See Schedule of Findings and Questioned Costs for chart/table 2022-001: Procurement and Suspension and Debarment Criteria: Per 2 CFR 200.318(i), the non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Per 2 CFR 200.214, non-Federal entities are subject to the nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. The regulations in 2 CFR Part 180 restrict awards, sub-awards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from, or ineligible for, participation in Federal Assistance programs or activities. Per 2 CFR 180.220, non-Federal entities are prohibited from contracting with or making sub-awards under covered transactions to parties that are suspended or debarred or whose principals are suspended or debarred. Covered transactions include contracts for goods and services awarded under a nonprocurement transaction that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR Section 180.220. All nonprocurement transactions entered into by a pass-through entity (i.e., sub-awards to subrecipients), irrespective of award amount, are considered covered transactions unless they are exempt as provided in 2 CFR Section 180.215. Condition/context: Five transactions were subject to the requirements of procurement based on the transaction price. Of the three transactions tested during the audit, all three were identified as not having the proper documentation supporting the procurement method. Five vendors were subject to the requirements of suspension and debarment. Of the three vendors tested during the audit, all three were identified as not having the proper documentation supporting the review of the suspension and debarment requirements prior to funds being expended. None of the entities were suspended or debarred. Questioned costs: $0 Cause: While the College has a procurement policy in place that appropriately addresses procurement, suspension and debarment, the policy was not properly followed, resulting in a lack of supporting documentation for the procurement and review of the suspension and debarment of vendors in the fiscal year. When the pandemic originally began, exceptions from competitive procurement requirements of the Uniform Guidance could be accepted if a public emergency would not permit a delay; however, the flexibility from competitive procurement has been reduced as it is unlikely the same circumstances would be occurring. The College was still operating under this previous flexibility and utilized prior vendors through sole source contracts. Effect: Per 2 CFR 200.339, if a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations, or the terms and conditions of a Federal award, the Federal awarding agency or pass-through entity may impose additional conditions, as described in ? 200.208. If the Federal awarding agency or pass-through entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or pass-through entity may take one or more of the following actions, as appropriate in the circumstances: (a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or more severe enforcement action by the Federal awarding agency or pass-through entity. (b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (c) Wholly or partly suspend or terminate the Federal award. (d) Initiate suspension or debarment proceedings as authorized under 2 CFR Part 180 and Federal awarding agency regulations (or in the case of a pass-through entity, recommend such a proceeding be initiated by a Federal awarding agency). (e) Withhold further Federal awards for the project or program. (f) Take other remedies that may be legally available. Identification as a repeat finding: No. Recommendation: We recommend that management ensure it is staying updated with changes in guidance and program requirements. In addition, for more consistent application, we recommend that the procurement policy be modified to more clearly state that documentation will be maintained to identify and maintain proper supporting documentation for the method of procurement utilized and for the review of the suspension and debarment requirement. Furthermore, we recommend that the procurement policy be modified to more clearly state vendors with a transaction, in the aggregate, greater than the micro-purchase threshold are required to be procured under approved procurement methods. Views of responsible officials and planned corrective actions: Management concurs with the finding. See Exhibit I.
