible Officials: Management agrees with the finding.
The Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance) 2 CFR 200.303 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 the Federal statutes, regulations, and the terms and conditions of the Federal award. The Compliance Requirements for the Coronavirus Relief Fund require funding to be used to cover the costs of necessary expenditures incurred due to the public health emergency with respect to COVID-19. The Commission submitted reimbursement requests to the State to receive their share of Coronavirus Relief Funds, including reimbursements for leave paid on behalf of employees in accordance with the Families First Coronavirus Response Act. Testing revealed that the Commission requested and received duplicate reimbursements for leave totaling $11,042.44. Additionally, reimbursements were submitted and received for taxes withheld from employees totaling $62,372.97 which were not considered expenses of the Commission. Controls were not in place to ensure all reimbursement requests for Coronavirus Relief Funds were calculated and reported correctly. As a result, the Commission received reimbursements from Coronavirus Relief Funds in excess of what was allowable.
2021‐001 – Internal Controls over Activities Allowed and Allowable Costs – Significant Deficiency in Internal Controls over Compliance Federal Program Information: Funding Agency: U.S. Department of Health and Human Services Title: Provider Relief Fund CFDA Number: 93.498 Federal Award Identification number Award Year: 2020‐21 Condition: There were 2 samples that the Entity could not provide supporting documentation and 21 samples that the employee was not paid the approved pay rate. Criteria: Per 2 CFR section 200.303(a) the 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 section 200.403(g) – in order to be allowable under Federal awards, costs must be adequately documented and Per 2 CFR section 200.430(i) – Compensation – personal services – Standards for Documentation of Personnel Expenses, Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Questioned costs: Employee paid a rate other than the approved pay rate. Total dollar amount of $874 was divided by the total payroll population tested to get a 7% error and then multiplied by the total payroll expenditures of the program to get a questioned costs of $6,848. Effect: The Entity paid employees time at a rate not approved. In addition the Entity did not retain supporting documentation. Cause: The Entity did not retain supporting documentation for expenditures paid with federal funding and did not have approved pay rate documentation to support the pay rate employee was paid. Auditors’ Recommendation: The Auditor recommends that the Entity implement controls for documenting and retaining information on expenditures charged to federal awards to follow the requirements over 2 CFR Section 200.430(g)(i) and in addition the Entity is properly paying employees at the approved pay rate. Views of Responsible Officials and Planned Corrective Action: See Corrective Action Plan.
Condition and Context: As noted in findings 2021-001, 2021-003, and 2021-004, ITCN’s internal control over financial reporting and grants management was insufficient to provide the level of assurance necessary to demonstrate compliance with the federal awards. Criteria: 2 CFR §200.303, Internal Controls, requires that non-federal entities 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 comply 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). Cause and Effect: The cause is a lack of resources and oversight of the accounting and financial reporting process. The effect is that ITCN’s financial management system was insufficient to provide accurate financial information with reasonable assurance that ITCN is managing its awards in compliance with federal statutes, regulations and terms and conditions of its federal awards. Recommendation: We recommend that ITCN implement the recommendations noted in findings 2021-001, 2021-003, and 2021-004. Management’s Response: ITCN’s responsible officials’ views and planned corrective action are in its corrective action plan at the end of the report.
Condition and Context: As noted in findings 2021-001, 2021-003, and 2021-004, ITCN’s internal control over financial reporting and grants management was insufficient to provide the level of assurance necessary to demonstrate compliance with the federal awards. Criteria: 2 CFR §200.303, Internal Controls, requires that non-federal entities 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 comply 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). Cause and Effect: The cause is a lack of resources and oversight of the accounting and financial reporting process. The effect is that ITCN’s financial management system was insufficient to provide accurate financial information with reasonable assurance that ITCN is managing its awards in compliance with federal statutes, regulations and terms and conditions of its federal awards. Recommendation: We recommend that ITCN implement the recommendations noted in findings 2021-001, 2021-003, and 2021-004. Management’s Response: ITCN’s responsible officials’ views and planned corrective action are in its corrective action plan at the end of the report.
