2023-001 U.S. Department of Treasury & Passed through the Commonwealth of Massachusetts Executive Office of Public Safety and Homeland Security COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – AL# 21.027 Criteria: Per 2 CFR section 200.328 of the Uniform Guidance, each recipient must report program outlays and program income on a cash or accrual basis, as prescribed by the federal awarding agency. The compliance supplement identifies four Key Line Items required to be reported to the federal awarding agency which include (1) current period obligation, (2) cumulative obligation, (3) current period expenditure and (4) cumulative expenditure. Condition: As of the June 30, 2023 reporting date, the City’s Project and Expenditure Reports understated expenditures by $629,040. Also, obligations were overstated by approximately $15,000,000. Cause: The City did not reconcile the Project and Expenditure report with the City’s general ledger before submitting. The City also considered City departments as subrecipients which caused them to report departmental agreements as obligations. Effect: The City did not properly report grant expenditures and obligations in the Project and Expenditure reporting. Questioned Costs: None Repeat Finding from Prior Year: Yes; Finding 2022-002 Recommendation: The City should implement procedures to reconcile the financial information in the Project and Expenditure reports to the City’s general ledger and contract files before submission. Views of Responsible Official: Management agrees with the finding, but notes that there was confusion with the US Treasury portal and the City reached out to the US Treasury and received clarification on reporting obligations moving forward. Additionally, the US Treasury issued in November 2023 the Obligation Interim Final Rule to address questions and comments regarding the definition of obligation by recipients. In addition, it revises the definition of “obligation” in US Treasury’s SLFRF program. Anticipated completion date of the corrective action is April 30, 2024.
Federal Awarding Agency: U.S. Department of Transportation (USDOT) Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.106 Airport Improvement Program (AIP) Federal Award Number: Indeterminate Applicable Compliance Requirement: Reporting Condition: One of four randomly selected (25 percent) and two of three judgmentally selected (67 percent) 5100-126 reports tested did not tie to support, resulting in an overstatement of expenditures. One of three judgmentally selected 5100-127 reports tested (33 percent) had multiple lines in error, resulting in overstatements of revenue and net assets. Context: Commercial service airports that enplane 2,500 or more passengers in a calendar year and provided commercial service in the preceding calendar year are required to annually file financial reports with the Federal Aviation Administration (FAA). Each commercial service airport must file: (1) The Financial Government Payment Report, FAA Form 5100-126. The form reports payments the airport makes to government entities, the service the airport performs for governmental entities, and the land and facilities that the airport provides to such entities. (2) The Operating and Financial Summary, FAA Form 5100-127. The form reports airport revenues, expenses, and other financial information. The State of Alaska filed multiple 5100-126 reports for each airport that met the criteria above for payments to governmental entities. Errors on the tested 5100-126 reports included overstatements of expenditures as shown in the table below. [See Schedule of Findings and Questioned Costs for chart/table.] The State of Alaska filed 5100-127 reports for Anchorage International Airport, Fairbanks International Airport, Lake Hood Airport, and an Alaska Consolidated report encompassing all other State-owned airports that met the above criteria. All FY 23 5100-127 reports were tested, except for Lake Hood Airport. Errors were identified on the 5100-127 Alaska Consolidated report as shown below. [See Schedule of Findings and Questioned Costs for chart/table.] Cause: The Alaska Consolidated 5100-126 report expenditure overstatement was due to a clerical error when DOTPF staff added information for an airport that was not previously reported. Supervisory review procedures were insufficient to detect and correct the error. According to Alaska International Airport (AIA) management, a lack of written procedures for the preparation and review of the annual 5100-126 reports and staff turnover resulted in the overreporting of expenditures for the Anchorage and Fairbanks International Airport 5100-126 reports. Additionally, AIA management lacked written procedures for the preparation and review of the annual 5100-127 report. The Alaska Consolidated 5100-127 report overstatement errors were due to insufficient review procedures by DOTPF staff of information provided from an external source for the Ketchikan and Sitka airports, which are State-owned. Criteria: Title 2 CFR 200.328 requires states to report financial information on the forms approved by the federal Office of Management and Budget (OMB), with the frequency required by the terms and conditions of the federal award. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: The ineffective internal controls resulted in inaccurate federal reporting. Inaccurate federal reporting may impair federal decision-making and may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DOTPF’s DAS director should ensure report preparation procedures are followed and updated to include supervisory review of documentation prior to report submission. AIA’s controller should develop and implement written procedures for the 5100 126 and 5100-127 reports. View of Responsible Officials: Management agrees with this finding. [See Schedule of Findings and Questioned Costs for footnote.]
Federal Awarding Agency: U.S. Department of Transportation (USDOT) Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.106 Airport Improvement Program (AIP) Federal Award Number: Indeterminate Applicable Compliance Requirement: Reporting Condition: One of four randomly selected (25 percent) and two of three judgmentally selected (67 percent) 5100-126 reports tested did not tie to support, resulting in an overstatement of expenditures. One of three judgmentally selected 5100-127 reports tested (33 percent) had multiple lines in error, resulting in overstatements of revenue and net assets. Context: Commercial service airports that enplane 2,500 or more passengers in a calendar year and provided commercial service in the preceding calendar year are required to annually file financial reports with the Federal Aviation Administration (FAA). Each commercial service airport must file: (1) The Financial Government Payment Report, FAA Form 5100-126. The form reports payments the airport makes to government entities, the service the airport performs for governmental entities, and the land and facilities that the airport provides to such entities. (2) The Operating and Financial Summary, FAA Form 5100-127. The form reports airport revenues, expenses, and other financial information. The State of Alaska filed multiple 5100-126 reports for each airport that met the criteria above for payments to governmental entities. Errors on the tested 5100-126 reports included overstatements of expenditures as shown in the table below. [See Schedule of Findings and Questioned Costs for chart/table.] The State of Alaska filed 5100-127 reports for Anchorage International Airport, Fairbanks International Airport, Lake Hood Airport, and an Alaska Consolidated report encompassing all other State-owned airports that met the above criteria. All FY 23 5100-127 reports were tested, except for Lake Hood Airport. Errors were identified on the 5100-127 Alaska Consolidated report as shown below. [See Schedule of Findings and Questioned Costs for chart/table.] Cause: The Alaska Consolidated 5100-126 report expenditure overstatement was due to a clerical error when DOTPF staff added information for an airport that was not previously reported. Supervisory review procedures were insufficient to detect and correct the error. According to Alaska International Airport (AIA) management, a lack of written procedures for the preparation and review of the annual 5100-126 reports and staff turnover resulted in the overreporting of expenditures for the Anchorage and Fairbanks International Airport 5100-126 reports. Additionally, AIA management lacked written procedures for the preparation and review of the annual 5100-127 report. The Alaska Consolidated 5100-127 report overstatement errors were due to insufficient review procedures by DOTPF staff of information provided from an external source for the Ketchikan and Sitka airports, which are State-owned. Criteria: Title 2 CFR 200.328 requires states to report financial information on the forms approved by the federal Office of Management and Budget (OMB), with the frequency required by the terms and conditions of the federal award. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: The ineffective internal controls resulted in inaccurate federal reporting. Inaccurate federal reporting may impair federal decision-making and may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DOTPF’s DAS director should ensure report preparation procedures are followed and updated to include supervisory review of documentation prior to report submission. AIA’s controller should develop and implement written procedures for the 5100 126 and 5100-127 reports. View of Responsible Officials: Management agrees with this finding. [See Schedule of Findings and Questioned Costs for footnote.]
2023-030 The Office of Financial Management did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Reporting Known Questioned Cost Amount: None Prior Year Audit Finding: Yes, Finding 2022-020 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. The program also provides resources to fight the pandemic, address economic impacts, maintain vital public services, and build a strong, resilient, and equitable recovery. Washington received about $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, Washington spent more than $1.8 billion in federal program funds. Under the SLFRF program, recipients are required to submit Project and Expenditure Reports during the covered period, which began March 3, 2021, and ends December 31, 2024. Treasury identified the following key line items that contain critical information: 1. Obligations and Expenditures a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure 2. Revenue loss calculation validation 3. Capital Expenditures The Office was responsible for compiling information from state agencies and submitting the reports no later than the last day of the month following the end of each reporting period. The Office was also responsible for calculating and reporting the state’s revenue losses from the pandemic, as well as identifying SLFRF projects with capital expenditures that required written justifications. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. The prior finding number was 2022-020. Description of Condition The Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. During the audit period, the Office submitted four quarterly Project and Expenditure Reports: • Report No. 4 (covering activity from July 1, 2022, through September 30, 2022) • Report No. 5 (covering activity from October 1, 2022, through December 31, 2022) • Report No. 6 (covering activity from January 1, 2023, through March 31, 2023) • Report No. 7 (covering activity from April 1, 2023, through June 30, 2023) Office staff prepared the reports by collecting and compiling reporting information from each state agency. For all four reports, we found that the Office did not have adequate supporting documentation for amounts reported under current period and cumulative obligations. We also found the Office did not have adequate internal controls to ensure material compliance with the capital expenditure requirement. We identified 14 out of 95 projects for which the Office did not follow up to determine whether there were capital expenditures incurred. Eight projects had expenditures greater than $1 million during fiscal year 2023, and two of those projects required written justifications. We found the Office did not have the required written justifications for two out of eight (25 percent) projects. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition The Office did not require state agencies to include supporting documentation when they reported their obligations at the end of each reporting period. Instead, the Office relied on self-reporting by agencies without ensuring supporting documentation was provided and retained. In addition, management did not ensure that information provided by agencies was reviewed to ensure the project and expenditure reports are complete, accurate, and adequately supported. In addition, the Office was unable to confirm all information reported for capital expenditures was adequately supported. Effect of Condition We focused our review on the obligation and expenditure key line items for the Department of Commerce (Commerce) and Department of Social and Health Services (DSHS). Combined, these two agencies accounted for about 57 percent of total SLFRF expenditures during fiscal year 2023. We determined that both agencies’ current period and cumulative expenditures were accurate and supported, and any variances were not material to the overall reporting. However, we were unable to confirm whether the supporting documentation for both agencies’ reported obligations accounted for all activity during each reporting period. Therefore, our estimates of overreported and underreported obligations for both agencies in the tables below are based on the agency reports for obligations available at the time of the audit. Commerce We found that the current period obligations for Commerce in all four reports did not have adequate supporting documentation. We also found that cumulative obligations for Commerce in all four reports did not have adequate supporting documentation. As of the final fiscal year 2023 report, Commerce’s cumulative obligations totaled $985,274,734 and cumulative expenditures totaled $783,360,809. Because Commerce’s expenditures were accurate and supported, we calculated the variance to be the net of the unsupported obligations minus supported expenditures, or $201,913,924 (difference due to rounding). DSHS In two reports, we identified reporting variances for current period obligations reported for DSHS, including $7,158,350 in overreported obligations in Report No. 7. DSHS reported $17,781,970 in current obligations for Report No. 7. We also found that cumulative obligations were underreported by $1,445,556 compared to estimated expected obligations of $363,451,530. To determine the magnitude of the reporting variances, we totaled the largest current period obligation variance for DSHS with the net unsupported obligations for Commerce. This totaled $209,081,184, or about 11 percent of total SLFRF expenditures during fiscal year 2023. Our determination of the variance is an estimate because documentation necessary to calculate accurate obligation amounts for each reporting period was not available. By not establishing adequate internal controls, the Office cannot ensure that information reported to the federal grantor is complete and accurate. Without complete supporting documentation for obligations, management is not able to demonstrate that amounts reported to the federal grantor are complete and accurate. Recommendations We recommend the Office: • Establish internal controls to ensure reported obligations are supported by source documentation, which should be retained and available for review • Improve internal controls to ensure staff continue to follow up with agencies that report incomplete information • Ensure that management verifies reporting information is adequately supported before certifying and submitting the report Office’s Response The Office will continue to communicate to agencies the importance of maintaining adequate source supporting documentation for future project and expenditure reports. Although a complete cumulative obligations report as of the report date was not maintained supporting the project and expenditure report, all obligations are supported by grant agreements, contracts, and purchase orders. Additionally, the Office was able to provide the auditor a current report including all obligations to date which exceeded the cumulative obligations during the reporting period. The Office continues to improve the reporting template used to collect the required information from agencies and frequently meets with agencies to discuss the reporting requirements to ensure the quarterly Project and Expenditure Reports are complete, accurate, and supported. The Office will continue its review and verification process to ensure information is adequately supported before certifying and submitting the report. As noted in the U.S. Treasury reporting guidance, corrections or any changes to the report need to be reflected in the next Project and Expenditure report. As a result, the supporting documentation for the quarter may not align with the quarterly reports. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Office of Management and Budget, 2 CFR Part 200, Appendix XI, 2023 Compliance Supplement, for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds, states in part: L. Reporting 2. Performance Reporting Title of Report: Project and Expenditure Report PRA Number: 1505-0271 Reporting Cycle: Quarterly and Annual Authoritative Requirement: 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information Blank Copy of the Report: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Instructions: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Corrections: Recipients will have an opportunity to reopen and provide edits to their submitted Project and Expenditure Reports any time before the reporting deadline. Recipients will then be required to re-certify and submit the report again to properly reflect any edits made. After the reporting deadline, unless prompted by Treasury staff, recipients will not be able to edit their submitted report, any changes or revisions will need to be reflected in the next Project and Expenditure report. The Office of Recovery Program’s (ORP) reporting portal has built-in functionality to reopen a report and allow recipients to make edits after the reporting deadline. However, it is ORP’s policy that recipients may only make revisions if authorized by Treasury staff for a period of up to 60 days after the reporting deadline. After the revision period ends, the report is final. A resubmitted report becomes a recipient’s final report within ORP’s reporting portal. Recipients can generate PDFs of this reports at any time. Key Line Item(s)- The following line items contain critical information: 1. Obligations and Expenditures- Quantifiable Objective Criteria: Reported obligations and expenditures. (See pages 16 and 17 of the above links.) a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure Revenue loss calculation validation- Note- Recipients may elect a “standard allowance” of up to $10 million to spend on government services through the period of performance instead of using the full formula specified in the final rule. The standard allowance is available to all recipients. See page 30 for when recipients may modify their revenue loss election. Quantifiable Objective Criteria: Recipient’s application of the revenue loss calculation is accurate if they did not elect the standard allowance. Specific information regarding the revenue loss formula can be found in paragraph (d)(2) of 31 CFR § 35.6 at 31 CFR § 35.6(d)(2)(d)(2). Capital Expenditures- Quantifiable Objective Criteria: The recipient has the required written justification in their grant file if the total of the capital expenditures costs in a project is greater than or equal to $1 million and less than $10 million; or, the recipient submitted the required justification to Treasury if (1) a project has total capital expenditures costs greater than $10 million for capital expenditures enumerated by Treasury in the final rule; or (2) the total of a project’s capital expenditures costs is greater than $1 million for capital expenditures not enumerated by Treasury in the final rule. Note: Capital expenditures paid for using revenue replacement funds are not subject to this requirement. Tribal governments are not required to complete the written justification. (See 31 CFR section 35.6(b)(4))
2023-030 The Office of Financial Management did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Reporting Known Questioned Cost Amount: None Prior Year Audit Finding: Yes, Finding 2022-020 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. The program also provides resources to fight the pandemic, address economic impacts, maintain vital public services, and build a strong, resilient, and equitable recovery. Washington received about $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, Washington spent more than $1.8 billion in federal program funds. Under the SLFRF program, recipients are required to submit Project and Expenditure Reports during the covered period, which began March 3, 2021, and ends December 31, 2024. Treasury identified the following key line items that contain critical information: 1. Obligations and Expenditures a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure 2. Revenue loss calculation validation 3. Capital Expenditures The Office was responsible for compiling information from state agencies and submitting the reports no later than the last day of the month following the end of each reporting period. The Office was also responsible for calculating and reporting the state’s revenue losses from the pandemic, as well as identifying SLFRF projects with capital expenditures that required written justifications. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. The prior finding number was 2022-020. Description of Condition The Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. During the audit period, the Office submitted four quarterly Project and Expenditure Reports: • Report No. 4 (covering activity from July 1, 2022, through September 30, 2022) • Report No. 5 (covering activity from October 1, 2022, through December 31, 2022) • Report No. 6 (covering activity from January 1, 2023, through March 31, 2023) • Report No. 7 (covering activity from April 1, 2023, through June 30, 2023) Office staff prepared the reports by collecting and compiling reporting information from each state agency. For all four reports, we found that the Office did not have adequate supporting documentation for amounts reported under current period and cumulative obligations. We also found the Office did not have adequate internal controls to ensure material compliance with the capital expenditure requirement. We identified 14 out of 95 projects for which the Office did not follow up to determine whether there were capital expenditures incurred. Eight projects had expenditures greater than $1 million during fiscal year 2023, and two of those projects required written justifications. We found the Office did not have the required written justifications for two out of eight (25 percent) projects. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition The Office did not require state agencies to include supporting documentation when they reported their obligations at the end of each reporting period. Instead, the Office relied on self-reporting by agencies without ensuring supporting documentation was provided and retained. In addition, management did not ensure that information provided by agencies was reviewed to ensure the project and expenditure reports are complete, accurate, and adequately supported. In addition, the Office was unable to confirm all information reported for capital expenditures was adequately supported. Effect of Condition We focused our review on the obligation and expenditure key line items for the Department of Commerce (Commerce) and Department of Social and Health Services (DSHS). Combined, these two agencies accounted for about 57 percent of total SLFRF expenditures during fiscal year 2023. We determined that both agencies’ current period and cumulative expenditures were accurate and supported, and any variances were not material to the overall reporting. However, we were unable to confirm whether the supporting documentation for both agencies’ reported obligations accounted for all activity during each reporting period. Therefore, our estimates of overreported and underreported obligations for both agencies in the tables below are based on the agency reports for obligations available at the time of the audit. Commerce We found that the current period obligations for Commerce in all four reports did not have adequate supporting documentation. We also found that cumulative obligations for Commerce in all four reports did not have adequate supporting documentation. As of the final fiscal year 2023 report, Commerce’s cumulative obligations totaled $985,274,734 and cumulative expenditures totaled $783,360,809. Because Commerce’s expenditures were accurate and supported, we calculated the variance to be the net of the unsupported obligations minus supported expenditures, or $201,913,924 (difference due to rounding). DSHS In two reports, we identified reporting variances for current period obligations reported for DSHS, including $7,158,350 in overreported obligations in Report No. 7. DSHS reported $17,781,970 in current obligations for Report No. 7. We also found that cumulative obligations were underreported by $1,445,556 compared to estimated expected obligations of $363,451,530. To determine the magnitude of the reporting variances, we totaled the largest current period obligation variance for DSHS with the net unsupported obligations for Commerce. This totaled $209,081,184, or about 11 percent of total SLFRF expenditures during fiscal year 2023. Our determination of the variance is an estimate because documentation necessary to calculate accurate obligation amounts for each reporting period was not available. By not establishing adequate internal controls, the Office cannot ensure that information reported to the federal grantor is complete and accurate. Without complete supporting documentation for obligations, management is not able to demonstrate that amounts reported to the federal grantor are complete and accurate. Recommendations We recommend the Office: • Establish internal controls to ensure reported obligations are supported by source documentation, which should be retained and available for review • Improve internal controls to ensure staff continue to follow up with agencies that report incomplete information • Ensure that management verifies reporting information is adequately supported before certifying and submitting the report Office’s Response The Office will continue to communicate to agencies the importance of maintaining adequate source supporting documentation for future project and expenditure reports. Although a complete cumulative obligations report as of the report date was not maintained supporting the project and expenditure report, all obligations are supported by grant agreements, contracts, and purchase orders. Additionally, the Office was able to provide the auditor a current report including all obligations to date which exceeded the cumulative obligations during the reporting period. The Office continues to improve the reporting template used to collect the required information from agencies and frequently meets with agencies to discuss the reporting requirements to ensure the quarterly Project and Expenditure Reports are complete, accurate, and supported. The Office will continue its review and verification process to ensure information is adequately supported before certifying and submitting the report. As noted in the U.S. Treasury reporting guidance, corrections or any changes to the report need to be reflected in the next Project and Expenditure report. As a result, the supporting documentation for the quarter may not align with the quarterly reports. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Office of Management and Budget, 2 CFR Part 200, Appendix XI, 2023 Compliance Supplement, for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds, states in part: L. Reporting 2. Performance Reporting Title of Report: Project and Expenditure Report PRA Number: 1505-0271 Reporting Cycle: Quarterly and Annual Authoritative Requirement: 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information Blank Copy of the Report: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Instructions: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Corrections: Recipients will have an opportunity to reopen and provide edits to their submitted Project and Expenditure Reports any time before the reporting deadline. Recipients will then be required to re-certify and submit the report again to properly reflect any edits made. After the reporting deadline, unless prompted by Treasury staff, recipients will not be able to edit their submitted report, any changes or revisions will need to be reflected in the next Project and Expenditure report. The Office of Recovery Program’s (ORP) reporting portal has built-in functionality to reopen a report and allow recipients to make edits after the reporting deadline. However, it is ORP’s policy that recipients may only make revisions if authorized by Treasury staff for a period of up to 60 days after the reporting deadline. After the revision period ends, the report is final. A resubmitted report becomes a recipient’s final report within ORP’s reporting portal. Recipients can generate PDFs of this reports at any time. Key Line Item(s)- The following line items contain critical information: 1. Obligations and Expenditures- Quantifiable Objective Criteria: Reported obligations and expenditures. (See pages 16 and 17 of the above links.) a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure Revenue loss calculation validation- Note- Recipients may elect a “standard allowance” of up to $10 million to spend on government services through the period of performance instead of using the full formula specified in the final rule. The standard allowance is available to all recipients. See page 30 for when recipients may modify their revenue loss election. Quantifiable Objective Criteria: Recipient’s application of the revenue loss calculation is accurate if they did not elect the standard allowance. Specific information regarding the revenue loss formula can be found in paragraph (d)(2) of 31 CFR § 35.6 at 31 CFR § 35.6(d)(2)(d)(2). Capital Expenditures- Quantifiable Objective Criteria: The recipient has the required written justification in their grant file if the total of the capital expenditures costs in a project is greater than or equal to $1 million and less than $10 million; or, the recipient submitted the required justification to Treasury if (1) a project has total capital expenditures costs greater than $10 million for capital expenditures enumerated by Treasury in the final rule; or (2) the total of a project’s capital expenditures costs is greater than $1 million for capital expenditures not enumerated by Treasury in the final rule. Note: Capital expenditures paid for using revenue replacement funds are not subject to this requirement. Tribal governments are not required to complete the written justification. (See 31 CFR section 35.6(b)(4))