FINDING 2022-009 FEDERAL PROGRAM DISASTER GRANT-PUBLIC ASSISTANCE ( ASSISTANCE LISTING NO. 97.036) DEPARTMENT OF HOMELAND SECURITY CATEGORY INTERNAL CONTROL NONCOMPLIANCE PROCUREMENT-CONTRACT PROVISION CONDITIONS As part of our allowability test we verified if the contract contained the clauses required by FEMA. During our audit, we identified that the revised contracts did not contain the following required clauses: Retention of records for three years; Equal Employment Opportunity; Compliance with the Clean Air Act and Water Act; Compliance with Suspension and Debarment; Compliance with Byrd Anti Lobbying Amendment. CRITERIA 2 CFR, Section 200.327 states that the non-Federal entity's contracts must contain the applicable provisions described in appendix II, which includes the clauses mentioned above. CAUSE The Program Director and the City Clerk's Office failed to take internal control measures to ensure that FEMA-funded contracts included all clauses required by applicable regulations. EFFECT In case of noncompliance with the federal procurement rules, FEMA may apply a remedy, as appropriate, in accordance with its authorities found at 2 C.F.R. § 200.339 Remedies for Noncompliance. RECOMMENDATION The Program Director and the City Clerk’s Office should implement adequate internal control procedures to ensure that the contracts contain all the clauses required by FEMA. QUESTIONED COSTS None PRIOR YEAR Not Applicable VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION Corrective action was taken on contracts 2023 and beyond. The 2023 contracts already awarded were amended to include them and the new contracts that are being formalized in 2024 are including FEMA's mandatory clauses. RESPONSIBLE PERSON Mr. Jose González-Program Director 787-894-9191
Lack of Internal Controls and Noncompliance with Subrecipient Monitoring Requirement –Coronavirus Relief Fund (Repeat Finding - 2021-001) FEDERAL AGENCY: U.S. Department of the Treasury ASSISTANCE LISTING: 21.019 FEDERAL PROGRAM NAME: Coronavirus Relief Fund FEDERAL AWARD NUMBER: SLT0259 FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Subrecipient Monitoring QUESTIONED COSTS: $176,562 Condition: During the process of documenting the County’s internal controls regarding federal disbursements, we noted that Oklahoma County has not established the following procedures to ensure compliance with the Subrecipient Monitoring requirements: • Identify the award and applicable requirements to the subrecipients. • Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(b)). • Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(d) through (f)). Further, when performing tests over compliance of the federal grant, it was noted that the County did not perform any subrecipient monitoring procedures. In addition, subaward agreements were not designed to ensure the subrecipients understand and use the funds in accordance with federal regulations, and terms and conditions of the subaward. Cause of Condition: Policies and procedures have not been designed and implemented to ensure the County complies with federal laws and regulations and grant agreements. Effect of Condition: This condition resulted in noncompliance with federal laws and regulations and grant agreements. Recommendation: OSAI recommends the County comply with federal laws and regulations and grant agreements by creating award agreements that are designed and implemented to ensure Subrecipient Monitoring is performed. Management Response: Chairman of the Board of County Commissioners: Oklahoma County will comply with federal laws and regulations and grant agreements by creating award agreements that are designed and implemented to ensure Subrecipient Monitoring is performed. Criteria: GAO Standards – Section 2 – Establishing an Effective Internal Control System – OV2.23 states in part: Objectives of an Entity – Compliance Objectives Management conducts activities in accordance with applicable laws and regulations. As part of specifying compliance objectives, the entity determines which laws and regulations apply to the entity. Management is expected to set objectives that incorporate these requirements. 2 CFR § 200.303(a) Internal Controls reads as follows: The non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 2 CFR § 200.332 states: All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward… (b) Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section,… (c) Consider imposing specific subaward conditions upon a subrecipient if appropriate as described in § 200.208. (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals areachieved. ... (e) Depending upon the pass-through entity's assessment of risk posed by the subrecipient (as described in paragraph (b) of this section), the following monitoring tools may be useful for the pass-through entity to ensure proper accountability and compliance with program requirements and achievement of performance goals. (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501. (g) Consider whether the results of the subrecipient's audits, on-site reviews, or other monitoring indicate conditions that necessitate adjustments to the pass-through entity's own records. (h) Consider taking enforcement action against noncompliant subrecipients as described in § 200.339 of this part and in program regulations.