Condition and Context: As noted in findings 2021-001, 2021-003, and 2021-004, ITCN’s internal control over financial reporting and grants management was insufficient to provide the level of assurance necessary to demonstrate compliance with the federal awards. Criteria: 2 CFR §200.303, Internal Controls, requires that non-federal entities 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 comply 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). Cause and Effect: The cause is a lack of resources and oversight of the accounting and financial reporting process. The effect is that ITCN’s financial management system was insufficient to provide accurate financial information with reasonable assurance that ITCN is managing its awards in compliance with federal statutes, regulations and terms and conditions of its federal awards. Recommendation: We recommend that ITCN implement the recommendations noted in findings 2021-001, 2021-003, and 2021-004. Management’s Response: ITCN’s responsible officials’ views and planned corrective action are in its corrective action plan at the end of the report.
Condition and Context: As noted in findings 2021-001, 2021-003, and 2021-004, ITCN’s internal control over financial reporting and grants management was insufficient to provide the level of assurance necessary to demonstrate compliance with the federal awards. Criteria: 2 CFR §200.303, Internal Controls, requires that non-federal entities 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 comply 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). Cause and Effect: The cause is a lack of resources and oversight of the accounting and financial reporting process. The effect is that ITCN’s financial management system was insufficient to provide accurate financial information with reasonable assurance that ITCN is managing its awards in compliance with federal statutes, regulations and terms and conditions of its federal awards. Recommendation: We recommend that ITCN implement the recommendations noted in findings 2021-001, 2021-003, and 2021-004. Management’s Response: ITCN’s responsible officials’ views and planned corrective action are in its corrective action plan at the end of the report.
Condition and Context: As noted in findings 2021-001, 2021-003, and 2021-004, ITCN’s internal control over financial reporting and grants management was insufficient to provide the level of assurance necessary to demonstrate compliance with the federal awards. Criteria: 2 CFR §200.303, Internal Controls, requires that non-federal entities 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 comply 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). Cause and Effect: The cause is a lack of resources and oversight of the accounting and financial reporting process. The effect is that ITCN’s financial management system was insufficient to provide accurate financial information with reasonable assurance that ITCN is managing its awards in compliance with federal statutes, regulations and terms and conditions of its federal awards. Recommendation: We recommend that ITCN implement the recommendations noted in findings 2021-001, 2021-003, and 2021-004. Management’s Response: ITCN’s responsible officials’ views and planned corrective action are in its corrective action plan at the end of the report.
Finding 2021-001 Federal Program Title – Airport Improvement Program and COVID-19 Airport Improvement Program Assistance Listing No. – 20.106 Federal Agency – U.S. Department of Transportation – Direct Program Federal Award Number – 30601270472020 Grant Award Periods – May 7, 2020 to May 6, 2024 Compliance Requirement – Reporting Criteria: As set forth in 2 CFR 200.328, the Federal Financial Report, SF 425, must be collected with the frequency required by the terms and conditions of the federal award, but no less frequently than annually nor more frequently than quarterly except in unusual circumstances. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Conditions Found: The City did not have an effective system of internal control in place to ensure the reports that are required to be submitted to the U.S. Department of Transportation were accurate. We selected a sample of nine reports and determined that one report omitted $18.4 million in payroll and payroll-related costs of which $3.6 million are costs incurred during the fiscal year ended September 30, 2021. Questioned Costs: There are no questioned costs. Context: The City is required to submit annual federal financial reports related to the Airport Improvement Program that include all disbursements for direct charges for property and services; the amount of indirect expense incurred; and the net increase or decrease in the amounts owed by the recipient for (1) goods and other property received; (2) services performed by employees, contractors, subrecipients, and other payees; and (3) programs for which no current services or performance are required. Cause and Effect: City management indicated that interpretation of the reporting requirements was that payments made to employees for services provided were required to be omitted from the SF 425 report. As a result, the reports submitted omitted $18.4 million in payroll and payroll-related costs. Repeat Finding: A similar finding was not reported in the prior-year audit. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the City strengthen processes and internal controls to ensure the City has an effective internal control in place to ensure that reports are complete and accurate prior to submitting to the U.S. Department of Transportation as required. View of Responsible Official: The subject Airport Improvement Program (AIP) grant for COVID-19 related funding was used solely for internal City payroll-related expenditures and debt service payments, which is different from other previous AIP grants received by the Airport Department. The misinterpretation of reporting requirements for the new grant led to an error on the Federal Financial Report SF 425. The Airport Department will be providing more training to staff that are involved with the preparation, review and approval of the reports to reduce the risk of misinterpreting reporting requirements. The Airport Department will also strengthen internal controls by requiring at least two levels of review for Federal Financial Report SF 425, prior to submission. These improvements to the process will ensure that reports are complete and accurate.