2023-030 The Office of Financial Management did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Reporting Known Questioned Cost Amount: None Prior Year Audit Finding: Yes, Finding 2022-020 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. The program also provides resources to fight the pandemic, address economic impacts, maintain vital public services, and build a strong, resilient, and equitable recovery. Washington received about $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, Washington spent more than $1.8 billion in federal program funds. Under the SLFRF program, recipients are required to submit Project and Expenditure Reports during the covered period, which began March 3, 2021, and ends December 31, 2024. Treasury identified the following key line items that contain critical information: 1. Obligations and Expenditures a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure 2. Revenue loss calculation validation 3. Capital Expenditures The Office was responsible for compiling information from state agencies and submitting the reports no later than the last day of the month following the end of each reporting period. The Office was also responsible for calculating and reporting the state’s revenue losses from the pandemic, as well as identifying SLFRF projects with capital expenditures that required written justifications. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. The prior finding number was 2022-020. Description of Condition The Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. During the audit period, the Office submitted four quarterly Project and Expenditure Reports: • Report No. 4 (covering activity from July 1, 2022, through September 30, 2022) • Report No. 5 (covering activity from October 1, 2022, through December 31, 2022) • Report No. 6 (covering activity from January 1, 2023, through March 31, 2023) • Report No. 7 (covering activity from April 1, 2023, through June 30, 2023) Office staff prepared the reports by collecting and compiling reporting information from each state agency. For all four reports, we found that the Office did not have adequate supporting documentation for amounts reported under current period and cumulative obligations. We also found the Office did not have adequate internal controls to ensure material compliance with the capital expenditure requirement. We identified 14 out of 95 projects for which the Office did not follow up to determine whether there were capital expenditures incurred. Eight projects had expenditures greater than $1 million during fiscal year 2023, and two of those projects required written justifications. We found the Office did not have the required written justifications for two out of eight (25 percent) projects. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition The Office did not require state agencies to include supporting documentation when they reported their obligations at the end of each reporting period. Instead, the Office relied on self-reporting by agencies without ensuring supporting documentation was provided and retained. In addition, management did not ensure that information provided by agencies was reviewed to ensure the project and expenditure reports are complete, accurate, and adequately supported. In addition, the Office was unable to confirm all information reported for capital expenditures was adequately supported. Effect of Condition We focused our review on the obligation and expenditure key line items for the Department of Commerce (Commerce) and Department of Social and Health Services (DSHS). Combined, these two agencies accounted for about 57 percent of total SLFRF expenditures during fiscal year 2023. We determined that both agencies’ current period and cumulative expenditures were accurate and supported, and any variances were not material to the overall reporting. However, we were unable to confirm whether the supporting documentation for both agencies’ reported obligations accounted for all activity during each reporting period. Therefore, our estimates of overreported and underreported obligations for both agencies in the tables below are based on the agency reports for obligations available at the time of the audit. Commerce We found that the current period obligations for Commerce in all four reports did not have adequate supporting documentation. We also found that cumulative obligations for Commerce in all four reports did not have adequate supporting documentation. As of the final fiscal year 2023 report, Commerce’s cumulative obligations totaled $985,274,734 and cumulative expenditures totaled $783,360,809. Because Commerce’s expenditures were accurate and supported, we calculated the variance to be the net of the unsupported obligations minus supported expenditures, or $201,913,924 (difference due to rounding). DSHS In two reports, we identified reporting variances for current period obligations reported for DSHS, including $7,158,350 in overreported obligations in Report No. 7. DSHS reported $17,781,970 in current obligations for Report No. 7. We also found that cumulative obligations were underreported by $1,445,556 compared to estimated expected obligations of $363,451,530. To determine the magnitude of the reporting variances, we totaled the largest current period obligation variance for DSHS with the net unsupported obligations for Commerce. This totaled $209,081,184, or about 11 percent of total SLFRF expenditures during fiscal year 2023. Our determination of the variance is an estimate because documentation necessary to calculate accurate obligation amounts for each reporting period was not available. By not establishing adequate internal controls, the Office cannot ensure that information reported to the federal grantor is complete and accurate. Without complete supporting documentation for obligations, management is not able to demonstrate that amounts reported to the federal grantor are complete and accurate. Recommendations We recommend the Office: • Establish internal controls to ensure reported obligations are supported by source documentation, which should be retained and available for review • Improve internal controls to ensure staff continue to follow up with agencies that report incomplete information • Ensure that management verifies reporting information is adequately supported before certifying and submitting the report Office’s Response The Office will continue to communicate to agencies the importance of maintaining adequate source supporting documentation for future project and expenditure reports. Although a complete cumulative obligations report as of the report date was not maintained supporting the project and expenditure report, all obligations are supported by grant agreements, contracts, and purchase orders. Additionally, the Office was able to provide the auditor a current report including all obligations to date which exceeded the cumulative obligations during the reporting period. The Office continues to improve the reporting template used to collect the required information from agencies and frequently meets with agencies to discuss the reporting requirements to ensure the quarterly Project and Expenditure Reports are complete, accurate, and supported. The Office will continue its review and verification process to ensure information is adequately supported before certifying and submitting the report. As noted in the U.S. Treasury reporting guidance, corrections or any changes to the report need to be reflected in the next Project and Expenditure report. As a result, the supporting documentation for the quarter may not align with the quarterly reports. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Office of Management and Budget, 2 CFR Part 200, Appendix XI, 2023 Compliance Supplement, for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds, states in part: L. Reporting 2. Performance Reporting Title of Report: Project and Expenditure Report PRA Number: 1505-0271 Reporting Cycle: Quarterly and Annual Authoritative Requirement: 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information Blank Copy of the Report: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Instructions: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Corrections: Recipients will have an opportunity to reopen and provide edits to their submitted Project and Expenditure Reports any time before the reporting deadline. Recipients will then be required to re-certify and submit the report again to properly reflect any edits made. After the reporting deadline, unless prompted by Treasury staff, recipients will not be able to edit their submitted report, any changes or revisions will need to be reflected in the next Project and Expenditure report. The Office of Recovery Program’s (ORP) reporting portal has built-in functionality to reopen a report and allow recipients to make edits after the reporting deadline. However, it is ORP’s policy that recipients may only make revisions if authorized by Treasury staff for a period of up to 60 days after the reporting deadline. After the revision period ends, the report is final. A resubmitted report becomes a recipient’s final report within ORP’s reporting portal. Recipients can generate PDFs of this reports at any time. Key Line Item(s)- The following line items contain critical information: 1. Obligations and Expenditures- Quantifiable Objective Criteria: Reported obligations and expenditures. (See pages 16 and 17 of the above links.) a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure Revenue loss calculation validation- Note- Recipients may elect a “standard allowance” of up to $10 million to spend on government services through the period of performance instead of using the full formula specified in the final rule. The standard allowance is available to all recipients. See page 30 for when recipients may modify their revenue loss election. Quantifiable Objective Criteria: Recipient’s application of the revenue loss calculation is accurate if they did not elect the standard allowance. Specific information regarding the revenue loss formula can be found in paragraph (d)(2) of 31 CFR § 35.6 at 31 CFR § 35.6(d)(2)(d)(2). Capital Expenditures- Quantifiable Objective Criteria: The recipient has the required written justification in their grant file if the total of the capital expenditures costs in a project is greater than or equal to $1 million and less than $10 million; or, the recipient submitted the required justification to Treasury if (1) a project has total capital expenditures costs greater than $10 million for capital expenditures enumerated by Treasury in the final rule; or (2) the total of a project’s capital expenditures costs is greater than $1 million for capital expenditures not enumerated by Treasury in the final rule. Note: Capital expenditures paid for using revenue replacement funds are not subject to this requirement. Tribal governments are not required to complete the written justification. (See 31 CFR section 35.6(b)(4))
2023-030 The Office of Financial Management did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Reporting Known Questioned Cost Amount: None Prior Year Audit Finding: Yes, Finding 2022-020 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. The program also provides resources to fight the pandemic, address economic impacts, maintain vital public services, and build a strong, resilient, and equitable recovery. Washington received about $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, Washington spent more than $1.8 billion in federal program funds. Under the SLFRF program, recipients are required to submit Project and Expenditure Reports during the covered period, which began March 3, 2021, and ends December 31, 2024. Treasury identified the following key line items that contain critical information: 1. Obligations and Expenditures a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure 2. Revenue loss calculation validation 3. Capital Expenditures The Office was responsible for compiling information from state agencies and submitting the reports no later than the last day of the month following the end of each reporting period. The Office was also responsible for calculating and reporting the state’s revenue losses from the pandemic, as well as identifying SLFRF projects with capital expenditures that required written justifications. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. The prior finding number was 2022-020. Description of Condition The Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. During the audit period, the Office submitted four quarterly Project and Expenditure Reports: • Report No. 4 (covering activity from July 1, 2022, through September 30, 2022) • Report No. 5 (covering activity from October 1, 2022, through December 31, 2022) • Report No. 6 (covering activity from January 1, 2023, through March 31, 2023) • Report No. 7 (covering activity from April 1, 2023, through June 30, 2023) Office staff prepared the reports by collecting and compiling reporting information from each state agency. For all four reports, we found that the Office did not have adequate supporting documentation for amounts reported under current period and cumulative obligations. We also found the Office did not have adequate internal controls to ensure material compliance with the capital expenditure requirement. We identified 14 out of 95 projects for which the Office did not follow up to determine whether there were capital expenditures incurred. Eight projects had expenditures greater than $1 million during fiscal year 2023, and two of those projects required written justifications. We found the Office did not have the required written justifications for two out of eight (25 percent) projects. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition The Office did not require state agencies to include supporting documentation when they reported their obligations at the end of each reporting period. Instead, the Office relied on self-reporting by agencies without ensuring supporting documentation was provided and retained. In addition, management did not ensure that information provided by agencies was reviewed to ensure the project and expenditure reports are complete, accurate, and adequately supported. In addition, the Office was unable to confirm all information reported for capital expenditures was adequately supported. Effect of Condition We focused our review on the obligation and expenditure key line items for the Department of Commerce (Commerce) and Department of Social and Health Services (DSHS). Combined, these two agencies accounted for about 57 percent of total SLFRF expenditures during fiscal year 2023. We determined that both agencies’ current period and cumulative expenditures were accurate and supported, and any variances were not material to the overall reporting. However, we were unable to confirm whether the supporting documentation for both agencies’ reported obligations accounted for all activity during each reporting period. Therefore, our estimates of overreported and underreported obligations for both agencies in the tables below are based on the agency reports for obligations available at the time of the audit. Commerce We found that the current period obligations for Commerce in all four reports did not have adequate supporting documentation. We also found that cumulative obligations for Commerce in all four reports did not have adequate supporting documentation. As of the final fiscal year 2023 report, Commerce’s cumulative obligations totaled $985,274,734 and cumulative expenditures totaled $783,360,809. Because Commerce’s expenditures were accurate and supported, we calculated the variance to be the net of the unsupported obligations minus supported expenditures, or $201,913,924 (difference due to rounding). DSHS In two reports, we identified reporting variances for current period obligations reported for DSHS, including $7,158,350 in overreported obligations in Report No. 7. DSHS reported $17,781,970 in current obligations for Report No. 7. We also found that cumulative obligations were underreported by $1,445,556 compared to estimated expected obligations of $363,451,530. To determine the magnitude of the reporting variances, we totaled the largest current period obligation variance for DSHS with the net unsupported obligations for Commerce. This totaled $209,081,184, or about 11 percent of total SLFRF expenditures during fiscal year 2023. Our determination of the variance is an estimate because documentation necessary to calculate accurate obligation amounts for each reporting period was not available. By not establishing adequate internal controls, the Office cannot ensure that information reported to the federal grantor is complete and accurate. Without complete supporting documentation for obligations, management is not able to demonstrate that amounts reported to the federal grantor are complete and accurate. Recommendations We recommend the Office: • Establish internal controls to ensure reported obligations are supported by source documentation, which should be retained and available for review • Improve internal controls to ensure staff continue to follow up with agencies that report incomplete information • Ensure that management verifies reporting information is adequately supported before certifying and submitting the report Office’s Response The Office will continue to communicate to agencies the importance of maintaining adequate source supporting documentation for future project and expenditure reports. Although a complete cumulative obligations report as of the report date was not maintained supporting the project and expenditure report, all obligations are supported by grant agreements, contracts, and purchase orders. Additionally, the Office was able to provide the auditor a current report including all obligations to date which exceeded the cumulative obligations during the reporting period. The Office continues to improve the reporting template used to collect the required information from agencies and frequently meets with agencies to discuss the reporting requirements to ensure the quarterly Project and Expenditure Reports are complete, accurate, and supported. The Office will continue its review and verification process to ensure information is adequately supported before certifying and submitting the report. As noted in the U.S. Treasury reporting guidance, corrections or any changes to the report need to be reflected in the next Project and Expenditure report. As a result, the supporting documentation for the quarter may not align with the quarterly reports. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Office of Management and Budget, 2 CFR Part 200, Appendix XI, 2023 Compliance Supplement, for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds, states in part: L. Reporting 2. Performance Reporting Title of Report: Project and Expenditure Report PRA Number: 1505-0271 Reporting Cycle: Quarterly and Annual Authoritative Requirement: 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information Blank Copy of the Report: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Instructions: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Corrections: Recipients will have an opportunity to reopen and provide edits to their submitted Project and Expenditure Reports any time before the reporting deadline. Recipients will then be required to re-certify and submit the report again to properly reflect any edits made. After the reporting deadline, unless prompted by Treasury staff, recipients will not be able to edit their submitted report, any changes or revisions will need to be reflected in the next Project and Expenditure report. The Office of Recovery Program’s (ORP) reporting portal has built-in functionality to reopen a report and allow recipients to make edits after the reporting deadline. However, it is ORP’s policy that recipients may only make revisions if authorized by Treasury staff for a period of up to 60 days after the reporting deadline. After the revision period ends, the report is final. A resubmitted report becomes a recipient’s final report within ORP’s reporting portal. Recipients can generate PDFs of this reports at any time. Key Line Item(s)- The following line items contain critical information: 1. Obligations and Expenditures- Quantifiable Objective Criteria: Reported obligations and expenditures. (See pages 16 and 17 of the above links.) a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure Revenue loss calculation validation- Note- Recipients may elect a “standard allowance” of up to $10 million to spend on government services through the period of performance instead of using the full formula specified in the final rule. The standard allowance is available to all recipients. See page 30 for when recipients may modify their revenue loss election. Quantifiable Objective Criteria: Recipient’s application of the revenue loss calculation is accurate if they did not elect the standard allowance. Specific information regarding the revenue loss formula can be found in paragraph (d)(2) of 31 CFR § 35.6 at 31 CFR § 35.6(d)(2)(d)(2). Capital Expenditures- Quantifiable Objective Criteria: The recipient has the required written justification in their grant file if the total of the capital expenditures costs in a project is greater than or equal to $1 million and less than $10 million; or, the recipient submitted the required justification to Treasury if (1) a project has total capital expenditures costs greater than $10 million for capital expenditures enumerated by Treasury in the final rule; or (2) the total of a project’s capital expenditures costs is greater than $1 million for capital expenditures not enumerated by Treasury in the final rule. Note: Capital expenditures paid for using revenue replacement funds are not subject to this requirement. Tribal governments are not required to complete the written justification. (See 31 CFR section 35.6(b)(4))
2023-030 The Office of Financial Management did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Reporting Known Questioned Cost Amount: None Prior Year Audit Finding: Yes, Finding 2022-020 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. The program also provides resources to fight the pandemic, address economic impacts, maintain vital public services, and build a strong, resilient, and equitable recovery. Washington received about $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, Washington spent more than $1.8 billion in federal program funds. Under the SLFRF program, recipients are required to submit Project and Expenditure Reports during the covered period, which began March 3, 2021, and ends December 31, 2024. Treasury identified the following key line items that contain critical information: 1. Obligations and Expenditures a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure 2. Revenue loss calculation validation 3. Capital Expenditures The Office was responsible for compiling information from state agencies and submitting the reports no later than the last day of the month following the end of each reporting period. The Office was also responsible for calculating and reporting the state’s revenue losses from the pandemic, as well as identifying SLFRF projects with capital expenditures that required written justifications. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. The prior finding number was 2022-020. Description of Condition The Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. During the audit period, the Office submitted four quarterly Project and Expenditure Reports: • Report No. 4 (covering activity from July 1, 2022, through September 30, 2022) • Report No. 5 (covering activity from October 1, 2022, through December 31, 2022) • Report No. 6 (covering activity from January 1, 2023, through March 31, 2023) • Report No. 7 (covering activity from April 1, 2023, through June 30, 2023) Office staff prepared the reports by collecting and compiling reporting information from each state agency. For all four reports, we found that the Office did not have adequate supporting documentation for amounts reported under current period and cumulative obligations. We also found the Office did not have adequate internal controls to ensure material compliance with the capital expenditure requirement. We identified 14 out of 95 projects for which the Office did not follow up to determine whether there were capital expenditures incurred. Eight projects had expenditures greater than $1 million during fiscal year 2023, and two of those projects required written justifications. We found the Office did not have the required written justifications for two out of eight (25 percent) projects. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition The Office did not require state agencies to include supporting documentation when they reported their obligations at the end of each reporting period. Instead, the Office relied on self-reporting by agencies without ensuring supporting documentation was provided and retained. In addition, management did not ensure that information provided by agencies was reviewed to ensure the project and expenditure reports are complete, accurate, and adequately supported. In addition, the Office was unable to confirm all information reported for capital expenditures was adequately supported. Effect of Condition We focused our review on the obligation and expenditure key line items for the Department of Commerce (Commerce) and Department of Social and Health Services (DSHS). Combined, these two agencies accounted for about 57 percent of total SLFRF expenditures during fiscal year 2023. We determined that both agencies’ current period and cumulative expenditures were accurate and supported, and any variances were not material to the overall reporting. However, we were unable to confirm whether the supporting documentation for both agencies’ reported obligations accounted for all activity during each reporting period. Therefore, our estimates of overreported and underreported obligations for both agencies in the tables below are based on the agency reports for obligations available at the time of the audit. Commerce We found that the current period obligations for Commerce in all four reports did not have adequate supporting documentation. We also found that cumulative obligations for Commerce in all four reports did not have adequate supporting documentation. As of the final fiscal year 2023 report, Commerce’s cumulative obligations totaled $985,274,734 and cumulative expenditures totaled $783,360,809. Because Commerce’s expenditures were accurate and supported, we calculated the variance to be the net of the unsupported obligations minus supported expenditures, or $201,913,924 (difference due to rounding). DSHS In two reports, we identified reporting variances for current period obligations reported for DSHS, including $7,158,350 in overreported obligations in Report No. 7. DSHS reported $17,781,970 in current obligations for Report No. 7. We also found that cumulative obligations were underreported by $1,445,556 compared to estimated expected obligations of $363,451,530. To determine the magnitude of the reporting variances, we totaled the largest current period obligation variance for DSHS with the net unsupported obligations for Commerce. This totaled $209,081,184, or about 11 percent of total SLFRF expenditures during fiscal year 2023. Our determination of the variance is an estimate because documentation necessary to calculate accurate obligation amounts for each reporting period was not available. By not establishing adequate internal controls, the Office cannot ensure that information reported to the federal grantor is complete and accurate. Without complete supporting documentation for obligations, management is not able to demonstrate that amounts reported to the federal grantor are complete and accurate. Recommendations We recommend the Office: • Establish internal controls to ensure reported obligations are supported by source documentation, which should be retained and available for review • Improve internal controls to ensure staff continue to follow up with agencies that report incomplete information • Ensure that management verifies reporting information is adequately supported before certifying and submitting the report Office’s Response The Office will continue to communicate to agencies the importance of maintaining adequate source supporting documentation for future project and expenditure reports. Although a complete cumulative obligations report as of the report date was not maintained supporting the project and expenditure report, all obligations are supported by grant agreements, contracts, and purchase orders. Additionally, the Office was able to provide the auditor a current report including all obligations to date which exceeded the cumulative obligations during the reporting period. The Office continues to improve the reporting template used to collect the required information from agencies and frequently meets with agencies to discuss the reporting requirements to ensure the quarterly Project and Expenditure Reports are complete, accurate, and supported. The Office will continue its review and verification process to ensure information is adequately supported before certifying and submitting the report. As noted in the U.S. Treasury reporting guidance, corrections or any changes to the report need to be reflected in the next Project and Expenditure report. As a result, the supporting documentation for the quarter may not align with the quarterly reports. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Office of Management and Budget, 2 CFR Part 200, Appendix XI, 2023 Compliance Supplement, for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds, states in part: L. Reporting 2. Performance Reporting Title of Report: Project and Expenditure Report PRA Number: 1505-0271 Reporting Cycle: Quarterly and Annual Authoritative Requirement: 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information Blank Copy of the Report: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Instructions: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Corrections: Recipients will have an opportunity to reopen and provide edits to their submitted Project and Expenditure Reports any time before the reporting deadline. Recipients will then be required to re-certify and submit the report again to properly reflect any edits made. After the reporting deadline, unless prompted by Treasury staff, recipients will not be able to edit their submitted report, any changes or revisions will need to be reflected in the next Project and Expenditure report. The Office of Recovery Program’s (ORP) reporting portal has built-in functionality to reopen a report and allow recipients to make edits after the reporting deadline. However, it is ORP’s policy that recipients may only make revisions if authorized by Treasury staff for a period of up to 60 days after the reporting deadline. After the revision period ends, the report is final. A resubmitted report becomes a recipient’s final report within ORP’s reporting portal. Recipients can generate PDFs of this reports at any time. Key Line Item(s)- The following line items contain critical information: 1. Obligations and Expenditures- Quantifiable Objective Criteria: Reported obligations and expenditures. (See pages 16 and 17 of the above links.) a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure Revenue loss calculation validation- Note- Recipients may elect a “standard allowance” of up to $10 million to spend on government services through the period of performance instead of using the full formula specified in the final rule. The standard allowance is available to all recipients. See page 30 for when recipients may modify their revenue loss election. Quantifiable Objective Criteria: Recipient’s application of the revenue loss calculation is accurate if they did not elect the standard allowance. Specific information regarding the revenue loss formula can be found in paragraph (d)(2) of 31 CFR § 35.6 at 31 CFR § 35.6(d)(2)(d)(2). Capital Expenditures- Quantifiable Objective Criteria: The recipient has the required written justification in their grant file if the total of the capital expenditures costs in a project is greater than or equal to $1 million and less than $10 million; or, the recipient submitted the required justification to Treasury if (1) a project has total capital expenditures costs greater than $10 million for capital expenditures enumerated by Treasury in the final rule; or (2) the total of a project’s capital expenditures costs is greater than $1 million for capital expenditures not enumerated by Treasury in the final rule. Note: Capital expenditures paid for using revenue replacement funds are not subject to this requirement. Tribal governments are not required to complete the written justification. (See 31 CFR section 35.6(b)(4))
2023-030 The Office of Financial Management did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Reporting Known Questioned Cost Amount: None Prior Year Audit Finding: Yes, Finding 2022-020 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. The program also provides resources to fight the pandemic, address economic impacts, maintain vital public services, and build a strong, resilient, and equitable recovery. Washington received about $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, Washington spent more than $1.8 billion in federal program funds. Under the SLFRF program, recipients are required to submit Project and Expenditure Reports during the covered period, which began March 3, 2021, and ends December 31, 2024. Treasury identified the following key line items that contain critical information: 1. Obligations and Expenditures a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure 2. Revenue loss calculation validation 3. Capital Expenditures The Office was responsible for compiling information from state agencies and submitting the reports no later than the last day of the month following the end of each reporting period. The Office was also responsible for calculating and reporting the state’s revenue losses from the pandemic, as well as identifying SLFRF projects with capital expenditures that required written justifications. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. The prior finding number was 2022-020. Description of Condition The Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. During the audit period, the Office submitted four quarterly Project and Expenditure Reports: • Report No. 4 (covering activity from July 1, 2022, through September 30, 2022) • Report No. 5 (covering activity from October 1, 2022, through December 31, 2022) • Report No. 6 (covering activity from January 1, 2023, through March 31, 2023) • Report No. 7 (covering activity from April 1, 2023, through June 30, 2023) Office staff prepared the reports by collecting and compiling reporting information from each state agency. For all four reports, we found that the Office did not have adequate supporting documentation for amounts reported under current period and cumulative obligations. We also found the Office did not have adequate internal controls to ensure material compliance with the capital expenditure requirement. We identified 14 out of 95 projects for which the Office did not follow up to determine whether there were capital expenditures incurred. Eight projects had expenditures greater than $1 million during fiscal year 2023, and two of those projects required written justifications. We found the Office did not have the required written justifications for two out of eight (25 percent) projects. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition The Office did not require state agencies to include supporting documentation when they reported their obligations at the end of each reporting period. Instead, the Office relied on self-reporting by agencies without ensuring supporting documentation was provided and retained. In addition, management did not ensure that information provided by agencies was reviewed to ensure the project and expenditure reports are complete, accurate, and adequately supported. In addition, the Office was unable to confirm all information reported for capital expenditures was adequately supported. Effect of Condition We focused our review on the obligation and expenditure key line items for the Department of Commerce (Commerce) and Department of Social and Health Services (DSHS). Combined, these two agencies accounted for about 57 percent of total SLFRF expenditures during fiscal year 2023. We determined that both agencies’ current period and cumulative expenditures were accurate and supported, and any variances were not material to the overall reporting. However, we were unable to confirm whether the supporting documentation for both agencies’ reported obligations accounted for all activity during each reporting period. Therefore, our estimates of overreported and underreported obligations for both agencies in the tables below are based on the agency reports for obligations available at the time of the audit. Commerce We found that the current period obligations for Commerce in all four reports did not have adequate supporting documentation. We also found that cumulative obligations for Commerce in all four reports did not have adequate supporting documentation. As of the final fiscal year 2023 report, Commerce’s cumulative obligations totaled $985,274,734 and cumulative expenditures totaled $783,360,809. Because Commerce’s expenditures were accurate and supported, we calculated the variance to be the net of the unsupported obligations minus supported expenditures, or $201,913,924 (difference due to rounding). DSHS In two reports, we identified reporting variances for current period obligations reported for DSHS, including $7,158,350 in overreported obligations in Report No. 7. DSHS reported $17,781,970 in current obligations for Report No. 7. We also found that cumulative obligations were underreported by $1,445,556 compared to estimated expected obligations of $363,451,530. To determine the magnitude of the reporting variances, we totaled the largest current period obligation variance for DSHS with the net unsupported obligations for Commerce. This totaled $209,081,184, or about 11 percent of total SLFRF expenditures during fiscal year 2023. Our determination of the variance is an estimate because documentation necessary to calculate accurate obligation amounts for each reporting period was not available. By not establishing adequate internal controls, the Office cannot ensure that information reported to the federal grantor is complete and accurate. Without complete supporting documentation for obligations, management is not able to demonstrate that amounts reported to the federal grantor are complete and accurate. Recommendations We recommend the Office: • Establish internal controls to ensure reported obligations are supported by source documentation, which should be retained and available for review • Improve internal controls to ensure staff continue to follow up with agencies that report incomplete information • Ensure that management verifies reporting information is adequately supported before certifying and submitting the report Office’s Response The Office will continue to communicate to agencies the importance of maintaining adequate source supporting documentation for future project and expenditure reports. Although a complete cumulative obligations report as of the report date was not maintained supporting the project and expenditure report, all obligations are supported by grant agreements, contracts, and purchase orders. Additionally, the Office was able to provide the auditor a current report including all obligations to date which exceeded the cumulative obligations during the reporting period. The Office continues to improve the reporting template used to collect the required information from agencies and frequently meets with agencies to discuss the reporting requirements to ensure the quarterly Project and Expenditure Reports are complete, accurate, and supported. The Office will continue its review and verification process to ensure information is adequately supported before certifying and submitting the report. As noted in the U.S. Treasury reporting guidance, corrections or any changes to the report need to be reflected in the next Project and Expenditure report. As a result, the supporting documentation for the quarter may not align with the quarterly reports. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Office of Management and Budget, 2 CFR Part 200, Appendix XI, 2023 Compliance Supplement, for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds, states in part: L. Reporting 2. Performance Reporting Title of Report: Project and Expenditure Report PRA Number: 1505-0271 Reporting Cycle: Quarterly and Annual Authoritative Requirement: 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information Blank Copy of the Report: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Instructions: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Corrections: Recipients will have an opportunity to reopen and provide edits to their submitted Project and Expenditure Reports any time before the reporting deadline. Recipients will then be required to re-certify and submit the report again to properly reflect any edits made. After the reporting deadline, unless prompted by Treasury staff, recipients will not be able to edit their submitted report, any changes or revisions will need to be reflected in the next Project and Expenditure report. The Office of Recovery Program’s (ORP) reporting portal has built-in functionality to reopen a report and allow recipients to make edits after the reporting deadline. However, it is ORP’s policy that recipients may only make revisions if authorized by Treasury staff for a period of up to 60 days after the reporting deadline. After the revision period ends, the report is final. A resubmitted report becomes a recipient’s final report within ORP’s reporting portal. Recipients can generate PDFs of this reports at any time. Key Line Item(s)- The following line items contain critical information: 1. Obligations and Expenditures- Quantifiable Objective Criteria: Reported obligations and expenditures. (See pages 16 and 17 of the above links.) a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure Revenue loss calculation validation- Note- Recipients may elect a “standard allowance” of up to $10 million to spend on government services through the period of performance instead of using the full formula specified in the final rule. The standard allowance is available to all recipients. See page 30 for when recipients may modify their revenue loss election. Quantifiable Objective Criteria: Recipient’s application of the revenue loss calculation is accurate if they did not elect the standard allowance. Specific information regarding the revenue loss formula can be found in paragraph (d)(2) of 31 CFR § 35.6 at 31 CFR § 35.6(d)(2)(d)(2). Capital Expenditures- Quantifiable Objective Criteria: The recipient has the required written justification in their grant file if the total of the capital expenditures costs in a project is greater than or equal to $1 million and less than $10 million; or, the recipient submitted the required justification to Treasury if (1) a project has total capital expenditures costs greater than $10 million for capital expenditures enumerated by Treasury in the final rule; or (2) the total of a project’s capital expenditures costs is greater than $1 million for capital expenditures not enumerated by Treasury in the final rule. Note: Capital expenditures paid for using revenue replacement funds are not subject to this requirement. Tribal governments are not required to complete the written justification. (See 31 CFR section 35.6(b)(4))