Lack of Internal Controls and Noncompliance with Subrecipient Monitoring Requirement – Emergency Rental Assistance Program (Repeat Finding – 2021-002) FEDERAL AGENCY: U.S. Department of the Treasury ASSISTANCE LISTING: 21.023 FEDERAL PROGRAM NAME: Emergency Rental Assistance Program FEDERAL AWARD NUMBER: ERAE0514, ERAE0418 FEDERAL AWARD YEAR: 2022 CONTROL CATEGORY: Subrecipient Monitoring QUESTIONED COSTS: $13,241,928 Condition: During the process of documenting the County’s internal controls regarding federal disbursements, we noted that Oklahoma County has not established the following procedures to ensure compliance with the Subrecipient Monitoring requirements: • Identify the award and applicable requirements to the subrecipients. • Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(b)). • Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(d) through (f)). Further, when performing tests over compliance of the federal grant, it was noted that the County did not perform any subrecipient monitoring procedures. In addition, subaward agreements were not designed to ensure the subrecipients understand and use the funds in accordance with federal regulations, and terms and conditions of the subaward. Cause of Condition: Policies and procedures have not been designed and implemented to ensure the County complies with federal laws and regulations and grant agreements. Effect of Condition: This condition resulted in noncompliance with federal laws and regulations and grant agreements. Recommendation: OSAI recommends the County comply with federal laws and regulations and grant agreements by creating award agreements that are designed and implemented to ensure Subrecipient Monitoring is performed. Management Response: Chairman of the Board of County Commissioners: Oklahoma County will comply with federal laws and regulations and grant agreements by creating award agreements that are designed and implemented to ensure Subrecipient Monitoring is performed. Criteria: GAO Standards – Section 2 – Establishing an Effective Internal Control System – OV2.23 states in part: Objectives of an Entity – Compliance Objectives Management conducts activities in accordance with applicable laws and regulations. As part of specifying compliance objectives, the entity determines which laws and regulations apply to the entity. Management is expected to set objectives that incorporate these requirements. 2 CFR § 200.303(a) Internal Controls reads as follows: The non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 2 CFR § 200.332 states: All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward… (b) Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section, . . . (c) Consider imposing specific subaward conditions upon a subrecipient if appropriate as described in § 200.208. (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. … (e) Depending upon the pass-through entity's assessment of risk posed by the subrecipient (as described in paragraph (b) of this section), the following monitoring tools may be useful for the pass-through entity to ensure proper accountability and compliance with program requirements and achievement of performance goals (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501. (g) Consider whether the results of the subrecipient's audits, on-site reviews, or other monitoring indicate conditions that necessitate adjustments to the pass-through entity's own records. (h) Consider taking enforcement action against noncompliant subrecipients as described in § 200.339 of this part and in program regulations.
Condition: The Municipality failed to identify, within their records, a list of transactions, nor could provide supporting documentation for the disbursement of $373,670 of program funds. Several inconsistencies between the disbursement and supporting documentation were observed for disbursements totaling $8,579. A total of $373,670 of program funds were transferred to other accounts of the Municipality. The Municipality did not provide us with supporting documentation for transactions totaling $373,670, therefore, we could not ascertain that these transactions complied with program regulations. Context: The Municipality received $758,218 of program funds during the fiscal year ended on June 30, 2022. A total of $1,526,593 was included in the schedule of expenditures of federal awards (SEFA) as program expenses. The Municipality did not provide sufficient and appropriate documentation for $373,670 of program expenses. This represents 24% of the expenses reported in the SEFA. The following situations were observed for disbursements totaling $8,579: Context, continued: Situation Number of transactions with situation Disbursement was made before the receipt of the related invoice 1 Duplicity of payments for the same invoice 2 Disbursement was made without the receipt of the related invoice nor the signoff of all required personnel. 