Finding 2021-002 Federal Program: Transportation Infrastructure Finance and Innovation Act (TIFIA) Program ALN Number: 20.223 Federal Agency: U.S. Department of Transportation – Direct Program Federal Award Year: 2021 Grant number: N/A Compliance Requirement: Other – Inaccurate reporting of the Schedule of Expenditures of Federal Awards Criteria: According to 2 CFR 200.510(b), a recipient of federal awards is required to prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with 2 CFR 200.502. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure federal expenditures are accurately and completely reported on the SEFA. Conditions Found: The City did not have adequate internal controls related to the reporting of expenditures on the SEFA for the Transportation Infrastructure Finance and Innovation Act (TIFIA) Program. In 2007, the City completed plans for the reconstruction of the Gerald Desmond Bridge (Harbor Bridge), which was a $1.6 billion design, development, and construction project that included multiple funding sources, including federal, state, and private funds. During fiscal year 2014, the City entered into a loan agreement with the U.S. Department of Transportation for $325,000,000 of TIFIA Program funds. During fiscal year 2020, the loan agreement was modified for $500,000,000 of TIFIA Program funds. The executed loan agreement contained a clause that the TIFIA Program loan funds were not available to be drawn until the Harbor Bridge was certified as substantially complete. In January 2021 (fiscal year 2021) the Harbor Bridge was certified as substantially complete and the TIFIA Program loan was made. As a result, the City should have reported the $500,000,000 TIFIA Program loan on the SEFA for the year ended September 30, 2021. Cause and Effect: In discussing these conditions with the City, they stated the error was primarily due to the TIFIA Program not being a traditional federal award where expenses were reimbursed as incurred. When the City certified the substantial completion of the Harbor Bridge project and the TIFIA Program loan was made during fiscal year 2021, the City was not aware the TIFIA Program loan was reportable on the SEFA. Additionally, the management review controls in place over the completeness and accuracy of the SEFA were not designed to detect the error. Failure to establish effective internal controls regarding financial reporting for the preparation of the Schedule may prevent the City from completing an audit in accordance with the timelines of Uniform Guidance. Questioned Costs: Not applicable. Statistical Sampling: Not applicable. Repeat Finding: A similar finding was reported in the prior year report. Recommendation: We recommend the City implement a system of internal control that is designed and operating at a level of precision to ensure the Schedule is complete and accurate. View of Responsible Official: The Harbor Department was not aware that a TIFIA loan was required to be reported on the SEFA. Our understanding of the SEFA is to report the federal share of expenditures. TIFIA loan expenditures are comprised of the expenses for which no grant reimbursement was sought, therefore, these expenses are the cost share or local share, not the federal share. The Harbor Department now understands that all federal assistance including loans should be reported on the SEFA. KPMG has been the City’s auditor since 2001 and was aware of the TIFIA loan agreement in 2014 and the TIFIA loan draw down in 2021. KPMG did not inform us that the TIFIA loan was required to be reported on the SEFA when they performed the single audit in 2021.