2023-030 The Office of Financial Management did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Reporting Known Questioned Cost Amount: None Prior Year Audit Finding: Yes, Finding 2022-020 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. The program also provides resources to fight the pandemic, address economic impacts, maintain vital public services, and build a strong, resilient, and equitable recovery. Washington received about $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, Washington spent more than $1.8 billion in federal program funds. Under the SLFRF program, recipients are required to submit Project and Expenditure Reports during the covered period, which began March 3, 2021, and ends December 31, 2024. Treasury identified the following key line items that contain critical information: 1. Obligations and Expenditures a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure 2. Revenue loss calculation validation 3. Capital Expenditures The Office was responsible for compiling information from state agencies and submitting the reports no later than the last day of the month following the end of each reporting period. The Office was also responsible for calculating and reporting the state’s revenue losses from the pandemic, as well as identifying SLFRF projects with capital expenditures that required written justifications. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. The prior finding number was 2022-020. Description of Condition The Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. During the audit period, the Office submitted four quarterly Project and Expenditure Reports: • Report No. 4 (covering activity from July 1, 2022, through September 30, 2022) • Report No. 5 (covering activity from October 1, 2022, through December 31, 2022) • Report No. 6 (covering activity from January 1, 2023, through March 31, 2023) • Report No. 7 (covering activity from April 1, 2023, through June 30, 2023) Office staff prepared the reports by collecting and compiling reporting information from each state agency. For all four reports, we found that the Office did not have adequate supporting documentation for amounts reported under current period and cumulative obligations. We also found the Office did not have adequate internal controls to ensure material compliance with the capital expenditure requirement. We identified 14 out of 95 projects for which the Office did not follow up to determine whether there were capital expenditures incurred. Eight projects had expenditures greater than $1 million during fiscal year 2023, and two of those projects required written justifications. We found the Office did not have the required written justifications for two out of eight (25 percent) projects. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition The Office did not require state agencies to include supporting documentation when they reported their obligations at the end of each reporting period. Instead, the Office relied on self-reporting by agencies without ensuring supporting documentation was provided and retained. In addition, management did not ensure that information provided by agencies was reviewed to ensure the project and expenditure reports are complete, accurate, and adequately supported. In addition, the Office was unable to confirm all information reported for capital expenditures was adequately supported. Effect of Condition We focused our review on the obligation and expenditure key line items for the Department of Commerce (Commerce) and Department of Social and Health Services (DSHS). Combined, these two agencies accounted for about 57 percent of total SLFRF expenditures during fiscal year 2023. We determined that both agencies’ current period and cumulative expenditures were accurate and supported, and any variances were not material to the overall reporting. However, we were unable to confirm whether the supporting documentation for both agencies’ reported obligations accounted for all activity during each reporting period. Therefore, our estimates of overreported and underreported obligations for both agencies in the tables below are based on the agency reports for obligations available at the time of the audit. Commerce We found that the current period obligations for Commerce in all four reports did not have adequate supporting documentation. We also found that cumulative obligations for Commerce in all four reports did not have adequate supporting documentation. As of the final fiscal year 2023 report, Commerce’s cumulative obligations totaled $985,274,734 and cumulative expenditures totaled $783,360,809. Because Commerce’s expenditures were accurate and supported, we calculated the variance to be the net of the unsupported obligations minus supported expenditures, or $201,913,924 (difference due to rounding). DSHS In two reports, we identified reporting variances for current period obligations reported for DSHS, including $7,158,350 in overreported obligations in Report No. 7. DSHS reported $17,781,970 in current obligations for Report No. 7. We also found that cumulative obligations were underreported by $1,445,556 compared to estimated expected obligations of $363,451,530. To determine the magnitude of the reporting variances, we totaled the largest current period obligation variance for DSHS with the net unsupported obligations for Commerce. This totaled $209,081,184, or about 11 percent of total SLFRF expenditures during fiscal year 2023. Our determination of the variance is an estimate because documentation necessary to calculate accurate obligation amounts for each reporting period was not available. By not establishing adequate internal controls, the Office cannot ensure that information reported to the federal grantor is complete and accurate. Without complete supporting documentation for obligations, management is not able to demonstrate that amounts reported to the federal grantor are complete and accurate. Recommendations We recommend the Office: • Establish internal controls to ensure reported obligations are supported by source documentation, which should be retained and available for review • Improve internal controls to ensure staff continue to follow up with agencies that report incomplete information • Ensure that management verifies reporting information is adequately supported before certifying and submitting the report Office’s Response The Office will continue to communicate to agencies the importance of maintaining adequate source supporting documentation for future project and expenditure reports. Although a complete cumulative obligations report as of the report date was not maintained supporting the project and expenditure report, all obligations are supported by grant agreements, contracts, and purchase orders. Additionally, the Office was able to provide the auditor a current report including all obligations to date which exceeded the cumulative obligations during the reporting period. The Office continues to improve the reporting template used to collect the required information from agencies and frequently meets with agencies to discuss the reporting requirements to ensure the quarterly Project and Expenditure Reports are complete, accurate, and supported. The Office will continue its review and verification process to ensure information is adequately supported before certifying and submitting the report. As noted in the U.S. Treasury reporting guidance, corrections or any changes to the report need to be reflected in the next Project and Expenditure report. As a result, the supporting documentation for the quarter may not align with the quarterly reports. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Office of Management and Budget, 2 CFR Part 200, Appendix XI, 2023 Compliance Supplement, for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds, states in part: L. Reporting 2. Performance Reporting Title of Report: Project and Expenditure Report PRA Number: 1505-0271 Reporting Cycle: Quarterly and Annual Authoritative Requirement: 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information Blank Copy of the Report: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Instructions: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Corrections: Recipients will have an opportunity to reopen and provide edits to their submitted Project and Expenditure Reports any time before the reporting deadline. Recipients will then be required to re-certify and submit the report again to properly reflect any edits made. After the reporting deadline, unless prompted by Treasury staff, recipients will not be able to edit their submitted report, any changes or revisions will need to be reflected in the next Project and Expenditure report. The Office of Recovery Program’s (ORP) reporting portal has built-in functionality to reopen a report and allow recipients to make edits after the reporting deadline. However, it is ORP’s policy that recipients may only make revisions if authorized by Treasury staff for a period of up to 60 days after the reporting deadline. After the revision period ends, the report is final. A resubmitted report becomes a recipient’s final report within ORP’s reporting portal. Recipients can generate PDFs of this reports at any time. Key Line Item(s)- The following line items contain critical information: 1. Obligations and Expenditures- Quantifiable Objective Criteria: Reported obligations and expenditures. (See pages 16 and 17 of the above links.) a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure Revenue loss calculation validation- Note- Recipients may elect a “standard allowance” of up to $10 million to spend on government services through the period of performance instead of using the full formula specified in the final rule. The standard allowance is available to all recipients. See page 30 for when recipients may modify their revenue loss election. Quantifiable Objective Criteria: Recipient’s application of the revenue loss calculation is accurate if they did not elect the standard allowance. Specific information regarding the revenue loss formula can be found in paragraph (d)(2) of 31 CFR § 35.6 at 31 CFR § 35.6(d)(2)(d)(2). Capital Expenditures- Quantifiable Objective Criteria: The recipient has the required written justification in their grant file if the total of the capital expenditures costs in a project is greater than or equal to $1 million and less than $10 million; or, the recipient submitted the required justification to Treasury if (1) a project has total capital expenditures costs greater than $10 million for capital expenditures enumerated by Treasury in the final rule; or (2) the total of a project’s capital expenditures costs is greater than $1 million for capital expenditures not enumerated by Treasury in the final rule. Note: Capital expenditures paid for using revenue replacement funds are not subject to this requirement. Tribal governments are not required to complete the written justification. (See 31 CFR section 35.6(b)(4))
2023-030 The Office of Financial Management did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Reporting Known Questioned Cost Amount: None Prior Year Audit Finding: Yes, Finding 2022-020 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. The program also provides resources to fight the pandemic, address economic impacts, maintain vital public services, and build a strong, resilient, and equitable recovery. Washington received about $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, Washington spent more than $1.8 billion in federal program funds. Under the SLFRF program, recipients are required to submit Project and Expenditure Reports during the covered period, which began March 3, 2021, and ends December 31, 2024. Treasury identified the following key line items that contain critical information: 1. Obligations and Expenditures a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure 2. Revenue loss calculation validation 3. Capital Expenditures The Office was responsible for compiling information from state agencies and submitting the reports no later than the last day of the month following the end of each reporting period. The Office was also responsible for calculating and reporting the state’s revenue losses from the pandemic, as well as identifying SLFRF projects with capital expenditures that required written justifications. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. The prior finding number was 2022-020. Description of Condition The Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. During the audit period, the Office submitted four quarterly Project and Expenditure Reports: • Report No. 4 (covering activity from July 1, 2022, through September 30, 2022) • Report No. 5 (covering activity from October 1, 2022, through December 31, 2022) • Report No. 6 (covering activity from January 1, 2023, through March 31, 2023) • Report No. 7 (covering activity from April 1, 2023, through June 30, 2023) Office staff prepared the reports by collecting and compiling reporting information from each state agency. For all four reports, we found that the Office did not have adequate supporting documentation for amounts reported under current period and cumulative obligations. We also found the Office did not have adequate internal controls to ensure material compliance with the capital expenditure requirement. We identified 14 out of 95 projects for which the Office did not follow up to determine whether there were capital expenditures incurred. Eight projects had expenditures greater than $1 million during fiscal year 2023, and two of those projects required written justifications. We found the Office did not have the required written justifications for two out of eight (25 percent) projects. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition The Office did not require state agencies to include supporting documentation when they reported their obligations at the end of each reporting period. Instead, the Office relied on self-reporting by agencies without ensuring supporting documentation was provided and retained. In addition, management did not ensure that information provided by agencies was reviewed to ensure the project and expenditure reports are complete, accurate, and adequately supported. In addition, the Office was unable to confirm all information reported for capital expenditures was adequately supported. Effect of Condition We focused our review on the obligation and expenditure key line items for the Department of Commerce (Commerce) and Department of Social and Health Services (DSHS). Combined, these two agencies accounted for about 57 percent of total SLFRF expenditures during fiscal year 2023. We determined that both agencies’ current period and cumulative expenditures were accurate and supported, and any variances were not material to the overall reporting. However, we were unable to confirm whether the supporting documentation for both agencies’ reported obligations accounted for all activity during each reporting period. Therefore, our estimates of overreported and underreported obligations for both agencies in the tables below are based on the agency reports for obligations available at the time of the audit. Commerce We found that the current period obligations for Commerce in all four reports did not have adequate supporting documentation. We also found that cumulative obligations for Commerce in all four reports did not have adequate supporting documentation. As of the final fiscal year 2023 report, Commerce’s cumulative obligations totaled $985,274,734 and cumulative expenditures totaled $783,360,809. Because Commerce’s expenditures were accurate and supported, we calculated the variance to be the net of the unsupported obligations minus supported expenditures, or $201,913,924 (difference due to rounding). DSHS In two reports, we identified reporting variances for current period obligations reported for DSHS, including $7,158,350 in overreported obligations in Report No. 7. DSHS reported $17,781,970 in current obligations for Report No. 7. We also found that cumulative obligations were underreported by $1,445,556 compared to estimated expected obligations of $363,451,530. To determine the magnitude of the reporting variances, we totaled the largest current period obligation variance for DSHS with the net unsupported obligations for Commerce. This totaled $209,081,184, or about 11 percent of total SLFRF expenditures during fiscal year 2023. Our determination of the variance is an estimate because documentation necessary to calculate accurate obligation amounts for each reporting period was not available. By not establishing adequate internal controls, the Office cannot ensure that information reported to the federal grantor is complete and accurate. Without complete supporting documentation for obligations, management is not able to demonstrate that amounts reported to the federal grantor are complete and accurate. Recommendations We recommend the Office: • Establish internal controls to ensure reported obligations are supported by source documentation, which should be retained and available for review • Improve internal controls to ensure staff continue to follow up with agencies that report incomplete information • Ensure that management verifies reporting information is adequately supported before certifying and submitting the report Office’s Response The Office will continue to communicate to agencies the importance of maintaining adequate source supporting documentation for future project and expenditure reports. Although a complete cumulative obligations report as of the report date was not maintained supporting the project and expenditure report, all obligations are supported by grant agreements, contracts, and purchase orders. Additionally, the Office was able to provide the auditor a current report including all obligations to date which exceeded the cumulative obligations during the reporting period. The Office continues to improve the reporting template used to collect the required information from agencies and frequently meets with agencies to discuss the reporting requirements to ensure the quarterly Project and Expenditure Reports are complete, accurate, and supported. The Office will continue its review and verification process to ensure information is adequately supported before certifying and submitting the report. As noted in the U.S. Treasury reporting guidance, corrections or any changes to the report need to be reflected in the next Project and Expenditure report. As a result, the supporting documentation for the quarter may not align with the quarterly reports. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Office of Management and Budget, 2 CFR Part 200, Appendix XI, 2023 Compliance Supplement, for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds, states in part: L. Reporting 2. Performance Reporting Title of Report: Project and Expenditure Report PRA Number: 1505-0271 Reporting Cycle: Quarterly and Annual Authoritative Requirement: 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information Blank Copy of the Report: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Instructions: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Corrections: Recipients will have an opportunity to reopen and provide edits to their submitted Project and Expenditure Reports any time before the reporting deadline. Recipients will then be required to re-certify and submit the report again to properly reflect any edits made. After the reporting deadline, unless prompted by Treasury staff, recipients will not be able to edit their submitted report, any changes or revisions will need to be reflected in the next Project and Expenditure report. The Office of Recovery Program’s (ORP) reporting portal has built-in functionality to reopen a report and allow recipients to make edits after the reporting deadline. However, it is ORP’s policy that recipients may only make revisions if authorized by Treasury staff for a period of up to 60 days after the reporting deadline. After the revision period ends, the report is final. A resubmitted report becomes a recipient’s final report within ORP’s reporting portal. Recipients can generate PDFs of this reports at any time. Key Line Item(s)- The following line items contain critical information: 1. Obligations and Expenditures- Quantifiable Objective Criteria: Reported obligations and expenditures. (See pages 16 and 17 of the above links.) a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure Revenue loss calculation validation- Note- Recipients may elect a “standard allowance” of up to $10 million to spend on government services through the period of performance instead of using the full formula specified in the final rule. The standard allowance is available to all recipients. See page 30 for when recipients may modify their revenue loss election. Quantifiable Objective Criteria: Recipient’s application of the revenue loss calculation is accurate if they did not elect the standard allowance. Specific information regarding the revenue loss formula can be found in paragraph (d)(2) of 31 CFR § 35.6 at 31 CFR § 35.6(d)(2)(d)(2). Capital Expenditures- Quantifiable Objective Criteria: The recipient has the required written justification in their grant file if the total of the capital expenditures costs in a project is greater than or equal to $1 million and less than $10 million; or, the recipient submitted the required justification to Treasury if (1) a project has total capital expenditures costs greater than $10 million for capital expenditures enumerated by Treasury in the final rule; or (2) the total of a project’s capital expenditures costs is greater than $1 million for capital expenditures not enumerated by Treasury in the final rule. Note: Capital expenditures paid for using revenue replacement funds are not subject to this requirement. Tribal governments are not required to complete the written justification. (See 31 CFR section 35.6(b)(4))
2023-030 The Office of Financial Management did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Reporting Known Questioned Cost Amount: None Prior Year Audit Finding: Yes, Finding 2022-020 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. The program also provides resources to fight the pandemic, address economic impacts, maintain vital public services, and build a strong, resilient, and equitable recovery. Washington received about $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, Washington spent more than $1.8 billion in federal program funds. Under the SLFRF program, recipients are required to submit Project and Expenditure Reports during the covered period, which began March 3, 2021, and ends December 31, 2024. Treasury identified the following key line items that contain critical information: 1. Obligations and Expenditures a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure 2. Revenue loss calculation validation 3. Capital Expenditures The Office was responsible for compiling information from state agencies and submitting the reports no later than the last day of the month following the end of each reporting period. The Office was also responsible for calculating and reporting the state’s revenue losses from the pandemic, as well as identifying SLFRF projects with capital expenditures that required written justifications. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. The prior finding number was 2022-020. Description of Condition The Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. During the audit period, the Office submitted four quarterly Project and Expenditure Reports: • Report No. 4 (covering activity from July 1, 2022, through September 30, 2022) • Report No. 5 (covering activity from October 1, 2022, through December 31, 2022) • Report No. 6 (covering activity from January 1, 2023, through March 31, 2023) • Report No. 7 (covering activity from April 1, 2023, through June 30, 2023) Office staff prepared the reports by collecting and compiling reporting information from each state agency. For all four reports, we found that the Office did not have adequate supporting documentation for amounts reported under current period and cumulative obligations. We also found the Office did not have adequate internal controls to ensure material compliance with the capital expenditure requirement. We identified 14 out of 95 projects for which the Office did not follow up to determine whether there were capital expenditures incurred. Eight projects had expenditures greater than $1 million during fiscal year 2023, and two of those projects required written justifications. We found the Office did not have the required written justifications for two out of eight (25 percent) projects. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition The Office did not require state agencies to include supporting documentation when they reported their obligations at the end of each reporting period. Instead, the Office relied on self-reporting by agencies without ensuring supporting documentation was provided and retained. In addition, management did not ensure that information provided by agencies was reviewed to ensure the project and expenditure reports are complete, accurate, and adequately supported. In addition, the Office was unable to confirm all information reported for capital expenditures was adequately supported. Effect of Condition We focused our review on the obligation and expenditure key line items for the Department of Commerce (Commerce) and Department of Social and Health Services (DSHS). Combined, these two agencies accounted for about 57 percent of total SLFRF expenditures during fiscal year 2023. We determined that both agencies’ current period and cumulative expenditures were accurate and supported, and any variances were not material to the overall reporting. However, we were unable to confirm whether the supporting documentation for both agencies’ reported obligations accounted for all activity during each reporting period. Therefore, our estimates of overreported and underreported obligations for both agencies in the tables below are based on the agency reports for obligations available at the time of the audit. Commerce We found that the current period obligations for Commerce in all four reports did not have adequate supporting documentation. We also found that cumulative obligations for Commerce in all four reports did not have adequate supporting documentation. As of the final fiscal year 2023 report, Commerce’s cumulative obligations totaled $985,274,734 and cumulative expenditures totaled $783,360,809. Because Commerce’s expenditures were accurate and supported, we calculated the variance to be the net of the unsupported obligations minus supported expenditures, or $201,913,924 (difference due to rounding). DSHS In two reports, we identified reporting variances for current period obligations reported for DSHS, including $7,158,350 in overreported obligations in Report No. 7. DSHS reported $17,781,970 in current obligations for Report No. 7. We also found that cumulative obligations were underreported by $1,445,556 compared to estimated expected obligations of $363,451,530. To determine the magnitude of the reporting variances, we totaled the largest current period obligation variance for DSHS with the net unsupported obligations for Commerce. This totaled $209,081,184, or about 11 percent of total SLFRF expenditures during fiscal year 2023. Our determination of the variance is an estimate because documentation necessary to calculate accurate obligation amounts for each reporting period was not available. By not establishing adequate internal controls, the Office cannot ensure that information reported to the federal grantor is complete and accurate. Without complete supporting documentation for obligations, management is not able to demonstrate that amounts reported to the federal grantor are complete and accurate. Recommendations We recommend the Office: • Establish internal controls to ensure reported obligations are supported by source documentation, which should be retained and available for review • Improve internal controls to ensure staff continue to follow up with agencies that report incomplete information • Ensure that management verifies reporting information is adequately supported before certifying and submitting the report Office’s Response The Office will continue to communicate to agencies the importance of maintaining adequate source supporting documentation for future project and expenditure reports. Although a complete cumulative obligations report as of the report date was not maintained supporting the project and expenditure report, all obligations are supported by grant agreements, contracts, and purchase orders. Additionally, the Office was able to provide the auditor a current report including all obligations to date which exceeded the cumulative obligations during the reporting period. The Office continues to improve the reporting template used to collect the required information from agencies and frequently meets with agencies to discuss the reporting requirements to ensure the quarterly Project and Expenditure Reports are complete, accurate, and supported. The Office will continue its review and verification process to ensure information is adequately supported before certifying and submitting the report. As noted in the U.S. Treasury reporting guidance, corrections or any changes to the report need to be reflected in the next Project and Expenditure report. As a result, the supporting documentation for the quarter may not align with the quarterly reports. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Office of Management and Budget, 2 CFR Part 200, Appendix XI, 2023 Compliance Supplement, for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds, states in part: L. Reporting 2. Performance Reporting Title of Report: Project and Expenditure Report PRA Number: 1505-0271 Reporting Cycle: Quarterly and Annual Authoritative Requirement: 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information Blank Copy of the Report: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Instructions: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Corrections: Recipients will have an opportunity to reopen and provide edits to their submitted Project and Expenditure Reports any time before the reporting deadline. Recipients will then be required to re-certify and submit the report again to properly reflect any edits made. After the reporting deadline, unless prompted by Treasury staff, recipients will not be able to edit their submitted report, any changes or revisions will need to be reflected in the next Project and Expenditure report. The Office of Recovery Program’s (ORP) reporting portal has built-in functionality to reopen a report and allow recipients to make edits after the reporting deadline. However, it is ORP’s policy that recipients may only make revisions if authorized by Treasury staff for a period of up to 60 days after the reporting deadline. After the revision period ends, the report is final. A resubmitted report becomes a recipient’s final report within ORP’s reporting portal. Recipients can generate PDFs of this reports at any time. Key Line Item(s)- The following line items contain critical information: 1. Obligations and Expenditures- Quantifiable Objective Criteria: Reported obligations and expenditures. (See pages 16 and 17 of the above links.) a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure Revenue loss calculation validation- Note- Recipients may elect a “standard allowance” of up to $10 million to spend on government services through the period of performance instead of using the full formula specified in the final rule. The standard allowance is available to all recipients. See page 30 for when recipients may modify their revenue loss election. Quantifiable Objective Criteria: Recipient’s application of the revenue loss calculation is accurate if they did not elect the standard allowance. Specific information regarding the revenue loss formula can be found in paragraph (d)(2) of 31 CFR § 35.6 at 31 CFR § 35.6(d)(2)(d)(2). Capital Expenditures- Quantifiable Objective Criteria: The recipient has the required written justification in their grant file if the total of the capital expenditures costs in a project is greater than or equal to $1 million and less than $10 million; or, the recipient submitted the required justification to Treasury if (1) a project has total capital expenditures costs greater than $10 million for capital expenditures enumerated by Treasury in the final rule; or (2) the total of a project’s capital expenditures costs is greater than $1 million for capital expenditures not enumerated by Treasury in the final rule. Note: Capital expenditures paid for using revenue replacement funds are not subject to this requirement. Tribal governments are not required to complete the written justification. (See 31 CFR section 35.6(b)(4))