1 Program regulation states that local governments are required to use payments from the Fund to cover: 1) Necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (Covid-19), 2) Costs that were not accounted in the governments’ most recently approved budget as of March 27, 2020, and 3) Costs that were incurred during the period that begins on March 1, 2020; and ends on December 31, 2021. Program Closure Report reminds the Municipality that as per 2 C.F.R. 200 and applicable federal regulations to the CRF Program, documentation that serves as evidence of any eligible expenditure reported under the CRF Program should be preserved and maintained for at least five years. We could not ascertain that these disbursements complied with program regulations. The Coronavirus Relief Fund is authorized by the Cares Act, Pub. L. No. 116-136, Division A, Title V (2020) (codified as 42 USC 81 et seq.) as amended by the Consolidated Appropriations Act, 201, Pub. L. No. 116-260 Division N, Title X, Section 1001. Criteria: Uniform Guidance states in 2 CFR 200.403 that otherwise authorized by statue, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity and be adequately documented. As per 2 CFR 200.302 the other non-Federal entity’s financial management system must provide for the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statues, regulations, and the terms and conditions of the Federal Award. Cause: The Municipality failed to provide documentation that served as evidence of eligible expenses for the CRF program for expenses totaling $373,670. The Municipality applied inconsistent internal control and program procedures to disbursement transactions totaling $8,579. Effect: Remedies for noncompliance are described in 2 CFR 200.339. Grantor may impose additional conditions as described in 2 CRF 200.208 or take one or more of the actions listed on 2 CRF 200.339 as appropriate in the circumstances. Auditor’s recommendation: The Municipality must strengthen internal controls and procedures to assure that disbursement of program funds is properly documented and allowed under program regulations. The Municipality must ensure that all documentation that serves as evidence for eligible expenses be preserved and maintained for at least five years. Views of Responsible officials and corrective actions: Evidence of AAFAF Funds closeout report was provided, there is no issue. Auditor Comments: The Coronavirus Relief Fund (CRF) Transfer Agreement – Assistance Program to Municipalities establishes the following on its grant agreement: 2.3 Recordkeeping: Transferee will maintain its books and records in a manner that will provide Transferor with sufficient detail to review Transferee’s receipts and expenditures relating to the Transfer. Transferee will make such records available for review by Transferor or its agent or designee upon reasonable notice during the Transfer Period and for five (5) years after the termination or expiration of this Agreement. 5.2 Compliance Audit Requirements E.: As applicable, Transferees required to have an audit must ensure the audits are performed in accordance with Generally Accepted Auditing Standards (GAAS) and Government Auditing Standards. The Assistance Program to Municipalities Program Closure Report that management refers to states the following: “Receipt of this notification means that your municipality does not need to provide further notifications or Use of Funds reports since the Program has been closed for your municipality. Your municipality is advised that all documentation that serves as evidence of any eligible expenditure reported under the CRF Program should be preserved and maintained for at least five (5) years, as indicated by federal regulation 2 C.F.R. 200 and applicable federal regulations to the CRF Program. Additionally, please be advised that your municipality will continue to be subject to revisions or audits by local, state or federal agencies pertaining to the use of funds in accordance with federal regulations applicable to the CRF program or the federal regulations regarding Federal Awards, 2 C.F.R. 200. Therefore, your municipality should expect and be prepared for a formal audit by the Government of Puerto Rico or by any pertinent federal agency”. Appendix XI to Part 200 – Compliance Supplement identifies Allowable Costs/Cost Principle as a compliance requirement. Except where otherwise authorized by statue, cost must meet the following general criteria in order to be allowable under federal awards: (1) Be necessary and reasonable for the performance of the federal award and be allocable thereto under the principles in 2 CFR Part 200, Subpart E., and (2) be adequately documented, among other things. The Assistance Program to Municipalities Program Closure Report does not constitute a list of transactions nor adequate supporting documentation of the transactions totaling $373,670. It also does not explain the inconsistencies in supporting documentation observed for disbursements totaling $8,579. Audit Status: Unresolved