Finding No.: 2021-003 Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34839-20-55-A-70 Area: Activities Allowed or Unallowed Questioned Costs: $11,820 Criteria: 1. In accordance with 2 CFR Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award Section 200.303, grant recipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 2. In accordance with applicable program requirements, funds may be used only for the payment of Pandemic Unemployment Assistance (PUA) benefits and for PUA-related state administrative costs. Condition: During the audit, the following matters were noted: 1. Internal control over the administration of activities allowed or unallowed requirements are not implemented. The Republic’s internal controls are unlikely to operate effectively, as we cannot verify the controls implemented in the program. This is due to the unavailability of the individuals responsible for performing these controls during the audit fieldwork. 2. For 9 (or 4%) of 60 transactions tested, aggregating $43,674 of $16.2 million in total program expenditures, deductions of $11,820 were deducted from PUA and FPUC benefits as follows: No. Claim ID Date PUA FPUC Total Benefits Withholding SS HCF ROP Cross Act Total Deductions Net Amount Disbursed Amount 1 43381 10/02/2020 $3,176 $4,800 7,976 $883 $559 $199 $200 $1,841 $6,135 $6,135 2 43562 10/16/2020 3,573 5,400 8,973 823 628 224 800 2,475 6,498 6,498 3 43825 11/13/2020 3,573 – 3,573 346 250 89 – 685 2,888 2,888 4 43701 11/13/2020 5,161 – 5,161 499 362 129 – 990 4,171 4,171 5 43882 11/17/2020 4,367 – 4,367 423 305 109 – 837 3,530 3,530 6 43967 11/20/2020 5,161 – 5,161 499 362 129 – 990 4,171 4,171 7 44077 12/02/2020 5,161 – 5,161 499 362 129 – 990 4,171 4,171 8 44127 12/11/2020 5,161 4,800 9,961 1,075 698 249 – 2,022 7,939 7,939 9 44268 12/23/2020 5,161 – 5,161 499 362 129 – 990 4,171 4,171 Total: $40,494 $15,000 $55,494 $5,546 $3,888 $1,386 $1,000 $11,820 $43,674 $43,674 Cause: The Republic did not maintain effective internal controls over management of the program or monitor compliance with applicable activities allowed or unallowed requirements. Effect: Condition 1: The Republic is not in compliance with applicable internal control requirements. This represents a material weakness, and the Compliance reports is modified accordingly. Condition 2: The Republic is in noncompliance with applicable activities allowed or unallowed requirements. The reportable questioned cost is $11,820. Recommendation: The Republic should establish and maintain internal controls over the administration of the program and effectively monitor program costs for compliance with allowable costs requirements. The Republic should establish and maintain internal controls and document roles and processes to address potential future personnel turnover. Views of Responsible Officials: The Republic’s Corrective Action Plan does not indicate disagreement and provides planned corrective action. The identified questioned costs were subsequently refunded in FY2022 and FY2023.
Finding Number: 2021-006 Prior Year Finding Number: 2020-007 Compliance Requirement: Reporting Program: U.S. Department of Commerce Economic Development Cluster ALN: 11.307 Award #: 01-01-14843, 01-01-14844 Award Year: 03/06/19 – 06/06/22 03/06/19 – 05/21/22 Criteria – Each non-Federal entity must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 5 (2 financial, 3 performance) out of the 12 reports (4 financial, 8 performance) required to be submitted during the fiscal year and noted that 2 performance reports tested did not contain evidence of proper segregation of duties. The same individual prepared and reviewed each report. Cause – It appears that policies and procedures, including review over reporting procedures, were not functioning as intended. Effect or Potential Effect – The lack of effective internal controls over compliance can potentially lead to the reporting of inaccurate or incomplete information to the Federal Government. Questioned Costs – None. Context – We tested a sample of 5 reports and found 2 exceptions, as noted in the condition. This is a condition identified per review of the Authority’s compliance with the specified requirements not using a statistically valid sample. Recommendation – We recommend that management implement procedures to ensure proper segregation of duties in the preparation and review of reports. Specifically, the individual responsible for preparing the report should not be the same person reviewing and approving it. Management should assign separate personnel for the preparation and independent review of all required reports, and maintain documentation evidencing both roles. Views of Responsible Officials - The Authority concurs with the auditor’s findings and recommendations. The Authority will implement measures to ensure proper monitoring and review of the required reports by an appropriate official. The planned corrective actions are presented in the Authority’s Corrective Action Plan, which is attached as Appendix B.