2023-030 The Office of Financial Management did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Reporting Known Questioned Cost Amount: None Prior Year Audit Finding: Yes, Finding 2022-020 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. The program also provides resources to fight the pandemic, address economic impacts, maintain vital public services, and build a strong, resilient, and equitable recovery. Washington received about $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, Washington spent more than $1.8 billion in federal program funds. Under the SLFRF program, recipients are required to submit Project and Expenditure Reports during the covered period, which began March 3, 2021, and ends December 31, 2024. Treasury identified the following key line items that contain critical information: 1. Obligations and Expenditures a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure 2. Revenue loss calculation validation 3. Capital Expenditures The Office was responsible for compiling information from state agencies and submitting the reports no later than the last day of the month following the end of each reporting period. The Office was also responsible for calculating and reporting the state’s revenue losses from the pandemic, as well as identifying SLFRF projects with capital expenditures that required written justifications. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. The prior finding number was 2022-020. Description of Condition The Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. During the audit period, the Office submitted four quarterly Project and Expenditure Reports: • Report No. 4 (covering activity from July 1, 2022, through September 30, 2022) • Report No. 5 (covering activity from October 1, 2022, through December 31, 2022) • Report No. 6 (covering activity from January 1, 2023, through March 31, 2023) • Report No. 7 (covering activity from April 1, 2023, through June 30, 2023) Office staff prepared the reports by collecting and compiling reporting information from each state agency. For all four reports, we found that the Office did not have adequate supporting documentation for amounts reported under current period and cumulative obligations. We also found the Office did not have adequate internal controls to ensure material compliance with the capital expenditure requirement. We identified 14 out of 95 projects for which the Office did not follow up to determine whether there were capital expenditures incurred. Eight projects had expenditures greater than $1 million during fiscal year 2023, and two of those projects required written justifications. We found the Office did not have the required written justifications for two out of eight (25 percent) projects. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition The Office did not require state agencies to include supporting documentation when they reported their obligations at the end of each reporting period. Instead, the Office relied on self-reporting by agencies without ensuring supporting documentation was provided and retained. In addition, management did not ensure that information provided by agencies was reviewed to ensure the project and expenditure reports are complete, accurate, and adequately supported. In addition, the Office was unable to confirm all information reported for capital expenditures was adequately supported. Effect of Condition We focused our review on the obligation and expenditure key line items for the Department of Commerce (Commerce) and Department of Social and Health Services (DSHS). Combined, these two agencies accounted for about 57 percent of total SLFRF expenditures during fiscal year 2023. We determined that both agencies’ current period and cumulative expenditures were accurate and supported, and any variances were not material to the overall reporting. However, we were unable to confirm whether the supporting documentation for both agencies’ reported obligations accounted for all activity during each reporting period. Therefore, our estimates of overreported and underreported obligations for both agencies in the tables below are based on the agency reports for obligations available at the time of the audit. Commerce We found that the current period obligations for Commerce in all four reports did not have adequate supporting documentation. We also found that cumulative obligations for Commerce in all four reports did not have adequate supporting documentation. As of the final fiscal year 2023 report, Commerce’s cumulative obligations totaled $985,274,734 and cumulative expenditures totaled $783,360,809. Because Commerce’s expenditures were accurate and supported, we calculated the variance to be the net of the unsupported obligations minus supported expenditures, or $201,913,924 (difference due to rounding). DSHS In two reports, we identified reporting variances for current period obligations reported for DSHS, including $7,158,350 in overreported obligations in Report No. 7. DSHS reported $17,781,970 in current obligations for Report No. 7. We also found that cumulative obligations were underreported by $1,445,556 compared to estimated expected obligations of $363,451,530. To determine the magnitude of the reporting variances, we totaled the largest current period obligation variance for DSHS with the net unsupported obligations for Commerce. This totaled $209,081,184, or about 11 percent of total SLFRF expenditures during fiscal year 2023. Our determination of the variance is an estimate because documentation necessary to calculate accurate obligation amounts for each reporting period was not available. By not establishing adequate internal controls, the Office cannot ensure that information reported to the federal grantor is complete and accurate. Without complete supporting documentation for obligations, management is not able to demonstrate that amounts reported to the federal grantor are complete and accurate. Recommendations We recommend the Office: • Establish internal controls to ensure reported obligations are supported by source documentation, which should be retained and available for review • Improve internal controls to ensure staff continue to follow up with agencies that report incomplete information • Ensure that management verifies reporting information is adequately supported before certifying and submitting the report Office’s Response The Office will continue to communicate to agencies the importance of maintaining adequate source supporting documentation for future project and expenditure reports. Although a complete cumulative obligations report as of the report date was not maintained supporting the project and expenditure report, all obligations are supported by grant agreements, contracts, and purchase orders. Additionally, the Office was able to provide the auditor a current report including all obligations to date which exceeded the cumulative obligations during the reporting period. The Office continues to improve the reporting template used to collect the required information from agencies and frequently meets with agencies to discuss the reporting requirements to ensure the quarterly Project and Expenditure Reports are complete, accurate, and supported. The Office will continue its review and verification process to ensure information is adequately supported before certifying and submitting the report. As noted in the U.S. Treasury reporting guidance, corrections or any changes to the report need to be reflected in the next Project and Expenditure report. As a result, the supporting documentation for the quarter may not align with the quarterly reports. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Office of Management and Budget, 2 CFR Part 200, Appendix XI, 2023 Compliance Supplement, for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds, states in part: L. Reporting 2. Performance Reporting Title of Report: Project and Expenditure Report PRA Number: 1505-0271 Reporting Cycle: Quarterly and Annual Authoritative Requirement: 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information Blank Copy of the Report: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Instructions: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Corrections: Recipients will have an opportunity to reopen and provide edits to their submitted Project and Expenditure Reports any time before the reporting deadline. Recipients will then be required to re-certify and submit the report again to properly reflect any edits made. After the reporting deadline, unless prompted by Treasury staff, recipients will not be able to edit their submitted report, any changes or revisions will need to be reflected in the next Project and Expenditure report. The Office of Recovery Program’s (ORP) reporting portal has built-in functionality to reopen a report and allow recipients to make edits after the reporting deadline. However, it is ORP’s policy that recipients may only make revisions if authorized by Treasury staff for a period of up to 60 days after the reporting deadline. After the revision period ends, the report is final. A resubmitted report becomes a recipient’s final report within ORP’s reporting portal. Recipients can generate PDFs of this reports at any time. Key Line Item(s)- The following line items contain critical information: 1. Obligations and Expenditures- Quantifiable Objective Criteria: Reported obligations and expenditures. (See pages 16 and 17 of the above links.) a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure Revenue loss calculation validation- Note- Recipients may elect a “standard allowance” of up to $10 million to spend on government services through the period of performance instead of using the full formula specified in the final rule. The standard allowance is available to all recipients. See page 30 for when recipients may modify their revenue loss election. Quantifiable Objective Criteria: Recipient’s application of the revenue loss calculation is accurate if they did not elect the standard allowance. Specific information regarding the revenue loss formula can be found in paragraph (d)(2) of 31 CFR § 35.6 at 31 CFR § 35.6(d)(2)(d)(2). Capital Expenditures- Quantifiable Objective Criteria: The recipient has the required written justification in their grant file if the total of the capital expenditures costs in a project is greater than or equal to $1 million and less than $10 million; or, the recipient submitted the required justification to Treasury if (1) a project has total capital expenditures costs greater than $10 million for capital expenditures enumerated by Treasury in the final rule; or (2) the total of a project’s capital expenditures costs is greater than $1 million for capital expenditures not enumerated by Treasury in the final rule. Note: Capital expenditures paid for using revenue replacement funds are not subject to this requirement. Tribal governments are not required to complete the written justification. (See 31 CFR section 35.6(b)(4))
2023-030 The Office of Financial Management did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Reporting Known Questioned Cost Amount: None Prior Year Audit Finding: Yes, Finding 2022-020 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. The program also provides resources to fight the pandemic, address economic impacts, maintain vital public services, and build a strong, resilient, and equitable recovery. Washington received about $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, Washington spent more than $1.8 billion in federal program funds. Under the SLFRF program, recipients are required to submit Project and Expenditure Reports during the covered period, which began March 3, 2021, and ends December 31, 2024. Treasury identified the following key line items that contain critical information: 1. Obligations and Expenditures a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure 2. Revenue loss calculation validation 3. Capital Expenditures The Office was responsible for compiling information from state agencies and submitting the reports no later than the last day of the month following the end of each reporting period. The Office was also responsible for calculating and reporting the state’s revenue losses from the pandemic, as well as identifying SLFRF projects with capital expenditures that required written justifications. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. The prior finding number was 2022-020. Description of Condition The Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. During the audit period, the Office submitted four quarterly Project and Expenditure Reports: • Report No. 4 (covering activity from July 1, 2022, through September 30, 2022) • Report No. 5 (covering activity from October 1, 2022, through December 31, 2022) • Report No. 6 (covering activity from January 1, 2023, through March 31, 2023) • Report No. 7 (covering activity from April 1, 2023, through June 30, 2023) Office staff prepared the reports by collecting and compiling reporting information from each state agency. For all four reports, we found that the Office did not have adequate supporting documentation for amounts reported under current period and cumulative obligations. We also found the Office did not have adequate internal controls to ensure material compliance with the capital expenditure requirement. We identified 14 out of 95 projects for which the Office did not follow up to determine whether there were capital expenditures incurred. Eight projects had expenditures greater than $1 million during fiscal year 2023, and two of those projects required written justifications. We found the Office did not have the required written justifications for two out of eight (25 percent) projects. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition The Office did not require state agencies to include supporting documentation when they reported their obligations at the end of each reporting period. Instead, the Office relied on self-reporting by agencies without ensuring supporting documentation was provided and retained. In addition, management did not ensure that information provided by agencies was reviewed to ensure the project and expenditure reports are complete, accurate, and adequately supported. In addition, the Office was unable to confirm all information reported for capital expenditures was adequately supported. Effect of Condition We focused our review on the obligation and expenditure key line items for the Department of Commerce (Commerce) and Department of Social and Health Services (DSHS). Combined, these two agencies accounted for about 57 percent of total SLFRF expenditures during fiscal year 2023. We determined that both agencies’ current period and cumulative expenditures were accurate and supported, and any variances were not material to the overall reporting. However, we were unable to confirm whether the supporting documentation for both agencies’ reported obligations accounted for all activity during each reporting period. Therefore, our estimates of overreported and underreported obligations for both agencies in the tables below are based on the agency reports for obligations available at the time of the audit. Commerce We found that the current period obligations for Commerce in all four reports did not have adequate supporting documentation. We also found that cumulative obligations for Commerce in all four reports did not have adequate supporting documentation. As of the final fiscal year 2023 report, Commerce’s cumulative obligations totaled $985,274,734 and cumulative expenditures totaled $783,360,809. Because Commerce’s expenditures were accurate and supported, we calculated the variance to be the net of the unsupported obligations minus supported expenditures, or $201,913,924 (difference due to rounding). DSHS In two reports, we identified reporting variances for current period obligations reported for DSHS, including $7,158,350 in overreported obligations in Report No. 7. DSHS reported $17,781,970 in current obligations for Report No. 7. We also found that cumulative obligations were underreported by $1,445,556 compared to estimated expected obligations of $363,451,530. To determine the magnitude of the reporting variances, we totaled the largest current period obligation variance for DSHS with the net unsupported obligations for Commerce. This totaled $209,081,184, or about 11 percent of total SLFRF expenditures during fiscal year 2023. Our determination of the variance is an estimate because documentation necessary to calculate accurate obligation amounts for each reporting period was not available. By not establishing adequate internal controls, the Office cannot ensure that information reported to the federal grantor is complete and accurate. Without complete supporting documentation for obligations, management is not able to demonstrate that amounts reported to the federal grantor are complete and accurate. Recommendations We recommend the Office: • Establish internal controls to ensure reported obligations are supported by source documentation, which should be retained and available for review • Improve internal controls to ensure staff continue to follow up with agencies that report incomplete information • Ensure that management verifies reporting information is adequately supported before certifying and submitting the report Office’s Response The Office will continue to communicate to agencies the importance of maintaining adequate source supporting documentation for future project and expenditure reports. Although a complete cumulative obligations report as of the report date was not maintained supporting the project and expenditure report, all obligations are supported by grant agreements, contracts, and purchase orders. Additionally, the Office was able to provide the auditor a current report including all obligations to date which exceeded the cumulative obligations during the reporting period. The Office continues to improve the reporting template used to collect the required information from agencies and frequently meets with agencies to discuss the reporting requirements to ensure the quarterly Project and Expenditure Reports are complete, accurate, and supported. The Office will continue its review and verification process to ensure information is adequately supported before certifying and submitting the report. As noted in the U.S. Treasury reporting guidance, corrections or any changes to the report need to be reflected in the next Project and Expenditure report. As a result, the supporting documentation for the quarter may not align with the quarterly reports. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Office of Management and Budget, 2 CFR Part 200, Appendix XI, 2023 Compliance Supplement, for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds, states in part: L. Reporting 2. Performance Reporting Title of Report: Project and Expenditure Report PRA Number: 1505-0271 Reporting Cycle: Quarterly and Annual Authoritative Requirement: 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information Blank Copy of the Report: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Instructions: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Corrections: Recipients will have an opportunity to reopen and provide edits to their submitted Project and Expenditure Reports any time before the reporting deadline. Recipients will then be required to re-certify and submit the report again to properly reflect any edits made. After the reporting deadline, unless prompted by Treasury staff, recipients will not be able to edit their submitted report, any changes or revisions will need to be reflected in the next Project and Expenditure report. The Office of Recovery Program’s (ORP) reporting portal has built-in functionality to reopen a report and allow recipients to make edits after the reporting deadline. However, it is ORP’s policy that recipients may only make revisions if authorized by Treasury staff for a period of up to 60 days after the reporting deadline. After the revision period ends, the report is final. A resubmitted report becomes a recipient’s final report within ORP’s reporting portal. Recipients can generate PDFs of this reports at any time. Key Line Item(s)- The following line items contain critical information: 1. Obligations and Expenditures- Quantifiable Objective Criteria: Reported obligations and expenditures. (See pages 16 and 17 of the above links.) a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure Revenue loss calculation validation- Note- Recipients may elect a “standard allowance” of up to $10 million to spend on government services through the period of performance instead of using the full formula specified in the final rule. The standard allowance is available to all recipients. See page 30 for when recipients may modify their revenue loss election. Quantifiable Objective Criteria: Recipient’s application of the revenue loss calculation is accurate if they did not elect the standard allowance. Specific information regarding the revenue loss formula can be found in paragraph (d)(2) of 31 CFR § 35.6 at 31 CFR § 35.6(d)(2)(d)(2). Capital Expenditures- Quantifiable Objective Criteria: The recipient has the required written justification in their grant file if the total of the capital expenditures costs in a project is greater than or equal to $1 million and less than $10 million; or, the recipient submitted the required justification to Treasury if (1) a project has total capital expenditures costs greater than $10 million for capital expenditures enumerated by Treasury in the final rule; or (2) the total of a project’s capital expenditures costs is greater than $1 million for capital expenditures not enumerated by Treasury in the final rule. Note: Capital expenditures paid for using revenue replacement funds are not subject to this requirement. Tribal governments are not required to complete the written justification. (See 31 CFR section 35.6(b)(4))
2023-030 The Office of Financial Management did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Reporting Known Questioned Cost Amount: None Prior Year Audit Finding: Yes, Finding 2022-020 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. The program also provides resources to fight the pandemic, address economic impacts, maintain vital public services, and build a strong, resilient, and equitable recovery. Washington received about $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, Washington spent more than $1.8 billion in federal program funds. Under the SLFRF program, recipients are required to submit Project and Expenditure Reports during the covered period, which began March 3, 2021, and ends December 31, 2024. Treasury identified the following key line items that contain critical information: 1. Obligations and Expenditures a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure 2. Revenue loss calculation validation 3. Capital Expenditures The Office was responsible for compiling information from state agencies and submitting the reports no later than the last day of the month following the end of each reporting period. The Office was also responsible for calculating and reporting the state’s revenue losses from the pandemic, as well as identifying SLFRF projects with capital expenditures that required written justifications. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. The prior finding number was 2022-020. Description of Condition The Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. During the audit period, the Office submitted four quarterly Project and Expenditure Reports: • Report No. 4 (covering activity from July 1, 2022, through September 30, 2022) • Report No. 5 (covering activity from October 1, 2022, through December 31, 2022) • Report No. 6 (covering activity from January 1, 2023, through March 31, 2023) • Report No. 7 (covering activity from April 1, 2023, through June 30, 2023) Office staff prepared the reports by collecting and compiling reporting information from each state agency. For all four reports, we found that the Office did not have adequate supporting documentation for amounts reported under current period and cumulative obligations. We also found the Office did not have adequate internal controls to ensure material compliance with the capital expenditure requirement. We identified 14 out of 95 projects for which the Office did not follow up to determine whether there were capital expenditures incurred. Eight projects had expenditures greater than $1 million during fiscal year 2023, and two of those projects required written justifications. We found the Office did not have the required written justifications for two out of eight (25 percent) projects. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition The Office did not require state agencies to include supporting documentation when they reported their obligations at the end of each reporting period. Instead, the Office relied on self-reporting by agencies without ensuring supporting documentation was provided and retained. In addition, management did not ensure that information provided by agencies was reviewed to ensure the project and expenditure reports are complete, accurate, and adequately supported. In addition, the Office was unable to confirm all information reported for capital expenditures was adequately supported. Effect of Condition We focused our review on the obligation and expenditure key line items for the Department of Commerce (Commerce) and Department of Social and Health Services (DSHS). Combined, these two agencies accounted for about 57 percent of total SLFRF expenditures during fiscal year 2023. We determined that both agencies’ current period and cumulative expenditures were accurate and supported, and any variances were not material to the overall reporting. However, we were unable to confirm whether the supporting documentation for both agencies’ reported obligations accounted for all activity during each reporting period. Therefore, our estimates of overreported and underreported obligations for both agencies in the tables below are based on the agency reports for obligations available at the time of the audit. Commerce We found that the current period obligations for Commerce in all four reports did not have adequate supporting documentation. We also found that cumulative obligations for Commerce in all four reports did not have adequate supporting documentation. As of the final fiscal year 2023 report, Commerce’s cumulative obligations totaled $985,274,734 and cumulative expenditures totaled $783,360,809. Because Commerce’s expenditures were accurate and supported, we calculated the variance to be the net of the unsupported obligations minus supported expenditures, or $201,913,924 (difference due to rounding). DSHS In two reports, we identified reporting variances for current period obligations reported for DSHS, including $7,158,350 in overreported obligations in Report No. 7. DSHS reported $17,781,970 in current obligations for Report No. 7. We also found that cumulative obligations were underreported by $1,445,556 compared to estimated expected obligations of $363,451,530. To determine the magnitude of the reporting variances, we totaled the largest current period obligation variance for DSHS with the net unsupported obligations for Commerce. This totaled $209,081,184, or about 11 percent of total SLFRF expenditures during fiscal year 2023. Our determination of the variance is an estimate because documentation necessary to calculate accurate obligation amounts for each reporting period was not available. By not establishing adequate internal controls, the Office cannot ensure that information reported to the federal grantor is complete and accurate. Without complete supporting documentation for obligations, management is not able to demonstrate that amounts reported to the federal grantor are complete and accurate. Recommendations We recommend the Office: • Establish internal controls to ensure reported obligations are supported by source documentation, which should be retained and available for review • Improve internal controls to ensure staff continue to follow up with agencies that report incomplete information • Ensure that management verifies reporting information is adequately supported before certifying and submitting the report Office’s Response The Office will continue to communicate to agencies the importance of maintaining adequate source supporting documentation for future project and expenditure reports. Although a complete cumulative obligations report as of the report date was not maintained supporting the project and expenditure report, all obligations are supported by grant agreements, contracts, and purchase orders. Additionally, the Office was able to provide the auditor a current report including all obligations to date which exceeded the cumulative obligations during the reporting period. The Office continues to improve the reporting template used to collect the required information from agencies and frequently meets with agencies to discuss the reporting requirements to ensure the quarterly Project and Expenditure Reports are complete, accurate, and supported. The Office will continue its review and verification process to ensure information is adequately supported before certifying and submitting the report. As noted in the U.S. Treasury reporting guidance, corrections or any changes to the report need to be reflected in the next Project and Expenditure report. As a result, the supporting documentation for the quarter may not align with the quarterly reports. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Office of Management and Budget, 2 CFR Part 200, Appendix XI, 2023 Compliance Supplement, for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds, states in part: L. Reporting 2. Performance Reporting Title of Report: Project and Expenditure Report PRA Number: 1505-0271 Reporting Cycle: Quarterly and Annual Authoritative Requirement: 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information Blank Copy of the Report: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Instructions: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Corrections: Recipients will have an opportunity to reopen and provide edits to their submitted Project and Expenditure Reports any time before the reporting deadline. Recipients will then be required to re-certify and submit the report again to properly reflect any edits made. After the reporting deadline, unless prompted by Treasury staff, recipients will not be able to edit their submitted report, any changes or revisions will need to be reflected in the next Project and Expenditure report. The Office of Recovery Program’s (ORP) reporting portal has built-in functionality to reopen a report and allow recipients to make edits after the reporting deadline. However, it is ORP’s policy that recipients may only make revisions if authorized by Treasury staff for a period of up to 60 days after the reporting deadline. After the revision period ends, the report is final. A resubmitted report becomes a recipient’s final report within ORP’s reporting portal. Recipients can generate PDFs of this reports at any time. Key Line Item(s)- The following line items contain critical information: 1. Obligations and Expenditures- Quantifiable Objective Criteria: Reported obligations and expenditures. (See pages 16 and 17 of the above links.) a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure Revenue loss calculation validation- Note- Recipients may elect a “standard allowance” of up to $10 million to spend on government services through the period of performance instead of using the full formula specified in the final rule. The standard allowance is available to all recipients. See page 30 for when recipients may modify their revenue loss election. Quantifiable Objective Criteria: Recipient’s application of the revenue loss calculation is accurate if they did not elect the standard allowance. Specific information regarding the revenue loss formula can be found in paragraph (d)(2) of 31 CFR § 35.6 at 31 CFR § 35.6(d)(2)(d)(2). Capital Expenditures- Quantifiable Objective Criteria: The recipient has the required written justification in their grant file if the total of the capital expenditures costs in a project is greater than or equal to $1 million and less than $10 million; or, the recipient submitted the required justification to Treasury if (1) a project has total capital expenditures costs greater than $10 million for capital expenditures enumerated by Treasury in the final rule; or (2) the total of a project’s capital expenditures costs is greater than $1 million for capital expenditures not enumerated by Treasury in the final rule. Note: Capital expenditures paid for using revenue replacement funds are not subject to this requirement. Tribal governments are not required to complete the written justification. (See 31 CFR section 35.6(b)(4))
2023-030 The Office of Financial Management did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Reporting Known Questioned Cost Amount: None Prior Year Audit Finding: Yes, Finding 2022-020 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. The program also provides resources to fight the pandemic, address economic impacts, maintain vital public services, and build a strong, resilient, and equitable recovery. Washington received about $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, Washington spent more than $1.8 billion in federal program funds. Under the SLFRF program, recipients are required to submit Project and Expenditure Reports during the covered period, which began March 3, 2021, and ends December 31, 2024. Treasury identified the following key line items that contain critical information: 1. Obligations and Expenditures a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure 2. Revenue loss calculation validation 3. Capital Expenditures The Office was responsible for compiling information from state agencies and submitting the reports no later than the last day of the month following the end of each reporting period. The Office was also responsible for calculating and reporting the state’s revenue losses from the pandemic, as well as identifying SLFRF projects with capital expenditures that required written justifications. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. The prior finding number was 2022-020. Description of Condition The Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. During the audit period, the Office submitted four quarterly Project and Expenditure Reports: • Report No. 4 (covering activity from July 1, 2022, through September 30, 2022) • Report No. 5 (covering activity from October 1, 2022, through December 31, 2022) • Report No. 6 (covering activity from January 1, 2023, through March 31, 2023) • Report No. 7 (covering activity from April 1, 2023, through June 30, 2023) Office staff prepared the reports by collecting and compiling reporting information from each state agency. For all four reports, we found that the Office did not have adequate supporting documentation for amounts reported under current period and cumulative obligations. We also found the Office did not have adequate internal controls to ensure material compliance with the capital expenditure requirement. We identified 14 out of 95 projects for which the Office did not follow up to determine whether there were capital expenditures incurred. Eight projects had expenditures greater than $1 million during fiscal year 2023, and two of those projects required written justifications. We found the Office did not have the required written justifications for two out of eight (25 percent) projects. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition The Office did not require state agencies to include supporting documentation when they reported their obligations at the end of each reporting period. Instead, the Office relied on self-reporting by agencies without ensuring supporting documentation was provided and retained. In addition, management did not ensure that information provided by agencies was reviewed to ensure the project and expenditure reports are complete, accurate, and adequately supported. In addition, the Office was unable to confirm all information reported for capital expenditures was adequately supported. Effect of Condition We focused our review on the obligation and expenditure key line items for the Department of Commerce (Commerce) and Department of Social and Health Services (DSHS). Combined, these two agencies accounted for about 57 percent of total SLFRF expenditures during fiscal year 2023. We determined that both agencies’ current period and cumulative expenditures were accurate and supported, and any variances were not material to the overall reporting. However, we were unable to confirm whether the supporting documentation for both agencies’ reported obligations accounted for all activity during each reporting period. Therefore, our estimates of overreported and underreported obligations for both agencies in the tables below are based on the agency reports for obligations available at the time of the audit. Commerce We found that the current period obligations for Commerce in all four reports did not have adequate supporting documentation. We also found that cumulative obligations for Commerce in all four reports did not have adequate supporting documentation. As of the final fiscal year 2023 report, Commerce’s cumulative obligations totaled $985,274,734 and cumulative expenditures totaled $783,360,809. Because Commerce’s expenditures were accurate and supported, we calculated the variance to be the net of the unsupported obligations minus supported expenditures, or $201,913,924 (difference due to rounding). DSHS In two reports, we identified reporting variances for current period obligations reported for DSHS, including $7,158,350 in overreported obligations in Report No. 7. DSHS reported $17,781,970 in current obligations for Report No. 7. We also found that cumulative obligations were underreported by $1,445,556 compared to estimated expected obligations of $363,451,530. To determine the magnitude of the reporting variances, we totaled the largest current period obligation variance for DSHS with the net unsupported obligations for Commerce. This totaled $209,081,184, or about 11 percent of total SLFRF expenditures during fiscal year 2023. Our determination of the variance is an estimate because documentation necessary to calculate accurate obligation amounts for each reporting period was not available. By not establishing adequate internal controls, the Office cannot ensure that information reported to the federal grantor is complete and accurate. Without complete supporting documentation for obligations, management is not able to demonstrate that amounts reported to the federal grantor are complete and accurate. Recommendations We recommend the Office: • Establish internal controls to ensure reported obligations are supported by source documentation, which should be retained and available for review • Improve internal controls to ensure staff continue to follow up with agencies that report incomplete information • Ensure that management verifies reporting information is adequately supported before certifying and submitting the report Office’s Response The Office will continue to communicate to agencies the importance of maintaining adequate source supporting documentation for future project and expenditure reports. Although a complete cumulative obligations report as of the report date was not maintained supporting the project and expenditure report, all obligations are supported by grant agreements, contracts, and purchase orders. Additionally, the Office was able to provide the auditor a current report including all obligations to date which exceeded the cumulative obligations during the reporting period. The Office continues to improve the reporting template used to collect the required information from agencies and frequently meets with agencies to discuss the reporting requirements to ensure the quarterly Project and Expenditure Reports are complete, accurate, and supported. The Office will continue its review and verification process to ensure information is adequately supported before certifying and submitting the report. As noted in the U.S. Treasury reporting guidance, corrections or any changes to the report need to be reflected in the next Project and Expenditure report. As a result, the supporting documentation for the quarter may not align with the quarterly reports. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Office of Management and Budget, 2 CFR Part 200, Appendix XI, 2023 Compliance Supplement, for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds, states in part: L. Reporting 2. Performance Reporting Title of Report: Project and Expenditure Report PRA Number: 1505-0271 Reporting Cycle: Quarterly and Annual Authoritative Requirement: 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information Blank Copy of the Report: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Instructions: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Corrections: Recipients will have an opportunity to reopen and provide edits to their submitted Project and Expenditure Reports any time before the reporting deadline. Recipients will then be required to re-certify and submit the report again to properly reflect any edits made. After the reporting deadline, unless prompted by Treasury staff, recipients will not be able to edit their submitted report, any changes or revisions will need to be reflected in the next Project and Expenditure report. The Office of Recovery Program’s (ORP) reporting portal has built-in functionality to reopen a report and allow recipients to make edits after the reporting deadline. However, it is ORP’s policy that recipients may only make revisions if authorized by Treasury staff for a period of up to 60 days after the reporting deadline. After the revision period ends, the report is final. A resubmitted report becomes a recipient’s final report within ORP’s reporting portal. Recipients can generate PDFs of this reports at any time. Key Line Item(s)- The following line items contain critical information: 1. Obligations and Expenditures- Quantifiable Objective Criteria: Reported obligations and expenditures. (See pages 16 and 17 of the above links.) a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure Revenue loss calculation validation- Note- Recipients may elect a “standard allowance” of up to $10 million to spend on government services through the period of performance instead of using the full formula specified in the final rule. The standard allowance is available to all recipients. See page 30 for when recipients may modify their revenue loss election. Quantifiable Objective Criteria: Recipient’s application of the revenue loss calculation is accurate if they did not elect the standard allowance. Specific information regarding the revenue loss formula can be found in paragraph (d)(2) of 31 CFR § 35.6 at 31 CFR § 35.6(d)(2)(d)(2). Capital Expenditures- Quantifiable Objective Criteria: The recipient has the required written justification in their grant file if the total of the capital expenditures costs in a project is greater than or equal to $1 million and less than $10 million; or, the recipient submitted the required justification to Treasury if (1) a project has total capital expenditures costs greater than $10 million for capital expenditures enumerated by Treasury in the final rule; or (2) the total of a project’s capital expenditures costs is greater than $1 million for capital expenditures not enumerated by Treasury in the final rule. Note: Capital expenditures paid for using revenue replacement funds are not subject to this requirement. Tribal governments are not required to complete the written justification. (See 31 CFR section 35.6(b)(4))
2023-030 The Office of Financial Management did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Reporting Known Questioned Cost Amount: None Prior Year Audit Finding: Yes, Finding 2022-020 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. The program also provides resources to fight the pandemic, address economic impacts, maintain vital public services, and build a strong, resilient, and equitable recovery. Washington received about $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, Washington spent more than $1.8 billion in federal program funds. Under the SLFRF program, recipients are required to submit Project and Expenditure Reports during the covered period, which began March 3, 2021, and ends December 31, 2024. Treasury identified the following key line items that contain critical information: 1. Obligations and Expenditures a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure 2. Revenue loss calculation validation 3. Capital Expenditures The Office was responsible for compiling information from state agencies and submitting the reports no later than the last day of the month following the end of each reporting period. The Office was also responsible for calculating and reporting the state’s revenue losses from the pandemic, as well as identifying SLFRF projects with capital expenditures that required written justifications. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. The prior finding number was 2022-020. Description of Condition The Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. During the audit period, the Office submitted four quarterly Project and Expenditure Reports: • Report No. 4 (covering activity from July 1, 2022, through September 30, 2022) • Report No. 5 (covering activity from October 1, 2022, through December 31, 2022) • Report No. 6 (covering activity from January 1, 2023, through March 31, 2023) • Report No. 7 (covering activity from April 1, 2023, through June 30, 2023) Office staff prepared the reports by collecting and compiling reporting information from each state agency. For all four reports, we found that the Office did not have adequate supporting documentation for amounts reported under current period and cumulative obligations. We also found the Office did not have adequate internal controls to ensure material compliance with the capital expenditure requirement. We identified 14 out of 95 projects for which the Office did not follow up to determine whether there were capital expenditures incurred. Eight projects had expenditures greater than $1 million during fiscal year 2023, and two of those projects required written justifications. We found the Office did not have the required written justifications for two out of eight (25 percent) projects. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition The Office did not require state agencies to include supporting documentation when they reported their obligations at the end of each reporting period. Instead, the Office relied on self-reporting by agencies without ensuring supporting documentation was provided and retained. In addition, management did not ensure that information provided by agencies was reviewed to ensure the project and expenditure reports are complete, accurate, and adequately supported. In addition, the Office was unable to confirm all information reported for capital expenditures was adequately supported. Effect of Condition We focused our review on the obligation and expenditure key line items for the Department of Commerce (Commerce) and Department of Social and Health Services (DSHS). Combined, these two agencies accounted for about 57 percent of total SLFRF expenditures during fiscal year 2023. We determined that both agencies’ current period and cumulative expenditures were accurate and supported, and any variances were not material to the overall reporting. However, we were unable to confirm whether the supporting documentation for both agencies’ reported obligations accounted for all activity during each reporting period. Therefore, our estimates of overreported and underreported obligations for both agencies in the tables below are based on the agency reports for obligations available at the time of the audit. Commerce We found that the current period obligations for Commerce in all four reports did not have adequate supporting documentation. We also found that cumulative obligations for Commerce in all four reports did not have adequate supporting documentation. As of the final fiscal year 2023 report, Commerce’s cumulative obligations totaled $985,274,734 and cumulative expenditures totaled $783,360,809. Because Commerce’s expenditures were accurate and supported, we calculated the variance to be the net of the unsupported obligations minus supported expenditures, or $201,913,924 (difference due to rounding). DSHS In two reports, we identified reporting variances for current period obligations reported for DSHS, including $7,158,350 in overreported obligations in Report No. 7. DSHS reported $17,781,970 in current obligations for Report No. 7. We also found that cumulative obligations were underreported by $1,445,556 compared to estimated expected obligations of $363,451,530. To determine the magnitude of the reporting variances, we totaled the largest current period obligation variance for DSHS with the net unsupported obligations for Commerce. This totaled $209,081,184, or about 11 percent of total SLFRF expenditures during fiscal year 2023. Our determination of the variance is an estimate because documentation necessary to calculate accurate obligation amounts for each reporting period was not available. By not establishing adequate internal controls, the Office cannot ensure that information reported to the federal grantor is complete and accurate. Without complete supporting documentation for obligations, management is not able to demonstrate that amounts reported to the federal grantor are complete and accurate. Recommendations We recommend the Office: • Establish internal controls to ensure reported obligations are supported by source documentation, which should be retained and available for review • Improve internal controls to ensure staff continue to follow up with agencies that report incomplete information • Ensure that management verifies reporting information is adequately supported before certifying and submitting the report Office’s Response The Office will continue to communicate to agencies the importance of maintaining adequate source supporting documentation for future project and expenditure reports. Although a complete cumulative obligations report as of the report date was not maintained supporting the project and expenditure report, all obligations are supported by grant agreements, contracts, and purchase orders. Additionally, the Office was able to provide the auditor a current report including all obligations to date which exceeded the cumulative obligations during the reporting period. The Office continues to improve the reporting template used to collect the required information from agencies and frequently meets with agencies to discuss the reporting requirements to ensure the quarterly Project and Expenditure Reports are complete, accurate, and supported. The Office will continue its review and verification process to ensure information is adequately supported before certifying and submitting the report. As noted in the U.S. Treasury reporting guidance, corrections or any changes to the report need to be reflected in the next Project and Expenditure report. As a result, the supporting documentation for the quarter may not align with the quarterly reports. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Office of Management and Budget, 2 CFR Part 200, Appendix XI, 2023 Compliance Supplement, for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds, states in part: L. Reporting 2. Performance Reporting Title of Report: Project and Expenditure Report PRA Number: 1505-0271 Reporting Cycle: Quarterly and Annual Authoritative Requirement: 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information Blank Copy of the Report: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Instructions: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Corrections: Recipients will have an opportunity to reopen and provide edits to their submitted Project and Expenditure Reports any time before the reporting deadline. Recipients will then be required to re-certify and submit the report again to properly reflect any edits made. After the reporting deadline, unless prompted by Treasury staff, recipients will not be able to edit their submitted report, any changes or revisions will need to be reflected in the next Project and Expenditure report. The Office of Recovery Program’s (ORP) reporting portal has built-in functionality to reopen a report and allow recipients to make edits after the reporting deadline. However, it is ORP’s policy that recipients may only make revisions if authorized by Treasury staff for a period of up to 60 days after the reporting deadline. After the revision period ends, the report is final. A resubmitted report becomes a recipient’s final report within ORP’s reporting portal. Recipients can generate PDFs of this reports at any time. Key Line Item(s)- The following line items contain critical information: 1. Obligations and Expenditures- Quantifiable Objective Criteria: Reported obligations and expenditures. (See pages 16 and 17 of the above links.) a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure Revenue loss calculation validation- Note- Recipients may elect a “standard allowance” of up to $10 million to spend on government services through the period of performance instead of using the full formula specified in the final rule. The standard allowance is available to all recipients. See page 30 for when recipients may modify their revenue loss election. Quantifiable Objective Criteria: Recipient’s application of the revenue loss calculation is accurate if they did not elect the standard allowance. Specific information regarding the revenue loss formula can be found in paragraph (d)(2) of 31 CFR § 35.6 at 31 CFR § 35.6(d)(2)(d)(2). Capital Expenditures- Quantifiable Objective Criteria: The recipient has the required written justification in their grant file if the total of the capital expenditures costs in a project is greater than or equal to $1 million and less than $10 million; or, the recipient submitted the required justification to Treasury if (1) a project has total capital expenditures costs greater than $10 million for capital expenditures enumerated by Treasury in the final rule; or (2) the total of a project’s capital expenditures costs is greater than $1 million for capital expenditures not enumerated by Treasury in the final rule. Note: Capital expenditures paid for using revenue replacement funds are not subject to this requirement. Tribal governments are not required to complete the written justification. (See 31 CFR section 35.6(b)(4))
2023-030 The Office of Financial Management did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Reporting Known Questioned Cost Amount: None Prior Year Audit Finding: Yes, Finding 2022-020 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. The program also provides resources to fight the pandemic, address economic impacts, maintain vital public services, and build a strong, resilient, and equitable recovery. Washington received about $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, Washington spent more than $1.8 billion in federal program funds. Under the SLFRF program, recipients are required to submit Project and Expenditure Reports during the covered period, which began March 3, 2021, and ends December 31, 2024. Treasury identified the following key line items that contain critical information: 1. Obligations and Expenditures a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure 2. Revenue loss calculation validation 3. Capital Expenditures The Office was responsible for compiling information from state agencies and submitting the reports no later than the last day of the month following the end of each reporting period. The Office was also responsible for calculating and reporting the state’s revenue losses from the pandemic, as well as identifying SLFRF projects with capital expenditures that required written justifications. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. The prior finding number was 2022-020. Description of Condition The Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. During the audit period, the Office submitted four quarterly Project and Expenditure Reports: • Report No. 4 (covering activity from July 1, 2022, through September 30, 2022) • Report No. 5 (covering activity from October 1, 2022, through December 31, 2022) • Report No. 6 (covering activity from January 1, 2023, through March 31, 2023) • Report No. 7 (covering activity from April 1, 2023, through June 30, 2023) Office staff prepared the reports by collecting and compiling reporting information from each state agency. For all four reports, we found that the Office did not have adequate supporting documentation for amounts reported under current period and cumulative obligations. We also found the Office did not have adequate internal controls to ensure material compliance with the capital expenditure requirement. We identified 14 out of 95 projects for which the Office did not follow up to determine whether there were capital expenditures incurred. Eight projects had expenditures greater than $1 million during fiscal year 2023, and two of those projects required written justifications. We found the Office did not have the required written justifications for two out of eight (25 percent) projects. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition The Office did not require state agencies to include supporting documentation when they reported their obligations at the end of each reporting period. Instead, the Office relied on self-reporting by agencies without ensuring supporting documentation was provided and retained. In addition, management did not ensure that information provided by agencies was reviewed to ensure the project and expenditure reports are complete, accurate, and adequately supported. In addition, the Office was unable to confirm all information reported for capital expenditures was adequately supported. Effect of Condition We focused our review on the obligation and expenditure key line items for the Department of Commerce (Commerce) and Department of Social and Health Services (DSHS). Combined, these two agencies accounted for about 57 percent of total SLFRF expenditures during fiscal year 2023. We determined that both agencies’ current period and cumulative expenditures were accurate and supported, and any variances were not material to the overall reporting. However, we were unable to confirm whether the supporting documentation for both agencies’ reported obligations accounted for all activity during each reporting period. Therefore, our estimates of overreported and underreported obligations for both agencies in the tables below are based on the agency reports for obligations available at the time of the audit. Commerce We found that the current period obligations for Commerce in all four reports did not have adequate supporting documentation. We also found that cumulative obligations for Commerce in all four reports did not have adequate supporting documentation. As of the final fiscal year 2023 report, Commerce’s cumulative obligations totaled $985,274,734 and cumulative expenditures totaled $783,360,809. Because Commerce’s expenditures were accurate and supported, we calculated the variance to be the net of the unsupported obligations minus supported expenditures, or $201,913,924 (difference due to rounding). DSHS In two reports, we identified reporting variances for current period obligations reported for DSHS, including $7,158,350 in overreported obligations in Report No. 7. DSHS reported $17,781,970 in current obligations for Report No. 7. We also found that cumulative obligations were underreported by $1,445,556 compared to estimated expected obligations of $363,451,530. To determine the magnitude of the reporting variances, we totaled the largest current period obligation variance for DSHS with the net unsupported obligations for Commerce. This totaled $209,081,184, or about 11 percent of total SLFRF expenditures during fiscal year 2023. Our determination of the variance is an estimate because documentation necessary to calculate accurate obligation amounts for each reporting period was not available. By not establishing adequate internal controls, the Office cannot ensure that information reported to the federal grantor is complete and accurate. Without complete supporting documentation for obligations, management is not able to demonstrate that amounts reported to the federal grantor are complete and accurate. Recommendations We recommend the Office: • Establish internal controls to ensure reported obligations are supported by source documentation, which should be retained and available for review • Improve internal controls to ensure staff continue to follow up with agencies that report incomplete information • Ensure that management verifies reporting information is adequately supported before certifying and submitting the report Office’s Response The Office will continue to communicate to agencies the importance of maintaining adequate source supporting documentation for future project and expenditure reports. Although a complete cumulative obligations report as of the report date was not maintained supporting the project and expenditure report, all obligations are supported by grant agreements, contracts, and purchase orders. Additionally, the Office was able to provide the auditor a current report including all obligations to date which exceeded the cumulative obligations during the reporting period. The Office continues to improve the reporting template used to collect the required information from agencies and frequently meets with agencies to discuss the reporting requirements to ensure the quarterly Project and Expenditure Reports are complete, accurate, and supported. The Office will continue its review and verification process to ensure information is adequately supported before certifying and submitting the report. As noted in the U.S. Treasury reporting guidance, corrections or any changes to the report need to be reflected in the next Project and Expenditure report. As a result, the supporting documentation for the quarter may not align with the quarterly reports. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Office of Management and Budget, 2 CFR Part 200, Appendix XI, 2023 Compliance Supplement, for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds, states in part: L. Reporting 2. Performance Reporting Title of Report: Project and Expenditure Report PRA Number: 1505-0271 Reporting Cycle: Quarterly and Annual Authoritative Requirement: 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information Blank Copy of the Report: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Instructions: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Corrections: Recipients will have an opportunity to reopen and provide edits to their submitted Project and Expenditure Reports any time before the reporting deadline. Recipients will then be required to re-certify and submit the report again to properly reflect any edits made. After the reporting deadline, unless prompted by Treasury staff, recipients will not be able to edit their submitted report, any changes or revisions will need to be reflected in the next Project and Expenditure report. The Office of Recovery Program’s (ORP) reporting portal has built-in functionality to reopen a report and allow recipients to make edits after the reporting deadline. However, it is ORP’s policy that recipients may only make revisions if authorized by Treasury staff for a period of up to 60 days after the reporting deadline. After the revision period ends, the report is final. A resubmitted report becomes a recipient’s final report within ORP’s reporting portal. Recipients can generate PDFs of this reports at any time. Key Line Item(s)- The following line items contain critical information: 1. Obligations and Expenditures- Quantifiable Objective Criteria: Reported obligations and expenditures. (See pages 16 and 17 of the above links.) a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure Revenue loss calculation validation- Note- Recipients may elect a “standard allowance” of up to $10 million to spend on government services through the period of performance instead of using the full formula specified in the final rule. The standard allowance is available to all recipients. See page 30 for when recipients may modify their revenue loss election. Quantifiable Objective Criteria: Recipient’s application of the revenue loss calculation is accurate if they did not elect the standard allowance. Specific information regarding the revenue loss formula can be found in paragraph (d)(2) of 31 CFR § 35.6 at 31 CFR § 35.6(d)(2)(d)(2). Capital Expenditures- Quantifiable Objective Criteria: The recipient has the required written justification in their grant file if the total of the capital expenditures costs in a project is greater than or equal to $1 million and less than $10 million; or, the recipient submitted the required justification to Treasury if (1) a project has total capital expenditures costs greater than $10 million for capital expenditures enumerated by Treasury in the final rule; or (2) the total of a project’s capital expenditures costs is greater than $1 million for capital expenditures not enumerated by Treasury in the final rule. Note: Capital expenditures paid for using revenue replacement funds are not subject to this requirement. Tribal governments are not required to complete the written justification. (See 31 CFR section 35.6(b)(4))
2023-030 The Office of Financial Management did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Reporting Known Questioned Cost Amount: None Prior Year Audit Finding: Yes, Finding 2022-020 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. The program also provides resources to fight the pandemic, address economic impacts, maintain vital public services, and build a strong, resilient, and equitable recovery. Washington received about $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, Washington spent more than $1.8 billion in federal program funds. Under the SLFRF program, recipients are required to submit Project and Expenditure Reports during the covered period, which began March 3, 2021, and ends December 31, 2024. Treasury identified the following key line items that contain critical information: 1. Obligations and Expenditures a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure 2. Revenue loss calculation validation 3. Capital Expenditures The Office was responsible for compiling information from state agencies and submitting the reports no later than the last day of the month following the end of each reporting period. The Office was also responsible for calculating and reporting the state’s revenue losses from the pandemic, as well as identifying SLFRF projects with capital expenditures that required written justifications. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. The prior finding number was 2022-020. Description of Condition The Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. During the audit period, the Office submitted four quarterly Project and Expenditure Reports: • Report No. 4 (covering activity from July 1, 2022, through September 30, 2022) • Report No. 5 (covering activity from October 1, 2022, through December 31, 2022) • Report No. 6 (covering activity from January 1, 2023, through March 31, 2023) • Report No. 7 (covering activity from April 1, 2023, through June 30, 2023) Office staff prepared the reports by collecting and compiling reporting information from each state agency. For all four reports, we found that the Office did not have adequate supporting documentation for amounts reported under current period and cumulative obligations. We also found the Office did not have adequate internal controls to ensure material compliance with the capital expenditure requirement. We identified 14 out of 95 projects for which the Office did not follow up to determine whether there were capital expenditures incurred. Eight projects had expenditures greater than $1 million during fiscal year 2023, and two of those projects required written justifications. We found the Office did not have the required written justifications for two out of eight (25 percent) projects. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition The Office did not require state agencies to include supporting documentation when they reported their obligations at the end of each reporting period. Instead, the Office relied on self-reporting by agencies without ensuring supporting documentation was provided and retained. In addition, management did not ensure that information provided by agencies was reviewed to ensure the project and expenditure reports are complete, accurate, and adequately supported. In addition, the Office was unable to confirm all information reported for capital expenditures was adequately supported. Effect of Condition We focused our review on the obligation and expenditure key line items for the Department of Commerce (Commerce) and Department of Social and Health Services (DSHS). Combined, these two agencies accounted for about 57 percent of total SLFRF expenditures during fiscal year 2023. We determined that both agencies’ current period and cumulative expenditures were accurate and supported, and any variances were not material to the overall reporting. However, we were unable to confirm whether the supporting documentation for both agencies’ reported obligations accounted for all activity during each reporting period. Therefore, our estimates of overreported and underreported obligations for both agencies in the tables below are based on the agency reports for obligations available at the time of the audit. Commerce We found that the current period obligations for Commerce in all four reports did not have adequate supporting documentation. We also found that cumulative obligations for Commerce in all four reports did not have adequate supporting documentation. As of the final fiscal year 2023 report, Commerce’s cumulative obligations totaled $985,274,734 and cumulative expenditures totaled $783,360,809. Because Commerce’s expenditures were accurate and supported, we calculated the variance to be the net of the unsupported obligations minus supported expenditures, or $201,913,924 (difference due to rounding). DSHS In two reports, we identified reporting variances for current period obligations reported for DSHS, including $7,158,350 in overreported obligations in Report No. 7. DSHS reported $17,781,970 in current obligations for Report No. 7. We also found that cumulative obligations were underreported by $1,445,556 compared to estimated expected obligations of $363,451,530. To determine the magnitude of the reporting variances, we totaled the largest current period obligation variance for DSHS with the net unsupported obligations for Commerce. This totaled $209,081,184, or about 11 percent of total SLFRF expenditures during fiscal year 2023. Our determination of the variance is an estimate because documentation necessary to calculate accurate obligation amounts for each reporting period was not available. By not establishing adequate internal controls, the Office cannot ensure that information reported to the federal grantor is complete and accurate. Without complete supporting documentation for obligations, management is not able to demonstrate that amounts reported to the federal grantor are complete and accurate. Recommendations We recommend the Office: • Establish internal controls to ensure reported obligations are supported by source documentation, which should be retained and available for review • Improve internal controls to ensure staff continue to follow up with agencies that report incomplete information • Ensure that management verifies reporting information is adequately supported before certifying and submitting the report Office’s Response The Office will continue to communicate to agencies the importance of maintaining adequate source supporting documentation for future project and expenditure reports. Although a complete cumulative obligations report as of the report date was not maintained supporting the project and expenditure report, all obligations are supported by grant agreements, contracts, and purchase orders. Additionally, the Office was able to provide the auditor a current report including all obligations to date which exceeded the cumulative obligations during the reporting period. The Office continues to improve the reporting template used to collect the required information from agencies and frequently meets with agencies to discuss the reporting requirements to ensure the quarterly Project and Expenditure Reports are complete, accurate, and supported. The Office will continue its review and verification process to ensure information is adequately supported before certifying and submitting the report. As noted in the U.S. Treasury reporting guidance, corrections or any changes to the report need to be reflected in the next Project and Expenditure report. As a result, the supporting documentation for the quarter may not align with the quarterly reports. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Office of Management and Budget, 2 CFR Part 200, Appendix XI, 2023 Compliance Supplement, for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds, states in part: L. Reporting 2. Performance Reporting Title of Report: Project and Expenditure Report PRA Number: 1505-0271 Reporting Cycle: Quarterly and Annual Authoritative Requirement: 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information Blank Copy of the Report: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Instructions: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Corrections: Recipients will have an opportunity to reopen and provide edits to their submitted Project and Expenditure Reports any time before the reporting deadline. Recipients will then be required to re-certify and submit the report again to properly reflect any edits made. After the reporting deadline, unless prompted by Treasury staff, recipients will not be able to edit their submitted report, any changes or revisions will need to be reflected in the next Project and Expenditure report. The Office of Recovery Program’s (ORP) reporting portal has built-in functionality to reopen a report and allow recipients to make edits after the reporting deadline. However, it is ORP’s policy that recipients may only make revisions if authorized by Treasury staff for a period of up to 60 days after the reporting deadline. After the revision period ends, the report is final. A resubmitted report becomes a recipient’s final report within ORP’s reporting portal. Recipients can generate PDFs of this reports at any time. Key Line Item(s)- The following line items contain critical information: 1. Obligations and Expenditures- Quantifiable Objective Criteria: Reported obligations and expenditures. (See pages 16 and 17 of the above links.) a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure Revenue loss calculation validation- Note- Recipients may elect a “standard allowance” of up to $10 million to spend on government services through the period of performance instead of using the full formula specified in the final rule. The standard allowance is available to all recipients. See page 30 for when recipients may modify their revenue loss election. Quantifiable Objective Criteria: Recipient’s application of the revenue loss calculation is accurate if they did not elect the standard allowance. Specific information regarding the revenue loss formula can be found in paragraph (d)(2) of 31 CFR § 35.6 at 31 CFR § 35.6(d)(2)(d)(2). Capital Expenditures- Quantifiable Objective Criteria: The recipient has the required written justification in their grant file if the total of the capital expenditures costs in a project is greater than or equal to $1 million and less than $10 million; or, the recipient submitted the required justification to Treasury if (1) a project has total capital expenditures costs greater than $10 million for capital expenditures enumerated by Treasury in the final rule; or (2) the total of a project’s capital expenditures costs is greater than $1 million for capital expenditures not enumerated by Treasury in the final rule. Note: Capital expenditures paid for using revenue replacement funds are not subject to this requirement. Tribal governments are not required to complete the written justification. (See 31 CFR section 35.6(b)(4))