Finding Number: 2021-008 Prior Year Finding Number: 2020-008 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Transportation Airport Improvement Program ALN: 20.106 Award #: Various Award Year: Various Criteria – Per 2 CFR section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and conditions of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Further, a physical inventory of equipment should be taken at least once every 2 years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We noted that the Authority maintains an equipment listing for fixed assets purchased with federal funding. However, the Authority was unable to provide complete property records which met the stated requirements. Additionally, the Authority did not conduct a physical inventory count of equipment in the last two years. The most recent physical inventory count was performed during fiscal year 2017. Further, it does not appear that internal controls over compliance are operating at a level of precision to ensure compliance with the equipment management compliance requirements. Cause – The internal controls established for the records maintenance and physical inventory count did not fully operate as designed causing the Authority to fall out of compliance with the required timing of such physical inventory count. Effect or Potential Effect – There is a risk that inadequate monitoring of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Questioned Costs – None. Context – This is a condition identified per review of the Authority’s compliance with the specified requirements. Recommendation – We recommend that the Authority improve internal controls to ensure adherence to Federal regulations related to equipment record maintenance and physical inventory counts. There should be timely coordination and communication among all departments responsible for handling and managing such assets. Views of Responsible Officials - The Authority concurs with the auditor’s findings and recommendations. The Authority recognize the importance of maintaining accurate and complete property records for fixed assets purchased with federal funding. A complete fixed asset inventory was conducted in 2023 and is now performed annually. The planned corrective actions are presented in the Authority’s Corrective Action Plan, which is attached as Appendix B.
Finding Number: 2021-009 Prior Year Finding Number: 2020-009 Compliance Requirement: Reporting Program: U.S. Department of Transportation Airport Improvement Program ALN: 20.106 Award #: Various Award Year: Various Criteria – Each non-Federal entity must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 18 (10 financial and 8 performance) out of the 53 (31 financial and 22 performance) reports required to be submitted during the fiscal year and noted the following: • 8 performance reports did not contain evidence of review and approval. • 1 financial report and 8 performance reports did not contain evidence of submission. • 1 financial report was not submitted in a timely manner (206 days late). Cause – It appears that policies and procedures, including review over reporting procedures, were not functioning as intended. Effect or Potential Effect – The Authority is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Failure to submit required reports could result in reduction or disallowance of Federal funding. Questioned Costs – None. Context – We tested a sample of 18 reports and found 10 exceptions as noted in the condition. This is a condition identified per review of the Authority’s compliance with the specified requirements not using a statistically valid sample. Recommendation – We recommend that the Authority reevaluate its policies and procedures to ensure proper monitoring and review of the required reports by an appropriate official who would ensure the information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials - The Authority concurs with the auditor’s findings and recommendations. The Authority will implement measures to ensure proper monitoring and review of the required reports by an appropriate official. The planned corrective actions are presented in the Authority’s Corrective Action Plan, which is attached as Appendix B.
Finding Number: 2021-007 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed/Allowable Costs/Cost Principles Program: U.S. Department of Transportation COVID-19 Airport Improvement Program ALN: 20.106 Award #: 3-78-0001-043-2020 Award Period: 5/12/2020 – 5/12/2024 Criteria – Per the grant award, funds may be used to reimburse operational and maintenance expenses directly related to the Sponsor-owned and operated Airports, incurred no earlier than January 20, 2020. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal award. Condition – During our testing of payroll expenditures incurred throughout the year, we noted for one pay period, the Authority sought and received reimbursement for payroll activities unrelated to Sponsor-owned and operated Airports. The total reimbursement amount of $632,113 exceeded the actual payroll expenditures for Sponsor-owned and operated airports, which totaled $553,075. The difference of $79,038 was related to the operations of the Authority’s Marine division. Cause – The Authority does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles or to ensure that an appropriate level of review and approval is completed prior to charging costs to a federal program. Effect or Potential Effect – An ineffective control system for reviewing transactions to ensure that only allowable costs and allowable activities are allocated to federal programs can result in noncompliance with federal statutes, regulations, and the provisions of grant agreements, which could ultimately lead to disallowed costs for major programs. Questioned Costs – $79,038. Context – This is a condition identified per review of the Authority’s compliance with the specified requirements. The exception noted was not part of a statistically valid sample. Recommendation – We recommend that the Authority reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirements for expending and accounting for payroll, and to ensure proper and accurate allocation of payroll costs. Views of Responsible Officials - The Authority concurs with the auditor’s findings and recommendations. The Authority will implement measures to ensure proper monitoring and review are completed prior to charging costs to a federal program. The planned corrective actions are presented in the Authority’s Corrective Action Plan, which is attached as Appendix B.