2023-030 The Office of Financial Management did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Reporting Known Questioned Cost Amount: None Prior Year Audit Finding: Yes, Finding 2022-020 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. The program also provides resources to fight the pandemic, address economic impacts, maintain vital public services, and build a strong, resilient, and equitable recovery. Washington received about $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, Washington spent more than $1.8 billion in federal program funds. Under the SLFRF program, recipients are required to submit Project and Expenditure Reports during the covered period, which began March 3, 2021, and ends December 31, 2024. Treasury identified the following key line items that contain critical information: 1. Obligations and Expenditures a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure 2. Revenue loss calculation validation 3. Capital Expenditures The Office was responsible for compiling information from state agencies and submitting the reports no later than the last day of the month following the end of each reporting period. The Office was also responsible for calculating and reporting the state’s revenue losses from the pandemic, as well as identifying SLFRF projects with capital expenditures that required written justifications. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. The prior finding number was 2022-020. Description of Condition The Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. During the audit period, the Office submitted four quarterly Project and Expenditure Reports: • Report No. 4 (covering activity from July 1, 2022, through September 30, 2022) • Report No. 5 (covering activity from October 1, 2022, through December 31, 2022) • Report No. 6 (covering activity from January 1, 2023, through March 31, 2023) • Report No. 7 (covering activity from April 1, 2023, through June 30, 2023) Office staff prepared the reports by collecting and compiling reporting information from each state agency. For all four reports, we found that the Office did not have adequate supporting documentation for amounts reported under current period and cumulative obligations. We also found the Office did not have adequate internal controls to ensure material compliance with the capital expenditure requirement. We identified 14 out of 95 projects for which the Office did not follow up to determine whether there were capital expenditures incurred. Eight projects had expenditures greater than $1 million during fiscal year 2023, and two of those projects required written justifications. We found the Office did not have the required written justifications for two out of eight (25 percent) projects. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition The Office did not require state agencies to include supporting documentation when they reported their obligations at the end of each reporting period. Instead, the Office relied on self-reporting by agencies without ensuring supporting documentation was provided and retained. In addition, management did not ensure that information provided by agencies was reviewed to ensure the project and expenditure reports are complete, accurate, and adequately supported. In addition, the Office was unable to confirm all information reported for capital expenditures was adequately supported. Effect of Condition We focused our review on the obligation and expenditure key line items for the Department of Commerce (Commerce) and Department of Social and Health Services (DSHS). Combined, these two agencies accounted for about 57 percent of total SLFRF expenditures during fiscal year 2023. We determined that both agencies’ current period and cumulative expenditures were accurate and supported, and any variances were not material to the overall reporting. However, we were unable to confirm whether the supporting documentation for both agencies’ reported obligations accounted for all activity during each reporting period. Therefore, our estimates of overreported and underreported obligations for both agencies in the tables below are based on the agency reports for obligations available at the time of the audit. Commerce We found that the current period obligations for Commerce in all four reports did not have adequate supporting documentation. We also found that cumulative obligations for Commerce in all four reports did not have adequate supporting documentation. As of the final fiscal year 2023 report, Commerce’s cumulative obligations totaled $985,274,734 and cumulative expenditures totaled $783,360,809. Because Commerce’s expenditures were accurate and supported, we calculated the variance to be the net of the unsupported obligations minus supported expenditures, or $201,913,924 (difference due to rounding). DSHS In two reports, we identified reporting variances for current period obligations reported for DSHS, including $7,158,350 in overreported obligations in Report No. 7. DSHS reported $17,781,970 in current obligations for Report No. 7. We also found that cumulative obligations were underreported by $1,445,556 compared to estimated expected obligations of $363,451,530. To determine the magnitude of the reporting variances, we totaled the largest current period obligation variance for DSHS with the net unsupported obligations for Commerce. This totaled $209,081,184, or about 11 percent of total SLFRF expenditures during fiscal year 2023. Our determination of the variance is an estimate because documentation necessary to calculate accurate obligation amounts for each reporting period was not available. By not establishing adequate internal controls, the Office cannot ensure that information reported to the federal grantor is complete and accurate. Without complete supporting documentation for obligations, management is not able to demonstrate that amounts reported to the federal grantor are complete and accurate. Recommendations We recommend the Office: • Establish internal controls to ensure reported obligations are supported by source documentation, which should be retained and available for review • Improve internal controls to ensure staff continue to follow up with agencies that report incomplete information • Ensure that management verifies reporting information is adequately supported before certifying and submitting the report Office’s Response The Office will continue to communicate to agencies the importance of maintaining adequate source supporting documentation for future project and expenditure reports. Although a complete cumulative obligations report as of the report date was not maintained supporting the project and expenditure report, all obligations are supported by grant agreements, contracts, and purchase orders. Additionally, the Office was able to provide the auditor a current report including all obligations to date which exceeded the cumulative obligations during the reporting period. The Office continues to improve the reporting template used to collect the required information from agencies and frequently meets with agencies to discuss the reporting requirements to ensure the quarterly Project and Expenditure Reports are complete, accurate, and supported. The Office will continue its review and verification process to ensure information is adequately supported before certifying and submitting the report. As noted in the U.S. Treasury reporting guidance, corrections or any changes to the report need to be reflected in the next Project and Expenditure report. As a result, the supporting documentation for the quarter may not align with the quarterly reports. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Office of Management and Budget, 2 CFR Part 200, Appendix XI, 2023 Compliance Supplement, for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds, states in part: L. Reporting 2. Performance Reporting Title of Report: Project and Expenditure Report PRA Number: 1505-0271 Reporting Cycle: Quarterly and Annual Authoritative Requirement: 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information Blank Copy of the Report: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Instructions: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Corrections: Recipients will have an opportunity to reopen and provide edits to their submitted Project and Expenditure Reports any time before the reporting deadline. Recipients will then be required to re-certify and submit the report again to properly reflect any edits made. After the reporting deadline, unless prompted by Treasury staff, recipients will not be able to edit their submitted report, any changes or revisions will need to be reflected in the next Project and Expenditure report. The Office of Recovery Program’s (ORP) reporting portal has built-in functionality to reopen a report and allow recipients to make edits after the reporting deadline. However, it is ORP’s policy that recipients may only make revisions if authorized by Treasury staff for a period of up to 60 days after the reporting deadline. After the revision period ends, the report is final. A resubmitted report becomes a recipient’s final report within ORP’s reporting portal. Recipients can generate PDFs of this reports at any time. Key Line Item(s)- The following line items contain critical information: 1. Obligations and Expenditures- Quantifiable Objective Criteria: Reported obligations and expenditures. (See pages 16 and 17 of the above links.) a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure Revenue loss calculation validation- Note- Recipients may elect a “standard allowance” of up to $10 million to spend on government services through the period of performance instead of using the full formula specified in the final rule. The standard allowance is available to all recipients. See page 30 for when recipients may modify their revenue loss election. Quantifiable Objective Criteria: Recipient’s application of the revenue loss calculation is accurate if they did not elect the standard allowance. Specific information regarding the revenue loss formula can be found in paragraph (d)(2) of 31 CFR § 35.6 at 31 CFR § 35.6(d)(2)(d)(2). Capital Expenditures- Quantifiable Objective Criteria: The recipient has the required written justification in their grant file if the total of the capital expenditures costs in a project is greater than or equal to $1 million and less than $10 million; or, the recipient submitted the required justification to Treasury if (1) a project has total capital expenditures costs greater than $10 million for capital expenditures enumerated by Treasury in the final rule; or (2) the total of a project’s capital expenditures costs is greater than $1 million for capital expenditures not enumerated by Treasury in the final rule. Note: Capital expenditures paid for using revenue replacement funds are not subject to this requirement. Tribal governments are not required to complete the written justification. (See 31 CFR section 35.6(b)(4))
2023-030 The Office of Financial Management did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Reporting Known Questioned Cost Amount: None Prior Year Audit Finding: Yes, Finding 2022-020 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. The program also provides resources to fight the pandemic, address economic impacts, maintain vital public services, and build a strong, resilient, and equitable recovery. Washington received about $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, Washington spent more than $1.8 billion in federal program funds. Under the SLFRF program, recipients are required to submit Project and Expenditure Reports during the covered period, which began March 3, 2021, and ends December 31, 2024. Treasury identified the following key line items that contain critical information: 1. Obligations and Expenditures a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure 2. Revenue loss calculation validation 3. Capital Expenditures The Office was responsible for compiling information from state agencies and submitting the reports no later than the last day of the month following the end of each reporting period. The Office was also responsible for calculating and reporting the state’s revenue losses from the pandemic, as well as identifying SLFRF projects with capital expenditures that required written justifications. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. The prior finding number was 2022-020. Description of Condition The Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. During the audit period, the Office submitted four quarterly Project and Expenditure Reports: • Report No. 4 (covering activity from July 1, 2022, through September 30, 2022) • Report No. 5 (covering activity from October 1, 2022, through December 31, 2022) • Report No. 6 (covering activity from January 1, 2023, through March 31, 2023) • Report No. 7 (covering activity from April 1, 2023, through June 30, 2023) Office staff prepared the reports by collecting and compiling reporting information from each state agency. For all four reports, we found that the Office did not have adequate supporting documentation for amounts reported under current period and cumulative obligations. We also found the Office did not have adequate internal controls to ensure material compliance with the capital expenditure requirement. We identified 14 out of 95 projects for which the Office did not follow up to determine whether there were capital expenditures incurred. Eight projects had expenditures greater than $1 million during fiscal year 2023, and two of those projects required written justifications. We found the Office did not have the required written justifications for two out of eight (25 percent) projects. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition The Office did not require state agencies to include supporting documentation when they reported their obligations at the end of each reporting period. Instead, the Office relied on self-reporting by agencies without ensuring supporting documentation was provided and retained. In addition, management did not ensure that information provided by agencies was reviewed to ensure the project and expenditure reports are complete, accurate, and adequately supported. In addition, the Office was unable to confirm all information reported for capital expenditures was adequately supported. Effect of Condition We focused our review on the obligation and expenditure key line items for the Department of Commerce (Commerce) and Department of Social and Health Services (DSHS). Combined, these two agencies accounted for about 57 percent of total SLFRF expenditures during fiscal year 2023. We determined that both agencies’ current period and cumulative expenditures were accurate and supported, and any variances were not material to the overall reporting. However, we were unable to confirm whether the supporting documentation for both agencies’ reported obligations accounted for all activity during each reporting period. Therefore, our estimates of overreported and underreported obligations for both agencies in the tables below are based on the agency reports for obligations available at the time of the audit. Commerce We found that the current period obligations for Commerce in all four reports did not have adequate supporting documentation. We also found that cumulative obligations for Commerce in all four reports did not have adequate supporting documentation. As of the final fiscal year 2023 report, Commerce’s cumulative obligations totaled $985,274,734 and cumulative expenditures totaled $783,360,809. Because Commerce’s expenditures were accurate and supported, we calculated the variance to be the net of the unsupported obligations minus supported expenditures, or $201,913,924 (difference due to rounding). DSHS In two reports, we identified reporting variances for current period obligations reported for DSHS, including $7,158,350 in overreported obligations in Report No. 7. DSHS reported $17,781,970 in current obligations for Report No. 7. We also found that cumulative obligations were underreported by $1,445,556 compared to estimated expected obligations of $363,451,530. To determine the magnitude of the reporting variances, we totaled the largest current period obligation variance for DSHS with the net unsupported obligations for Commerce. This totaled $209,081,184, or about 11 percent of total SLFRF expenditures during fiscal year 2023. Our determination of the variance is an estimate because documentation necessary to calculate accurate obligation amounts for each reporting period was not available. By not establishing adequate internal controls, the Office cannot ensure that information reported to the federal grantor is complete and accurate. Without complete supporting documentation for obligations, management is not able to demonstrate that amounts reported to the federal grantor are complete and accurate. Recommendations We recommend the Office: • Establish internal controls to ensure reported obligations are supported by source documentation, which should be retained and available for review • Improve internal controls to ensure staff continue to follow up with agencies that report incomplete information • Ensure that management verifies reporting information is adequately supported before certifying and submitting the report Office’s Response The Office will continue to communicate to agencies the importance of maintaining adequate source supporting documentation for future project and expenditure reports. Although a complete cumulative obligations report as of the report date was not maintained supporting the project and expenditure report, all obligations are supported by grant agreements, contracts, and purchase orders. Additionally, the Office was able to provide the auditor a current report including all obligations to date which exceeded the cumulative obligations during the reporting period. The Office continues to improve the reporting template used to collect the required information from agencies and frequently meets with agencies to discuss the reporting requirements to ensure the quarterly Project and Expenditure Reports are complete, accurate, and supported. The Office will continue its review and verification process to ensure information is adequately supported before certifying and submitting the report. As noted in the U.S. Treasury reporting guidance, corrections or any changes to the report need to be reflected in the next Project and Expenditure report. As a result, the supporting documentation for the quarter may not align with the quarterly reports. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Office of Management and Budget, 2 CFR Part 200, Appendix XI, 2023 Compliance Supplement, for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds, states in part: L. Reporting 2. Performance Reporting Title of Report: Project and Expenditure Report PRA Number: 1505-0271 Reporting Cycle: Quarterly and Annual Authoritative Requirement: 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information Blank Copy of the Report: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Instructions: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Corrections: Recipients will have an opportunity to reopen and provide edits to their submitted Project and Expenditure Reports any time before the reporting deadline. Recipients will then be required to re-certify and submit the report again to properly reflect any edits made. After the reporting deadline, unless prompted by Treasury staff, recipients will not be able to edit their submitted report, any changes or revisions will need to be reflected in the next Project and Expenditure report. The Office of Recovery Program’s (ORP) reporting portal has built-in functionality to reopen a report and allow recipients to make edits after the reporting deadline. However, it is ORP’s policy that recipients may only make revisions if authorized by Treasury staff for a period of up to 60 days after the reporting deadline. After the revision period ends, the report is final. A resubmitted report becomes a recipient’s final report within ORP’s reporting portal. Recipients can generate PDFs of this reports at any time. Key Line Item(s)- The following line items contain critical information: 1. Obligations and Expenditures- Quantifiable Objective Criteria: Reported obligations and expenditures. (See pages 16 and 17 of the above links.) a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure Revenue loss calculation validation- Note- Recipients may elect a “standard allowance” of up to $10 million to spend on government services through the period of performance instead of using the full formula specified in the final rule. The standard allowance is available to all recipients. See page 30 for when recipients may modify their revenue loss election. Quantifiable Objective Criteria: Recipient’s application of the revenue loss calculation is accurate if they did not elect the standard allowance. Specific information regarding the revenue loss formula can be found in paragraph (d)(2) of 31 CFR § 35.6 at 31 CFR § 35.6(d)(2)(d)(2). Capital Expenditures- Quantifiable Objective Criteria: The recipient has the required written justification in their grant file if the total of the capital expenditures costs in a project is greater than or equal to $1 million and less than $10 million; or, the recipient submitted the required justification to Treasury if (1) a project has total capital expenditures costs greater than $10 million for capital expenditures enumerated by Treasury in the final rule; or (2) the total of a project’s capital expenditures costs is greater than $1 million for capital expenditures not enumerated by Treasury in the final rule. Note: Capital expenditures paid for using revenue replacement funds are not subject to this requirement. Tribal governments are not required to complete the written justification. (See 31 CFR section 35.6(b)(4))
2023-030 The Office of Financial Management did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Reporting Known Questioned Cost Amount: None Prior Year Audit Finding: Yes, Finding 2022-020 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the American Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. The program also provides resources to fight the pandemic, address economic impacts, maintain vital public services, and build a strong, resilient, and equitable recovery. Washington received about $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, Washington spent more than $1.8 billion in federal program funds. Under the SLFRF program, recipients are required to submit Project and Expenditure Reports during the covered period, which began March 3, 2021, and ends December 31, 2024. Treasury identified the following key line items that contain critical information: 1. Obligations and Expenditures a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure 2. Revenue loss calculation validation 3. Capital Expenditures The Office was responsible for compiling information from state agencies and submitting the reports no later than the last day of the month following the end of each reporting period. The Office was also responsible for calculating and reporting the state’s revenue losses from the pandemic, as well as identifying SLFRF projects with capital expenditures that required written justifications. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. The prior finding number was 2022-020. Description of Condition The Office did not have adequate internal controls over and did not comply with reporting requirements for the SLFRF program. During the audit period, the Office submitted four quarterly Project and Expenditure Reports: • Report No. 4 (covering activity from July 1, 2022, through September 30, 2022) • Report No. 5 (covering activity from October 1, 2022, through December 31, 2022) • Report No. 6 (covering activity from January 1, 2023, through March 31, 2023) • Report No. 7 (covering activity from April 1, 2023, through June 30, 2023) Office staff prepared the reports by collecting and compiling reporting information from each state agency. For all four reports, we found that the Office did not have adequate supporting documentation for amounts reported under current period and cumulative obligations. We also found the Office did not have adequate internal controls to ensure material compliance with the capital expenditure requirement. We identified 14 out of 95 projects for which the Office did not follow up to determine whether there were capital expenditures incurred. Eight projects had expenditures greater than $1 million during fiscal year 2023, and two of those projects required written justifications. We found the Office did not have the required written justifications for two out of eight (25 percent) projects. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. Cause of Condition The Office did not require state agencies to include supporting documentation when they reported their obligations at the end of each reporting period. Instead, the Office relied on self-reporting by agencies without ensuring supporting documentation was provided and retained. In addition, management did not ensure that information provided by agencies was reviewed to ensure the project and expenditure reports are complete, accurate, and adequately supported. In addition, the Office was unable to confirm all information reported for capital expenditures was adequately supported. Effect of Condition We focused our review on the obligation and expenditure key line items for the Department of Commerce (Commerce) and Department of Social and Health Services (DSHS). Combined, these two agencies accounted for about 57 percent of total SLFRF expenditures during fiscal year 2023. We determined that both agencies’ current period and cumulative expenditures were accurate and supported, and any variances were not material to the overall reporting. However, we were unable to confirm whether the supporting documentation for both agencies’ reported obligations accounted for all activity during each reporting period. Therefore, our estimates of overreported and underreported obligations for both agencies in the tables below are based on the agency reports for obligations available at the time of the audit. Commerce We found that the current period obligations for Commerce in all four reports did not have adequate supporting documentation. We also found that cumulative obligations for Commerce in all four reports did not have adequate supporting documentation. As of the final fiscal year 2023 report, Commerce’s cumulative obligations totaled $985,274,734 and cumulative expenditures totaled $783,360,809. Because Commerce’s expenditures were accurate and supported, we calculated the variance to be the net of the unsupported obligations minus supported expenditures, or $201,913,924 (difference due to rounding). DSHS In two reports, we identified reporting variances for current period obligations reported for DSHS, including $7,158,350 in overreported obligations in Report No. 7. DSHS reported $17,781,970 in current obligations for Report No. 7. We also found that cumulative obligations were underreported by $1,445,556 compared to estimated expected obligations of $363,451,530. To determine the magnitude of the reporting variances, we totaled the largest current period obligation variance for DSHS with the net unsupported obligations for Commerce. This totaled $209,081,184, or about 11 percent of total SLFRF expenditures during fiscal year 2023. Our determination of the variance is an estimate because documentation necessary to calculate accurate obligation amounts for each reporting period was not available. By not establishing adequate internal controls, the Office cannot ensure that information reported to the federal grantor is complete and accurate. Without complete supporting documentation for obligations, management is not able to demonstrate that amounts reported to the federal grantor are complete and accurate. Recommendations We recommend the Office: • Establish internal controls to ensure reported obligations are supported by source documentation, which should be retained and available for review • Improve internal controls to ensure staff continue to follow up with agencies that report incomplete information • Ensure that management verifies reporting information is adequately supported before certifying and submitting the report Office’s Response The Office will continue to communicate to agencies the importance of maintaining adequate source supporting documentation for future project and expenditure reports. Although a complete cumulative obligations report as of the report date was not maintained supporting the project and expenditure report, all obligations are supported by grant agreements, contracts, and purchase orders. Additionally, the Office was able to provide the auditor a current report including all obligations to date which exceeded the cumulative obligations during the reporting period. The Office continues to improve the reporting template used to collect the required information from agencies and frequently meets with agencies to discuss the reporting requirements to ensure the quarterly Project and Expenditure Reports are complete, accurate, and supported. The Office will continue its review and verification process to ensure information is adequately supported before certifying and submitting the report. As noted in the U.S. Treasury reporting guidance, corrections or any changes to the report need to be reflected in the next Project and Expenditure report. As a result, the supporting documentation for the quarter may not align with the quarterly reports. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Office of Management and Budget, 2 CFR Part 200, Appendix XI, 2023 Compliance Supplement, for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds, states in part: L. Reporting 2. Performance Reporting Title of Report: Project and Expenditure Report PRA Number: 1505-0271 Reporting Cycle: Quarterly and Annual Authoritative Requirement: 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information Blank Copy of the Report: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Instructions: https://home.treasury.gov/policyissues/coronavirus/assistance-for-state-local-and-tribal-governments/state-andlocal-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities – See pages 17 through 34. Report Corrections: Recipients will have an opportunity to reopen and provide edits to their submitted Project and Expenditure Reports any time before the reporting deadline. Recipients will then be required to re-certify and submit the report again to properly reflect any edits made. After the reporting deadline, unless prompted by Treasury staff, recipients will not be able to edit their submitted report, any changes or revisions will need to be reflected in the next Project and Expenditure report. The Office of Recovery Program’s (ORP) reporting portal has built-in functionality to reopen a report and allow recipients to make edits after the reporting deadline. However, it is ORP’s policy that recipients may only make revisions if authorized by Treasury staff for a period of up to 60 days after the reporting deadline. After the revision period ends, the report is final. A resubmitted report becomes a recipient’s final report within ORP’s reporting portal. Recipients can generate PDFs of this reports at any time. Key Line Item(s)- The following line items contain critical information: 1. Obligations and Expenditures- Quantifiable Objective Criteria: Reported obligations and expenditures. (See pages 16 and 17 of the above links.) a. Current period obligation b. Cumulative obligation c. Current period expenditure d. Cumulative expenditure Revenue loss calculation validation- Note- Recipients may elect a “standard allowance” of up to $10 million to spend on government services through the period of performance instead of using the full formula specified in the final rule. The standard allowance is available to all recipients. See page 30 for when recipients may modify their revenue loss election. Quantifiable Objective Criteria: Recipient’s application of the revenue loss calculation is accurate if they did not elect the standard allowance. Specific information regarding the revenue loss formula can be found in paragraph (d)(2) of 31 CFR § 35.6 at 31 CFR § 35.6(d)(2)(d)(2). Capital Expenditures- Quantifiable Objective Criteria: The recipient has the required written justification in their grant file if the total of the capital expenditures costs in a project is greater than or equal to $1 million and less than $10 million; or, the recipient submitted the required justification to Treasury if (1) a project has total capital expenditures costs greater than $10 million for capital expenditures enumerated by Treasury in the final rule; or (2) the total of a project’s capital expenditures costs is greater than $1 million for capital expenditures not enumerated by Treasury in the final rule. Note: Capital expenditures paid for using revenue replacement funds are not subject to this requirement. Tribal governments are not required to complete the written justification. (See 31 CFR section 35.6(b)(4))
Assistance Listing Number(s): 21.027 Name of Federal Program or Cluster: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of the Treasury Name of Pass-through Entity: City of Madison, City of Sun Prairie, Wisconsin Department of Workforce Development Award Period: January 1, 2022 through December 31, 2022; September 22, 2021 through December 31, 2024; June 20, 2022 through June 30, 2025 Criteria or Specific Requirement: 2 CFR section 200.302(b)(2) requires the financial management system of a non-federal entity to provide for accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in 2 CFR sections 200.328 and 200.329. Condition and Context: A sample of 4 financial and programmatic reports totaling $204,255 was selected for testing from a population of 20 financial and programmatic reports totaling $900,466. The testing found no support of a review and approval for completeness and accuracy. 4 out of 18 financial reports tested had reported amounts that were not supported by the underlying accounting data. 2 of the 4 had expenses recorded as staffing and repairs and maintenance but were reported as supplies. 1 of the 4 had expenses recorded as supplies but reported as personnel. 1 of the 4 reported other subaward costs as subrecipient expenditures. Cause: There are no written procedures for reporting to require internal controls over reporting or documentation supporting reports to be filed and maintained. Recording expenses in the general ledger by award began in the fiscal year. Reports were not reconciled to the general ledger, the general ledger accounts were not structured to match the budgets, and budgets grouped expenses together that should be reported separately. Effect or Potential Effect: Costs may be disallowed if not approved in the budget or over budget without prior approval. Questioned Costs: $180,975; $4,462 for expenses that were reported greater than budget without prior approval; $176,157 of reported subrecipient costs that are unsupported in the general ledger; $356 of reported supplies that were repairs and maintenance and not included in the budget. Repeat Finding: No. Recommendation: Internal controls over reporting should be designed, implemented, and documented to ensure compliance with 2 CFR section 200.302(b)(2), including who is responsible, what they are reviewing for, when reviews are to take place, and how documentation of the controls will be maintained. The general ledger should be set up to properly capture and track expenses as well as budgets prepared and approved with the actual costs expected to be incurred. Reports should be reconciled to the general ledger. Budgets should be complete and include all line items and not just include all expenses under supplies. Views of Responsible Officials: Boys and Girls Club of Dane County, Inc. agrees with the finding and is implementing a grant budget process.
Assistance Listing Number(s): 21.027 Name of Federal Program or Cluster: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of the Treasury Name of Pass-through Entity: City of Madison, City of Sun Prairie, Wisconsin Department of Workforce Development Award Period: January 1, 2022 through December 31, 2022; September 22, 2021 through December 31, 2024; June 20, 2022 through June 30, 2025 Criteria or Specific Requirement: 2 CFR section 200.302(b)(2) requires the financial management system of a non-federal entity to provide for accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in 2 CFR sections 200.328 and 200.329. Condition and Context: A sample of 4 financial and programmatic reports totaling $204,255 was selected for testing from a population of 20 financial and programmatic reports totaling $900,466. The testing found no support of a review and approval for completeness and accuracy. 4 out of 18 financial reports tested had reported amounts that were not supported by the underlying accounting data. 2 of the 4 had expenses recorded as staffing and repairs and maintenance but were reported as supplies. 1 of the 4 had expenses recorded as supplies but reported as personnel. 1 of the 4 reported other subaward costs as subrecipient expenditures. Cause: There are no written procedures for reporting to require internal controls over reporting or documentation supporting reports to be filed and maintained. Recording expenses in the general ledger by award began in the fiscal year. Reports were not reconciled to the general ledger, the general ledger accounts were not structured to match the budgets, and budgets grouped expenses together that should be reported separately. Effect or Potential Effect: Costs may be disallowed if not approved in the budget or over budget without prior approval. Questioned Costs: $180,975; $4,462 for expenses that were reported greater than budget without prior approval; $176,157 of reported subrecipient costs that are unsupported in the general ledger; $356 of reported supplies that were repairs and maintenance and not included in the budget. Repeat Finding: No. Recommendation: Internal controls over reporting should be designed, implemented, and documented to ensure compliance with 2 CFR section 200.302(b)(2), including who is responsible, what they are reviewing for, when reviews are to take place, and how documentation of the controls will be maintained. The general ledger should be set up to properly capture and track expenses as well as budgets prepared and approved with the actual costs expected to be incurred. Reports should be reconciled to the general ledger. Budgets should be complete and include all line items and not just include all expenses under supplies. Views of Responsible Officials: Boys and Girls Club of Dane County, Inc. agrees with the finding and is implementing a grant budget process.
Assistance Listing Number(s): 21.027 Name of Federal Program or Cluster: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of the Treasury Name of Pass-through Entity: City of Madison, City of Sun Prairie, Wisconsin Department of Workforce Development Award Period: January 1, 2022 through December 31, 2022; September 22, 2021 through December 31, 2024; June 20, 2022 through June 30, 2025 Criteria or Specific Requirement: 2 CFR section 200.302(b)(2) requires the financial management system of a non-federal entity to provide for accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in 2 CFR sections 200.328 and 200.329. Condition and Context: A sample of 4 financial and programmatic reports totaling $204,255 was selected for testing from a population of 20 financial and programmatic reports totaling $900,466. The testing found no support of a review and approval for completeness and accuracy. 4 out of 18 financial reports tested had reported amounts that were not supported by the underlying accounting data. 2 of the 4 had expenses recorded as staffing and repairs and maintenance but were reported as supplies. 1 of the 4 had expenses recorded as supplies but reported as personnel. 1 of the 4 reported other subaward costs as subrecipient expenditures. Cause: There are no written procedures for reporting to require internal controls over reporting or documentation supporting reports to be filed and maintained. Recording expenses in the general ledger by award began in the fiscal year. Reports were not reconciled to the general ledger, the general ledger accounts were not structured to match the budgets, and budgets grouped expenses together that should be reported separately. Effect or Potential Effect: Costs may be disallowed if not approved in the budget or over budget without prior approval. Questioned Costs: $180,975; $4,462 for expenses that were reported greater than budget without prior approval; $176,157 of reported subrecipient costs that are unsupported in the general ledger; $356 of reported supplies that were repairs and maintenance and not included in the budget. Repeat Finding: No. Recommendation: Internal controls over reporting should be designed, implemented, and documented to ensure compliance with 2 CFR section 200.302(b)(2), including who is responsible, what they are reviewing for, when reviews are to take place, and how documentation of the controls will be maintained. The general ledger should be set up to properly capture and track expenses as well as budgets prepared and approved with the actual costs expected to be incurred. Reports should be reconciled to the general ledger. Budgets should be complete and include all line items and not just include all expenses under supplies. Views of Responsible Officials: Boys and Girls Club of Dane County, Inc. agrees with the finding and is implementing a grant budget process.
2023-001 U.S. Department of the Treasury COVID-19 – Coronavirus State and Local Fiscal Recovery Funds - CFDA 21.027 Criteria: Per 2 CFR section 200.328 of the Uniform Guidance, each recipient must report program outlays and program income on a cash or accrual basis, as prescribed by the federal awarding agency. The compliance supplement identifies four Key Line Items required to be reported to the federal awarding agency which include (1) current period obligation, (2) cumulative obligation, (3) current period expenditure and (4) cumulative expenditure. Condition: As of the March 31, 2023, reporting date, the Town understated its expenditures by approximately $1,132,000 and did not report any obligations for contracted amounts not spent. Cause: The Town removed the amounts from the previously submitted report and only included current year information. Effect: The Town’s reporting is understated. Questioned Costs: None Repeat Finding from Prior Year: Yes; Finding 2022-001 Recommendation: The Town should implement procedures to reconcile the financial information in the Project and Expenditure reports to the Town’s general ledger and purchasing files before submission. Views of Responsible Official: Management agrees with the finding.
Reference Number: 2023-003 Federal Program Title: Homeland Security Biowatch Program Federal Assistance Listing Number: 97.091 Federal Agency: Department of Homeland Security Pass-Through Entity: N/A Federal Award Number and Year 06OHBIO00009; Fiscal Year 2022-23 Category of Finding: Reporting Type of Finding: Significant Deficiency in Internal Control Over Compliance Criteria In accordance with Title 2 U.S. CFR §200.328, the financial reporting information must be collected with the frequency required by the terms and conditions of the federal award via the OMB-approved common information collection. §200.328 Financial Reporting states: Unless otherwise approved by OMB, the Federal awarding agency must solicit only the OMB-approved governmentwide data elements for collection of financial information (at time of publication the Federal Financial Report or such future, OMB-approved, governmentwide data elements available from the OMB-designated standards lead. This information 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, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes, and preferably in coordination with performance reporting. The Federal awarding agency must use OMB-approved common information collections, as applicable, when providing financial and performance reporting information. Furthermore, §200.329(c)(1) states: …Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period... Condition We tested two (2) quarterly financial reports and one (1) out of the two reports was submitted approximately 90 days after the required due date. Cause The District did not have sufficient capacity for the financial reporting of its federal grant programs. As a result, the District was not able to meet federal report submission deadlines. Effect Late reports could delay future grant funding or program renewals. The Federal agency might impose stricter monitoring or sanctions for noncompliance. Questioned Costs Not applicable. Context The District submitted four (4) SF-425 for the ALN 97.001 Homeland Security Biowatch Program in the current fiscal year. Two (2) out of four SF-425 were tested. Recommendation The District should take steps to improve their resource capacity for federal programs by implementing a streamline internal process or dedicating additional resources to ensure timely submissions. Views of Management Views of management and management’s response are reported in Management’s Response and Corrective Action Plan included in a separate section at the end of this report.
2 CFR § 3474.1 provides the Department of Education (DOE) adopts the Office of Management and Budget (OMB) Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 2 CFR § 200.207(a). Thus, this part gives regulatory effect to the OMB guidance and supplements the guidance as needed for the DOE. 2 CFR § 200.329(a) provides that the non-Federal entity is responsible for oversight of the operations of the Federal award supported activities. The non-Federal entity must monitor its activities under Federal awards to assure compliance with applicable Federal requirements and performance expectations are being achieved. Monitoring by the non-Federal entity must cover each program, function or activity. See also § 200.332. 2 CFR § 200.302(b)(2) provides, in part, that the financial management system of each non-Federal entity must provide for accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. 2 CFR § 200.332(d) provides, in part, that a pass-through entity must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) reviewing financial and performance reports required by the pass-through entity. The Ohio Department of Education requires school districts to file a Final Expenditure Report each year by September 30, unless stated otherwise in the grant application. ODE further requires subgrantees to obligate funds within the approved project period as set forth in the approved application and to liquidate said obligations not later than 90 days after the end of the project period for electronic applications for grants, with obligations having the same meaning as in 2 CFR §§ 200.343 and 200.1. ODE also requires all allowable grant expenditures obligated by the project end date as designated in the grant agreement to be reported in the FER. The District did file the Final Expenditure Report with ODE before the required reporting deadline, however, due to deficiencies in the internal policies and procedures over Federal compliance, the District did not exclude the prior grant year expenditures obligated during the prior fiscal year, but not paid until after June 30, 2022. This resulted in expenditures being overreported in the amount of $78,795; however, this oversight did not result in additional federal funding. Failure to file accurate financial information in the Final Expenditure Report could lead to material misstatements and could impact future grant funding. The District should review the Final Expenditure Report before submission to help ensure all required amounts are included.
2 CFR § 3474.1 provides the Department of Education (DOE) adopts the Office of Management and Budget (OMB) Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 2 CFR § 200.207(a). Thus, this part gives regulatory effect to the OMB guidance and supplements the guidance as needed for the DOE. 2 CFR § 200.329(a) provides that the non-Federal entity is responsible for oversight of the operations of the Federal award supported activities. The non-Federal entity must monitor its activities under Federal awards to assure compliance with applicable Federal requirements and performance expectations are being achieved. Monitoring by the non-Federal entity must cover each program, function or activity. See also § 200.332. 2 CFR § 200.302(b)(2) provides, in part, that the financial management system of each non-Federal entity must provide for accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. 2 CFR § 200.332(d) provides, in part, that a pass-through entity must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) reviewing financial and performance reports required by the pass-through entity. The Ohio Department of Education requires school districts to file a Final Expenditure Report each year by September 30, unless stated otherwise in the grant application. ODE further requires subgrantees to obligate funds within the approved project period as set forth in the approved application and to liquidate said obligations not later than 90 days after the end of the project period for electronic applications for grants, with obligations having the same meaning as in 2 CFR §§ 200.343 and 200.1. ODE also requires all allowable grant expenditures obligated by the project end date as designated in the grant agreement to be reported in the FER. The District did file the Final Expenditure Report with ODE before the required reporting deadline, however, due to deficiencies in the internal policies and procedures over Federal compliance, the District did not exclude the prior grant year expenditures obligated during the prior fiscal year, but not paid until after June 30, 2022. This resulted in expenditures being overreported in the amount of $78,795; however, this oversight did not result in additional federal funding. Failure to file accurate financial information in the Final Expenditure Report could lead to material misstatements and could impact future grant funding. The District should review the Final Expenditure Report before submission to help ensure all required amounts are included.
Program: Coronavirus State and Local Fiscal Recovery Funds ALN #: 21.027 Federal Agency: U.S. Department of Treasury Federal Award Number: SLFRP1982 Award Year: July 1, 2022–June 30, 2023 Reporting Type of finding: Material weakness and noncompliance Prior-year finding: No Statistically valid sample: No Criteria The 2 CFR 200.328 and 31 CFR section 35.4 require quarterly and annual reporting of the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant. The report focuses on the following key line items: current-period obligation, cumulative obligation, current-period expenditure, and cumulative expenditures. According to 2 CFR 200.303, the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition During our audit, we selected the December 31, 2022 and June 30, 2023 report for testing. We noted that the current-period obligations, cumulative obligations, current-period expenditures, and cumulative expenditures contained on these reports could not be reconciled to the City’s books and records. As such, the engagement team was unable to determine if the amounts included in these key line items were complete and accurate. Cause PeopleSoft reports that were used to prepare the CSLFRF reports were not retained by the City. As PeopleSoft continuously updates, the detail used to prepare these reports could not be reproduced by the City. Effect Lack of document retention and reconciliation from the general ledger system to the CSLFRF could result in inaccurate reporting to the US Department of Treasury. Questioned Costs None Recommendation We recommend the City ensures proper document retention and complete reconciliations for how quarterly and annual reports are compiled. Views of Responsible Officials and Corrective Actions The Finance department will document the reconciliation of the City’s GL ARPA expenditures and obligations to the Department of Treasury ARPA reporting portal report both quarterly and annually. All reconciling adjustments and GL report documentation will be properly retained. Implementation Date 7/1/2023 Responsible Officials Michele Kincaid, Assistant Finance Director, and Sharon Pu, Grants Management
Program: Coronavirus State and Local Fiscal Recovery Funds ALN #: 21.027 Federal Agency: U.S. Department of Treasury Federal Award Number: SLFRP1982 Award Year: July 1, 2022–June 30, 2023 Reporting Type of finding: Material weakness and noncompliance Prior-year finding: No Statistically valid sample: No Criteria The 2 CFR 200.328 and 31 CFR section 35.4 require quarterly and annual reporting of the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant. The report focuses on the following key line items: current-period obligation, cumulative obligation, current-period expenditure, and cumulative expenditures. According to 2 CFR 200.303, the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition During our audit, we selected the December 31, 2022 and June 30, 2023 report for testing. We noted that the current-period obligations, cumulative obligations, current-period expenditures, and cumulative expenditures contained on these reports could not be reconciled to the City’s books and records. As such, the engagement team was unable to determine if the amounts included in these key line items were complete and accurate. Cause PeopleSoft reports that were used to prepare the CSLFRF reports were not retained by the City. As PeopleSoft continuously updates, the detail used to prepare these reports could not be reproduced by the City. Effect Lack of document retention and reconciliation from the general ledger system to the CSLFRF could result in inaccurate reporting to the US Department of Treasury. Questioned Costs None Recommendation We recommend the City ensures proper document retention and complete reconciliations for how quarterly and annual reports are compiled. Views of Responsible Officials and Corrective Actions The Finance department will document the reconciliation of the City’s GL ARPA expenditures and obligations to the Department of Treasury ARPA reporting portal report both quarterly and annually. All reconciling adjustments and GL report documentation will be properly retained. Implementation Date 7/1/2023 Responsible Officials Michele Kincaid, Assistant Finance Director, and Sharon Pu, Grants Management
2023-005 - Internal Control Over Compliance and Compliance – Reporting (Preparation of the Schedule of Expenditures of Federal Awards) Program- U.S. Department of Energy, National Forum for State and Territorial Chief Executives - HHS OA, Yr 10 and Yr 11, National Forum ALN: 93.528, Award #: 2U98OA09028, Award Year: 09/01/2022 – 09/29/2023 Program- U.S. Department of Health and Human Services, Strengthening Public Health Systems and Services through National Partnerships to Improve and Protect the Nation’s Health ALN: 93.421, Award #: Various, Award Year: 08/01/2018 – 07/31/2023 Criteria – 2 CFR Section §200.510(b) states in part: “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 CFR Section §200.502 Basis for determining Federal awards expended.” The schedule must provide total Federal awards expended for each individual Federal program. In accordance with §200.302 Financial Management, a non-federal entity’s financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following: (1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in §200.327 Financial Reporting and §200.328 Monitoring and Reporting Program Performance. (3) Records that identify adequately the source and application of funds for federally-funded activities. (4) Effective control over, and accountability for, all funds, property, and other assets. Condition – The internal controls established for the review and approval of the SEFA to ensure its completeness and accuracy did not operate as designed. During our testing of management’s preparation of the SEFA, it was determined that some federal award expenditures were excluded from the original SEFA provided by management. Management subsequently corrected the SEFA to reflect the inclusion of the federal expenditures. In addition, several versions were received from management prior to the final SEFA. Questioned Costs – None. Context – This is a condition identified per review of NGA Center’s compliance with specified requirements. Cause – NGA Center only prepares the SEFA once a year in conjunction with the annual audit. This annual process lends itself to less familiarity with the processes necessary to provide a complete SEFA reporting package and turnover in key personnel historically involved in the SEFA process negatively impacted the process. Effect – Failure to present the SEFA correctly can result in incorrect major program selection and incorrect reporting to federal agencies. The finding identified was not of a magnitude to impact BDO’s selection of major programs. Repeat Finding – This is not a repeat finding. Recommendation - We recommend management continue to focus on training for both preparer and reviewer of the SEFA to ensure the documented policies and procedures can be performed as prescribed to comply with Section §200.510(b). This will ensure that the SEFA provides all relevant information as prescribed. Views of Responsible Officials – NGA Center agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.
2023-005 - Internal Control Over Compliance and Compliance – Reporting (Preparation of the Schedule of Expenditures of Federal Awards) Program- U.S. Department of Energy, National Forum for State and Territorial Chief Executives - HHS OA, Yr 10 and Yr 11, National Forum ALN: 93.528, Award #: 2U98OA09028, Award Year: 09/01/2022 – 09/29/2023 Program- U.S. Department of Health and Human Services, Strengthening Public Health Systems and Services through National Partnerships to Improve and Protect the Nation’s Health ALN: 93.421, Award #: Various, Award Year: 08/01/2018 – 07/31/2023 Criteria – 2 CFR Section §200.510(b) states in part: “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 CFR Section §200.502 Basis for determining Federal awards expended.” The schedule must provide total Federal awards expended for each individual Federal program. In accordance with §200.302 Financial Management, a non-federal entity’s financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following: (1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in §200.327 Financial Reporting and §200.328 Monitoring and Reporting Program Performance. (3) Records that identify adequately the source and application of funds for federally-funded activities. (4) Effective control over, and accountability for, all funds, property, and other assets. Condition – The internal controls established for the review and approval of the SEFA to ensure its completeness and accuracy did not operate as designed. During our testing of management’s preparation of the SEFA, it was determined that some federal award expenditures were excluded from the original SEFA provided by management. Management subsequently corrected the SEFA to reflect the inclusion of the federal expenditures. In addition, several versions were received from management prior to the final SEFA. Questioned Costs – None. Context – This is a condition identified per review of NGA Center’s compliance with specified requirements. Cause – NGA Center only prepares the SEFA once a year in conjunction with the annual audit. This annual process lends itself to less familiarity with the processes necessary to provide a complete SEFA reporting package and turnover in key personnel historically involved in the SEFA process negatively impacted the process. Effect – Failure to present the SEFA correctly can result in incorrect major program selection and incorrect reporting to federal agencies. The finding identified was not of a magnitude to impact BDO’s selection of major programs. Repeat Finding – This is not a repeat finding. Recommendation - We recommend management continue to focus on training for both preparer and reviewer of the SEFA to ensure the documented policies and procedures can be performed as prescribed to comply with Section §200.510(b). This will ensure that the SEFA provides all relevant information as prescribed. Views of Responsible Officials – NGA Center agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.
2023-005 - Internal Control Over Compliance and Compliance – Reporting (Preparation of the Schedule of Expenditures of Federal Awards) Program- U.S. Department of Energy, National Forum for State and Territorial Chief Executives - HHS OA, Yr 10 and Yr 11, National Forum ALN: 93.528, Award #: 2U98OA09028, Award Year: 09/01/2022 – 09/29/2023 Program- U.S. Department of Health and Human Services, Strengthening Public Health Systems and Services through National Partnerships to Improve and Protect the Nation’s Health ALN: 93.421, Award #: Various, Award Year: 08/01/2018 – 07/31/2023 Criteria – 2 CFR Section §200.510(b) states in part: “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 CFR Section §200.502 Basis for determining Federal awards expended.” The schedule must provide total Federal awards expended for each individual Federal program. In accordance with §200.302 Financial Management, a non-federal entity’s financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following: (1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in §200.327 Financial Reporting and §200.328 Monitoring and Reporting Program Performance. (3) Records that identify adequately the source and application of funds for federally-funded activities. (4) Effective control over, and accountability for, all funds, property, and other assets. Condition – The internal controls established for the review and approval of the SEFA to ensure its completeness and accuracy did not operate as designed. During our testing of management’s preparation of the SEFA, it was determined that some federal award expenditures were excluded from the original SEFA provided by management. Management subsequently corrected the SEFA to reflect the inclusion of the federal expenditures. In addition, several versions were received from management prior to the final SEFA. Questioned Costs – None. Context – This is a condition identified per review of NGA Center’s compliance with specified requirements. Cause – NGA Center only prepares the SEFA once a year in conjunction with the annual audit. This annual process lends itself to less familiarity with the processes necessary to provide a complete SEFA reporting package and turnover in key personnel historically involved in the SEFA process negatively impacted the process. Effect – Failure to present the SEFA correctly can result in incorrect major program selection and incorrect reporting to federal agencies. The finding identified was not of a magnitude to impact BDO’s selection of major programs. Repeat Finding – This is not a repeat finding. Recommendation - We recommend management continue to focus on training for both preparer and reviewer of the SEFA to ensure the documented policies and procedures can be performed as prescribed to comply with Section §200.510(b). This will ensure that the SEFA provides all relevant information as prescribed. Views of Responsible Officials – NGA Center agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.
2023-005 - Internal Control Over Compliance and Compliance – Reporting (Preparation of the Schedule of Expenditures of Federal Awards) Program- U.S. Department of Energy, National Forum for State and Territorial Chief Executives - HHS OA, Yr 10 and Yr 11, National Forum ALN: 93.528, Award #: 2U98OA09028, Award Year: 09/01/2022 – 09/29/2023 Program- U.S. Department of Health and Human Services, Strengthening Public Health Systems and Services through National Partnerships to Improve and Protect the Nation’s Health ALN: 93.421, Award #: Various, Award Year: 08/01/2018 – 07/31/2023 Criteria – 2 CFR Section §200.510(b) states in part: “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 CFR Section §200.502 Basis for determining Federal awards expended.” The schedule must provide total Federal awards expended for each individual Federal program. In accordance with §200.302 Financial Management, a non-federal entity’s financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following: (1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in §200.327 Financial Reporting and §200.328 Monitoring and Reporting Program Performance. (3) Records that identify adequately the source and application of funds for federally-funded activities. (4) Effective control over, and accountability for, all funds, property, and other assets. Condition – The internal controls established for the review and approval of the SEFA to ensure its completeness and accuracy did not operate as designed. During our testing of management’s preparation of the SEFA, it was determined that some federal award expenditures were excluded from the original SEFA provided by management. Management subsequently corrected the SEFA to reflect the inclusion of the federal expenditures. In addition, several versions were received from management prior to the final SEFA. Questioned Costs – None. Context – This is a condition identified per review of NGA Center’s compliance with specified requirements. Cause – NGA Center only prepares the SEFA once a year in conjunction with the annual audit. This annual process lends itself to less familiarity with the processes necessary to provide a complete SEFA reporting package and turnover in key personnel historically involved in the SEFA process negatively impacted the process. Effect – Failure to present the SEFA correctly can result in incorrect major program selection and incorrect reporting to federal agencies. The finding identified was not of a magnitude to impact BDO’s selection of major programs. Repeat Finding – This is not a repeat finding. Recommendation - We recommend management continue to focus on training for both preparer and reviewer of the SEFA to ensure the documented policies and procedures can be performed as prescribed to comply with Section §200.510(b). This will ensure that the SEFA provides all relevant information as prescribed. Views of Responsible Officials – NGA Center agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.