Finding Number: 2021-008 Prior Year Finding Number: 2020-008 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Transportation Airport Improvement Program ALN: 20.106 Award #: Various Award Year: Various Criteria – Per 2 CFR section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and conditions of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Further, a physical inventory of equipment should be taken at least once every 2 years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We noted that the Authority maintains an equipment listing for fixed assets purchased with federal funding. However, the Authority was unable to provide complete property records which met the stated requirements. Additionally, the Authority did not conduct a physical inventory count of equipment in the last two years. The most recent physical inventory count was performed during fiscal year 2017. Further, it does not appear that internal controls over compliance are operating at a level of precision to ensure compliance with the equipment management compliance requirements. Cause – The internal controls established for the records maintenance and physical inventory count did not fully operate as designed causing the Authority to fall out of compliance with the required timing of such physical inventory count. Effect or Potential Effect – There is a risk that inadequate monitoring of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Questioned Costs – None. Context – This is a condition identified per review of the Authority’s compliance with the specified requirements. Recommendation – We recommend that the Authority improve internal controls to ensure adherence to Federal regulations related to equipment record maintenance and physical inventory counts. There should be timely coordination and communication among all departments responsible for handling and managing such assets. Views of Responsible Officials - The Authority concurs with the auditor’s findings and recommendations. The Authority recognize the importance of maintaining accurate and complete property records for fixed assets purchased with federal funding. A complete fixed asset inventory was conducted in 2023 and is now performed annually. The planned corrective actions are presented in the Authority’s Corrective Action Plan, which is attached as Appendix B.
Finding Number: 2021-009 Prior Year Finding Number: 2020-009 Compliance Requirement: Reporting Program: U.S. Department of Transportation Airport Improvement Program ALN: 20.106 Award #: Various Award Year: Various Criteria – Each non-Federal entity must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 18 (10 financial and 8 performance) out of the 53 (31 financial and 22 performance) reports required to be submitted during the fiscal year and noted the following: • 8 performance reports did not contain evidence of review and approval. • 1 financial report and 8 performance reports did not contain evidence of submission. • 1 financial report was not submitted in a timely manner (206 days late). Cause – It appears that policies and procedures, including review over reporting procedures, were not functioning as intended. Effect or Potential Effect – The Authority is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Failure to submit required reports could result in reduction or disallowance of Federal funding. Questioned Costs – None. Context – We tested a sample of 18 reports and found 10 exceptions as noted in the condition. This is a condition identified per review of the Authority’s compliance with the specified requirements not using a statistically valid sample. Recommendation – We recommend that the Authority reevaluate its policies and procedures to ensure proper monitoring and review of the required reports by an appropriate official who would ensure the information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials - The Authority concurs with the auditor’s findings and recommendations. The Authority will implement measures to ensure proper monitoring and review of the required reports by an appropriate official. The planned corrective actions are presented in the Authority’s Corrective Action Plan, which is attached as Appendix B.
Finding Number: 2021-011 Prior Year Finding Number: 2020-010 Compliance Requirement: Reporting Program: U.S. Department of Transportation National Infrastructure Investments ALN: 20.933 Award #: DTMA91G1600010 Award Year: 02/01/2017 - 03/31/2022 Criteria – Each non-Federal entity must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 7 (2 financial and 5 special reports) out of the 13 (4 financial and 9 special) reports required to be submitted during the fiscal year and noted the following: • 3 special reports were not submitted. • 2 special reports did not contain evidence of review and approval. • 2 special reports were not submitted in a timely manner (22 and 40 days late). Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Effect or Potential Effect – The Authority is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Failure to submit required reports could result in reduction or disallowance of Federal funding. Questioned Costs – None. Context – We tested a sample of 7 reports and found 5 exceptions as noted in the condition. This is a condition identified per review of the Authority’s compliance with the specified requirements not using a statistically valid sample. Recommendation – We recommend that the Authority reevaluate its policies and procedures to ensure proper monitoring and review of the required reports by an appropriate official who would ensure the information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials - The Authority concurs with the auditor’s findings and recommendations. The Authority will implement measures to ensure proper monitoring and review of the required reports by an appropriate official. The planned corrective actions are presented in the Authority’s Corrective Action Plan, which is attached as Appendix B.