2023-005 - Internal Control Over Compliance and Compliance – Reporting (Preparation of the Schedule of Expenditures of Federal Awards) Program- U.S. Department of Energy, National Forum for State and Territorial Chief Executives - HHS OA, Yr 10 and Yr 11, National Forum ALN: 93.528, Award #: 2U98OA09028, Award Year: 09/01/2022 – 09/29/2023 Program- U.S. Department of Health and Human Services, Strengthening Public Health Systems and Services through National Partnerships to Improve and Protect the Nation’s Health ALN: 93.421, Award #: Various, Award Year: 08/01/2018 – 07/31/2023 Criteria – 2 CFR Section §200.510(b) states in part: “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 CFR Section §200.502 Basis for determining Federal awards expended.” The schedule must provide total Federal awards expended for each individual Federal program. In accordance with §200.302 Financial Management, a non-federal entity’s financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following: (1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in §200.327 Financial Reporting and §200.328 Monitoring and Reporting Program Performance. (3) Records that identify adequately the source and application of funds for federally-funded activities. (4) Effective control over, and accountability for, all funds, property, and other assets. Condition – The internal controls established for the review and approval of the SEFA to ensure its completeness and accuracy did not operate as designed. During our testing of management’s preparation of the SEFA, it was determined that some federal award expenditures were excluded from the original SEFA provided by management. Management subsequently corrected the SEFA to reflect the inclusion of the federal expenditures. In addition, several versions were received from management prior to the final SEFA. Questioned Costs – None. Context – This is a condition identified per review of NGA Center’s compliance with specified requirements. Cause – NGA Center only prepares the SEFA once a year in conjunction with the annual audit. This annual process lends itself to less familiarity with the processes necessary to provide a complete SEFA reporting package and turnover in key personnel historically involved in the SEFA process negatively impacted the process. Effect – Failure to present the SEFA correctly can result in incorrect major program selection and incorrect reporting to federal agencies. The finding identified was not of a magnitude to impact BDO’s selection of major programs. Repeat Finding – This is not a repeat finding. Recommendation - We recommend management continue to focus on training for both preparer and reviewer of the SEFA to ensure the documented policies and procedures can be performed as prescribed to comply with Section §200.510(b). This will ensure that the SEFA provides all relevant information as prescribed. Views of Responsible Officials – NGA Center agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.
2023-005 - Internal Control Over Compliance and Compliance – Reporting (Preparation of the Schedule of Expenditures of Federal Awards) Program- U.S. Department of Energy, National Forum for State and Territorial Chief Executives - HHS OA, Yr 10 and Yr 11, National Forum ALN: 93.528, Award #: 2U98OA09028, Award Year: 09/01/2022 – 09/29/2023 Program- U.S. Department of Health and Human Services, Strengthening Public Health Systems and Services through National Partnerships to Improve and Protect the Nation’s Health ALN: 93.421, Award #: Various, Award Year: 08/01/2018 – 07/31/2023 Criteria – 2 CFR Section §200.510(b) states in part: “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 CFR Section §200.502 Basis for determining Federal awards expended.” The schedule must provide total Federal awards expended for each individual Federal program. In accordance with §200.302 Financial Management, a non-federal entity’s financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following: (1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in §200.327 Financial Reporting and §200.328 Monitoring and Reporting Program Performance. (3) Records that identify adequately the source and application of funds for federally-funded activities. (4) Effective control over, and accountability for, all funds, property, and other assets. Condition – The internal controls established for the review and approval of the SEFA to ensure its completeness and accuracy did not operate as designed. During our testing of management’s preparation of the SEFA, it was determined that some federal award expenditures were excluded from the original SEFA provided by management. Management subsequently corrected the SEFA to reflect the inclusion of the federal expenditures. In addition, several versions were received from management prior to the final SEFA. Questioned Costs – None. Context – This is a condition identified per review of NGA Center’s compliance with specified requirements. Cause – NGA Center only prepares the SEFA once a year in conjunction with the annual audit. This annual process lends itself to less familiarity with the processes necessary to provide a complete SEFA reporting package and turnover in key personnel historically involved in the SEFA process negatively impacted the process. Effect – Failure to present the SEFA correctly can result in incorrect major program selection and incorrect reporting to federal agencies. The finding identified was not of a magnitude to impact BDO’s selection of major programs. Repeat Finding – This is not a repeat finding. Recommendation - We recommend management continue to focus on training for both preparer and reviewer of the SEFA to ensure the documented policies and procedures can be performed as prescribed to comply with Section §200.510(b). This will ensure that the SEFA provides all relevant information as prescribed. Views of Responsible Officials – NGA Center agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.
2023-005 - Internal Control Over Compliance and Compliance – Reporting (Preparation of the Schedule of Expenditures of Federal Awards) Program- U.S. Department of Energy, National Forum for State and Territorial Chief Executives - HHS OA, Yr 10 and Yr 11, National Forum ALN: 93.528, Award #: 2U98OA09028, Award Year: 09/01/2022 – 09/29/2023 Program- U.S. Department of Health and Human Services, Strengthening Public Health Systems and Services through National Partnerships to Improve and Protect the Nation’s Health ALN: 93.421, Award #: Various, Award Year: 08/01/2018 – 07/31/2023 Criteria – 2 CFR Section §200.510(b) states in part: “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 CFR Section §200.502 Basis for determining Federal awards expended.” The schedule must provide total Federal awards expended for each individual Federal program. In accordance with §200.302 Financial Management, a non-federal entity’s financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following: (1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in §200.327 Financial Reporting and §200.328 Monitoring and Reporting Program Performance. (3) Records that identify adequately the source and application of funds for federally-funded activities. (4) Effective control over, and accountability for, all funds, property, and other assets. Condition – The internal controls established for the review and approval of the SEFA to ensure its completeness and accuracy did not operate as designed. During our testing of management’s preparation of the SEFA, it was determined that some federal award expenditures were excluded from the original SEFA provided by management. Management subsequently corrected the SEFA to reflect the inclusion of the federal expenditures. In addition, several versions were received from management prior to the final SEFA. Questioned Costs – None. Context – This is a condition identified per review of NGA Center’s compliance with specified requirements. Cause – NGA Center only prepares the SEFA once a year in conjunction with the annual audit. This annual process lends itself to less familiarity with the processes necessary to provide a complete SEFA reporting package and turnover in key personnel historically involved in the SEFA process negatively impacted the process. Effect – Failure to present the SEFA correctly can result in incorrect major program selection and incorrect reporting to federal agencies. The finding identified was not of a magnitude to impact BDO’s selection of major programs. Repeat Finding – This is not a repeat finding. Recommendation - We recommend management continue to focus on training for both preparer and reviewer of the SEFA to ensure the documented policies and procedures can be performed as prescribed to comply with Section §200.510(b). This will ensure that the SEFA provides all relevant information as prescribed. Views of Responsible Officials – NGA Center agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.
2023-005 - Internal Control Over Compliance and Compliance – Reporting (Preparation of the Schedule of Expenditures of Federal Awards) Program- U.S. Department of Energy, National Forum for State and Territorial Chief Executives - HHS OA, Yr 10 and Yr 11, National Forum ALN: 93.528, Award #: 2U98OA09028, Award Year: 09/01/2022 – 09/29/2023 Program- U.S. Department of Health and Human Services, Strengthening Public Health Systems and Services through National Partnerships to Improve and Protect the Nation’s Health ALN: 93.421, Award #: Various, Award Year: 08/01/2018 – 07/31/2023 Criteria – 2 CFR Section §200.510(b) states in part: “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 CFR Section §200.502 Basis for determining Federal awards expended.” The schedule must provide total Federal awards expended for each individual Federal program. In accordance with §200.302 Financial Management, a non-federal entity’s financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following: (1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in §200.327 Financial Reporting and §200.328 Monitoring and Reporting Program Performance. (3) Records that identify adequately the source and application of funds for federally-funded activities. (4) Effective control over, and accountability for, all funds, property, and other assets. Condition – The internal controls established for the review and approval of the SEFA to ensure its completeness and accuracy did not operate as designed. During our testing of management’s preparation of the SEFA, it was determined that some federal award expenditures were excluded from the original SEFA provided by management. Management subsequently corrected the SEFA to reflect the inclusion of the federal expenditures. In addition, several versions were received from management prior to the final SEFA. Questioned Costs – None. Context – This is a condition identified per review of NGA Center’s compliance with specified requirements. Cause – NGA Center only prepares the SEFA once a year in conjunction with the annual audit. This annual process lends itself to less familiarity with the processes necessary to provide a complete SEFA reporting package and turnover in key personnel historically involved in the SEFA process negatively impacted the process. Effect – Failure to present the SEFA correctly can result in incorrect major program selection and incorrect reporting to federal agencies. The finding identified was not of a magnitude to impact BDO’s selection of major programs. Repeat Finding – This is not a repeat finding. Recommendation - We recommend management continue to focus on training for both preparer and reviewer of the SEFA to ensure the documented policies and procedures can be performed as prescribed to comply with Section §200.510(b). This will ensure that the SEFA provides all relevant information as prescribed. Views of Responsible Officials – NGA Center agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.
Finding # 2023-001 – Reporting Type of Finding Significant Deficiency in Internal Control and Noncompliance ALN Title Economic Development Assistance ALN 11.307 Total Federal Expenditures $761,377 Federal Award Numbers ED22HDQ3070044, 07-79-07888, 07-79-07889, 07-79-07901, 07-79-07903, 07-79-07905 Federal Award Year October 1, 2022 through September 30, 2023 Federal Agency U.S. Department of Commerce – Economic Development Administration Criteria 2 CFR 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Subpart D section 200.300 and section 200.328 set forth requirements for reporting on award amounts by grantees. Southeast Conference (SEC) was awarded a direct federal grant greater than or equal to $30,000 and was therefore subject to Federal Funding Accountability and Transparency Act (FFATA) sub-award reporting requirements as outlined in the Office of Management and Budgets guidance issued August 13, 2020. As such, SEC was required to file a FFATA sub-award report by the end of the month following the month in which SEC awarded any sub-grant greater than or equal to $30,000 (Pub. L. No. 109-282 [FFATA] and Pub. L. No. 113-101 [DATA Act]). Condition and Context SEC did not submit timely or accurate reports to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS) for its subawards as required by FFATA guidance. Questions Costs None. Effect SEC did not comply with the reporting requirements of Uniform Guidance and FFATA. Cause SEC’s internal controls over reporting were not sufficiently designed and implemented to ensure that staff were fully knowledgeable on when and how to report subaward amounts under FFATA. Recommendation SEC should provide training to staff for preparation of financial reports and design and implement systems to accurately and timely report subawards.
Finding No. 2023-004 Information on the Federal Program Education Stabilization Fund CARES Act Federal Assistance Listing No. 84.425d ESSER II Federal Assistance Listing No. 84.425d ESSER III Federal Assistance Listing No. 84.425u Criteria or Specific Requirement In accordance with 2 CFR section 200.328, the Federal awarding agency must solicit only for collection of financial information and this information must be collected with the frequency required by the terms and conditions of the Federal award, but no less frequently than annually. Additionally, in accordance with ESSER requirements, subreceipients must report expenditures by ESSER Subgrant fund, expenditure category, and object code. Condition The School District incorrectly reported expenditures on its reimbursement requests and final expenditures reports to the State. This resulted in the School District not providing accurate information to the State that is used to determine if grant money was expended in accordance with the original or amended grant application. Questioned Costs None Context During our testing of Education Stabilization Fund expenditures, we noted 12 expenditures that were not reported in accordance with federal guidelines. Effect or Potential Effect The School District did not comply with 2 CFR section 200.328 requirements. Cause The School District did not have the proper internal controls to ensure compliance with reporting requirements. Identification as a Repeat Finding Not Applicable Recommendation That the School District should review their internal controls and establish procedures to ensure that reports comply with 2 CFR section 200.328 and ensure proper reporting by ESSER Subgrant fund, expenditure category, and object code. View of Responsible Officials and Planned Corrective Action The responsible officials agree with the finding and will address the matter as part of their corrective action plan.
Finding No. 2023-004 Information on the Federal Program Education Stabilization Fund CARES Act Federal Assistance Listing No. 84.425d ESSER II Federal Assistance Listing No. 84.425d ESSER III Federal Assistance Listing No. 84.425u Criteria or Specific Requirement In accordance with 2 CFR section 200.328, the Federal awarding agency must solicit only for collection of financial information and this information must be collected with the frequency required by the terms and conditions of the Federal award, but no less frequently than annually. Additionally, in accordance with ESSER requirements, subreceipients must report expenditures by ESSER Subgrant fund, expenditure category, and object code. Condition The School District incorrectly reported expenditures on its reimbursement requests and final expenditures reports to the State. This resulted in the School District not providing accurate information to the State that is used to determine if grant money was expended in accordance with the original or amended grant application. Questioned Costs None Context During our testing of Education Stabilization Fund expenditures, we noted 12 expenditures that were not reported in accordance with federal guidelines. Effect or Potential Effect The School District did not comply with 2 CFR section 200.328 requirements. Cause The School District did not have the proper internal controls to ensure compliance with reporting requirements. Identification as a Repeat Finding Not Applicable Recommendation That the School District should review their internal controls and establish procedures to ensure that reports comply with 2 CFR section 200.328 and ensure proper reporting by ESSER Subgrant fund, expenditure category, and object code. View of Responsible Officials and Planned Corrective Action The responsible officials agree with the finding and will address the matter as part of their corrective action plan.
Finding No. 2023-004 Information on the Federal Program Education Stabilization Fund CARES Act Federal Assistance Listing No. 84.425d ESSER II Federal Assistance Listing No. 84.425d ESSER III Federal Assistance Listing No. 84.425u Criteria or Specific Requirement In accordance with 2 CFR section 200.328, the Federal awarding agency must solicit only for collection of financial information and this information must be collected with the frequency required by the terms and conditions of the Federal award, but no less frequently than annually. Additionally, in accordance with ESSER requirements, subreceipients must report expenditures by ESSER Subgrant fund, expenditure category, and object code. Condition The School District incorrectly reported expenditures on its reimbursement requests and final expenditures reports to the State. This resulted in the School District not providing accurate information to the State that is used to determine if grant money was expended in accordance with the original or amended grant application. Questioned Costs None Context During our testing of Education Stabilization Fund expenditures, we noted 12 expenditures that were not reported in accordance with federal guidelines. Effect or Potential Effect The School District did not comply with 2 CFR section 200.328 requirements. Cause The School District did not have the proper internal controls to ensure compliance with reporting requirements. Identification as a Repeat Finding Not Applicable Recommendation That the School District should review their internal controls and establish procedures to ensure that reports comply with 2 CFR section 200.328 and ensure proper reporting by ESSER Subgrant fund, expenditure category, and object code. View of Responsible Officials and Planned Corrective Action The responsible officials agree with the finding and will address the matter as part of their corrective action plan.
Finding No. 2023-004 Information on the Federal Program Education Stabilization Fund CARES Act Federal Assistance Listing No. 84.425d ESSER II Federal Assistance Listing No. 84.425d ESSER III Federal Assistance Listing No. 84.425u Criteria or Specific Requirement In accordance with 2 CFR section 200.328, the Federal awarding agency must solicit only for collection of financial information and this information must be collected with the frequency required by the terms and conditions of the Federal award, but no less frequently than annually. Additionally, in accordance with ESSER requirements, subreceipients must report expenditures by ESSER Subgrant fund, expenditure category, and object code. Condition The School District incorrectly reported expenditures on its reimbursement requests and final expenditures reports to the State. This resulted in the School District not providing accurate information to the State that is used to determine if grant money was expended in accordance with the original or amended grant application. Questioned Costs None Context During our testing of Education Stabilization Fund expenditures, we noted 12 expenditures that were not reported in accordance with federal guidelines. Effect or Potential Effect The School District did not comply with 2 CFR section 200.328 requirements. Cause The School District did not have the proper internal controls to ensure compliance with reporting requirements. Identification as a Repeat Finding Not Applicable Recommendation That the School District should review their internal controls and establish procedures to ensure that reports comply with 2 CFR section 200.328 and ensure proper reporting by ESSER Subgrant fund, expenditure category, and object code. View of Responsible Officials and Planned Corrective Action The responsible officials agree with the finding and will address the matter as part of their corrective action plan.
Finding No. 2023-004 Information on the Federal Program Education Stabilization Fund CARES Act Federal Assistance Listing No. 84.425d ESSER II Federal Assistance Listing No. 84.425d ESSER III Federal Assistance Listing No. 84.425u Criteria or Specific Requirement In accordance with 2 CFR section 200.328, the Federal awarding agency must solicit only for collection of financial information and this information must be collected with the frequency required by the terms and conditions of the Federal award, but no less frequently than annually. Additionally, in accordance with ESSER requirements, subreceipients must report expenditures by ESSER Subgrant fund, expenditure category, and object code. Condition The School District incorrectly reported expenditures on its reimbursement requests and final expenditures reports to the State. This resulted in the School District not providing accurate information to the State that is used to determine if grant money was expended in accordance with the original or amended grant application. Questioned Costs None Context During our testing of Education Stabilization Fund expenditures, we noted 12 expenditures that were not reported in accordance with federal guidelines. Effect or Potential Effect The School District did not comply with 2 CFR section 200.328 requirements. Cause The School District did not have the proper internal controls to ensure compliance with reporting requirements. Identification as a Repeat Finding Not Applicable Recommendation That the School District should review their internal controls and establish procedures to ensure that reports comply with 2 CFR section 200.328 and ensure proper reporting by ESSER Subgrant fund, expenditure category, and object code. View of Responsible Officials and Planned Corrective Action The responsible officials agree with the finding and will address the matter as part of their corrective action plan.
Finding No. 2023-004 Information on the Federal Program Education Stabilization Fund CARES Act Federal Assistance Listing No. 84.425d ESSER II Federal Assistance Listing No. 84.425d ESSER III Federal Assistance Listing No. 84.425u Criteria or Specific Requirement In accordance with 2 CFR section 200.328, the Federal awarding agency must solicit only for collection of financial information and this information must be collected with the frequency required by the terms and conditions of the Federal award, but no less frequently than annually. Additionally, in accordance with ESSER requirements, subreceipients must report expenditures by ESSER Subgrant fund, expenditure category, and object code. Condition The School District incorrectly reported expenditures on its reimbursement requests and final expenditures reports to the State. This resulted in the School District not providing accurate information to the State that is used to determine if grant money was expended in accordance with the original or amended grant application. Questioned Costs None Context During our testing of Education Stabilization Fund expenditures, we noted 12 expenditures that were not reported in accordance with federal guidelines. Effect or Potential Effect The School District did not comply with 2 CFR section 200.328 requirements. Cause The School District did not have the proper internal controls to ensure compliance with reporting requirements. Identification as a Repeat Finding Not Applicable Recommendation That the School District should review their internal controls and establish procedures to ensure that reports comply with 2 CFR section 200.328 and ensure proper reporting by ESSER Subgrant fund, expenditure category, and object code. View of Responsible Officials and Planned Corrective Action The responsible officials agree with the finding and will address the matter as part of their corrective action plan.
Finding No. 2023-004 Information on the Federal Program Education Stabilization Fund CARES Act Federal Assistance Listing No. 84.425d ESSER II Federal Assistance Listing No. 84.425d ESSER III Federal Assistance Listing No. 84.425u Criteria or Specific Requirement In accordance with 2 CFR section 200.328, the Federal awarding agency must solicit only for collection of financial information and this information must be collected with the frequency required by the terms and conditions of the Federal award, but no less frequently than annually. Additionally, in accordance with ESSER requirements, subreceipients must report expenditures by ESSER Subgrant fund, expenditure category, and object code. Condition The School District incorrectly reported expenditures on its reimbursement requests and final expenditures reports to the State. This resulted in the School District not providing accurate information to the State that is used to determine if grant money was expended in accordance with the original or amended grant application. Questioned Costs None Context During our testing of Education Stabilization Fund expenditures, we noted 12 expenditures that were not reported in accordance with federal guidelines. Effect or Potential Effect The School District did not comply with 2 CFR section 200.328 requirements. Cause The School District did not have the proper internal controls to ensure compliance with reporting requirements. Identification as a Repeat Finding Not Applicable Recommendation That the School District should review their internal controls and establish procedures to ensure that reports comply with 2 CFR section 200.328 and ensure proper reporting by ESSER Subgrant fund, expenditure category, and object code. View of Responsible Officials and Planned Corrective Action The responsible officials agree with the finding and will address the matter as part of their corrective action plan.
Finding No. 2023-004 Information on the Federal Program Education Stabilization Fund CARES Act Federal Assistance Listing No. 84.425d ESSER II Federal Assistance Listing No. 84.425d ESSER III Federal Assistance Listing No. 84.425u Criteria or Specific Requirement In accordance with 2 CFR section 200.328, the Federal awarding agency must solicit only for collection of financial information and this information must be collected with the frequency required by the terms and conditions of the Federal award, but no less frequently than annually. Additionally, in accordance with ESSER requirements, subreceipients must report expenditures by ESSER Subgrant fund, expenditure category, and object code. Condition The School District incorrectly reported expenditures on its reimbursement requests and final expenditures reports to the State. This resulted in the School District not providing accurate information to the State that is used to determine if grant money was expended in accordance with the original or amended grant application. Questioned Costs None Context During our testing of Education Stabilization Fund expenditures, we noted 12 expenditures that were not reported in accordance with federal guidelines. Effect or Potential Effect The School District did not comply with 2 CFR section 200.328 requirements. Cause The School District did not have the proper internal controls to ensure compliance with reporting requirements. Identification as a Repeat Finding Not Applicable Recommendation That the School District should review their internal controls and establish procedures to ensure that reports comply with 2 CFR section 200.328 and ensure proper reporting by ESSER Subgrant fund, expenditure category, and object code. View of Responsible Officials and Planned Corrective Action The responsible officials agree with the finding and will address the matter as part of their corrective action plan.
Finding 2023-003 Reporting – Internal Control and Compliance over Reporting Information on the Federal Program: Assistance Listing Number: 21.027 Federal Program Name: Coronavirus State and Local Fiscal Recovery Fund Federal Agency: Department of Treasury Pass-Through Entity: N/A Federal Award Number and Award Year: N/A - FY22-23 Criteria: Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. Chapter II - Office of Management and Budget Guidance. Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D - Post Federal Award Requirements. Performance and Financial Monitoring and Reporting. §200.328 – Financial Reporting (2 CFR 200.328): Unless otherwise approved by OMB, the Federal awarding agency must solicit only the OMB-approved governmentwide data elements for collection of financial information (at time of publication the Federal Financial Report or such future, OMB-approved, governmentwide data elements available from the OMB-designated standards lead. This information 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, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes, and preferably in coordination with performance reporting. The Federal awarding agency must use OMB-approved common information collections, as applicable, when providing financial and performance reporting information. Title 31 – Money and Finance: Treasury. Subtitle A – Office of the Secretary of the Treasury. Part 35 – Pandemic Relief Programs. Subpart A – Coronavirus State and Local Fiscal Recovery Funds. § 35.4 Reservation of authority, reporting. (c) Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds, modifications to a State or Territory’s tax revenue sources, and such other information as the Secretary may require for the administration of this section. In addition to regular reporting requirements, the Secretary may request other additional information as may be necessary or appropriate, including as may be necessary to prevent evasions of the requirements of this subpart. False statements or claims made to the Secretary may result in criminal, civil, or administrative sanctions, including fines, imprisonment, civil damages and penalties, debarment from participating in Federal awards or contracts, and/or any other remedy available by law. Condition: For the Coronavirus State and Local Fiscal Recovery Funds (SLFRF), the City did not submit the reports within the required deadline: Report Type Report Type Period Date Due Date Submitted Project and Expenditure Report Performance Report 1/1/23-3/31/23 4/30/2023 5/3/2023 Project and Expenditure Report Performance Report 4/1/23-6/30/23 7/31/2023 8/25/2023 Four (4) performance reports were tested and two (2) of the reports tested were not submitted by the required deadline. In addition, expenditure information reported on the Project and Expenditure Reports were not supported by the City’s accounting records and did not match expenditures reported on the SEFA. This was due to the City not reporting the Revenue Replacement project expenditures of $4,821,936. Cause: Due to the effects of grant staff turnover, the City’s procedures did not consistently ensure that the reports were submitted timely in accordance with the timelines in the Uniform Guidance, or properly reviewed and approved prior to submission. The County prepared the Project and Expenditure Reports as of a point in time, but internal controls did not allow for consistent reporting or expenditure recognition, to avoid variances. Effect: Failure to submit the Project and Expenditure Reports timely and accurately reporting expenditures results in noncompliance with the reporting requirements in the grant agreement. Questioned Costs: None noted. Identification as a Repeat Finding, If Applicable: No. Recommendation: We recommend that the City strengthen their report submission process and procedures to ensure all required reports are properly reviewed and approved and submitted timely. When a report cannot be submitted by the due date, the City should request an extension from the funding agency and maintain a record of the approval. We recommend the County enhance internal controls to ensure Project and Expenditure Reports are prepared in accordance with governing requirements, and updated timely if revisions are made by the County, to avoid material variances to the underlying expenditures reported on the SEFA. Management’s View and Corrective Action Plan: The City concurs with the auditors’ finding. The City will take steps to improve identification and monitoring of required grantor reporting deadlines.
2023-002 U.S. Department of the Treasury COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Material Weakness in Internal Controls and Compliance Finding Criteria: Per 2 CFR section 200.328 of the Uniform Guidance, each recipient must report program outlays and program income on a cash or accrual basis, as prescribed by the federal awarding agency. The compliance supplement identifies four Key Line Items required to be reported to the federal awarding agency which include (1) current period obligation, (2) cumulative obligation, (3) current period expenditure and (4) cumulative expenditure. Condition: The City did not prepare and file the four required quarterly Project and Expenditure reports for fiscal year 2023. Cause: The City was not aware of the timing of grant reporting requirements. Effect: The City is not in compliance with the federal award reporting requirements. Questioned Costs: None Repeat Finding from Prior Year: No. Recommendation: The City should implement procedures to prepare Project and Expenditure reports in a timely manner. Views of Responsible Official: Management agrees with the finding.