Condition: The Municipality failed to identify, within their records, a list of transactions, nor could provide supporting documentation for the disbursement of $1,468,197 of program funds. Documentation for the disbursement of $17,565 of program funds was not identified by the Municipality nor provided for our review. A total of $1,468,197 of program funds were transferred to other accounts of the Municipality. The Municipality did not provide us with supporting documentation for transactions totaling $1,468,197, therefore, we could not ascertain that these transactions complied with program regulations. Context: The Municipality received $6,013,479 of program funds during the fiscal year ended on June 30, 2022. A total of $ 4,810,454 was included in the schedule of expenditures of federal awards (SEFA) as program expenses. The Municipality did not provide sufficient and appropriate documentation for $1,485,762 of program expenses. This represents 31% of the expenses reported in the SEFA. The Municipality indicated that Revenue Replacement was their only project expenditure category in their annual March 2022 SLFRF Compliance Report. Revenue loss in and of itself is not an eligible use. Instead, recipients calculate lost revenue based on the formula provided in the Interim Final Rule and Final Rule to determine the limit for funds that can be used for the provision of government services. Entities are expected to use the direct payments to meet pandemic response needs and rebuild a strong, more equitable economy as the country recovers. Interim and final regulations state that recipients may not use funds to pay interest or principal on outstanding debt, as these expenses would not address the needs of pandemic response or its negative economic impacts. Such expenses would also not be considered provision of government services, as these financing expenses do not directly provide services or aid to citizens. The Coronavirus State and Local Fiscal Recovery Funds program is authorized by sections 602 and 603 of the Social Security Act as added by section 9901 of the American Rescue Plan Act of 2021, Pub. L. No. 117-2 (Mar. 11, 2021). Recipients may use payments from the Fund to among other things, replace lost public sector revenue to provide government services. Criteria: Uniform Guidance states in 2 CFR 200.403 that otherwise authorized by statue, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity and be adequately documented. As per 2 CFR 200.302 the other non-Federal entity’s financial management system must provide for the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statues, regulations, and the terms: and conditions of the Federal Award. Further, Coronavirus Local Fiscal Recovery Fund Award terms and conditions state the following regarding the maintenance of and Access to Records 1. Recipient shall maintain records and financial documents sufficient to evidence compliance with section 603© of the Act, Treasury’s regulations implementing that section, and guidance issued by Treasury regarding the foregoing. 2. The Treasury Office of Inspector General and the Government Accountability Office, or their authorized representatives, shall have the right of access to records (electronic and otherwise) of Recipient in order to conduct audits or other investigations. 3. Records shall be maintained by the Recipient for a period of five (5) years after all funds have been expended or returned to the Treasury, whichever is later. Cause: The Municipality failed to provide documentation that served as evidence of eligible expenses for the program for expenses totaling $1,485,762. The Municipality applied inconsistent internal control and program procedures to disbursement transactions totaling $17,565. Effect: Coronavirus Local Fiscal Recovery Fund Award terms and conditions state the following regarding Remedial Actions: In the event of recipient’s noncompliance with section 603 of the Act, other applicable laws, Treasury’s implementing regulations, guidance , or any reporting or other program requirements, Treasury may impose additional conditions on the receipt of a subsequent tranche of future award funds, If any, or take other available remedies as set forth in 2 CFR 200.339 In the case of a violation of section 603 (c ) of the Act regarding the use of funds, previous payments shall be subject to recoupment as provided in section 603 ( C )of the Act. Auditor’s recommendation: The Municipality must strengthen internal controls and procedures to assure that disbursement of program funds is properly documented and allowed under program regulations. The Municipality must ensure that all documentation that serves as evidence for eligible expenses be preserved and maintained for at least five years. Views of Responsible officials and corrective actions: The accounting staff will continue searching for supporting documentation related to the disbursements amounting $17,565. The Coronavirus State & Local Fiscal Recovery Funds (CSLFR) Department of Treasury Final Rule of January 2022., offers a standard allowance for revenue loss of $10 million, allowing recipients to select between a standard amount of revenue loss or complete a full revenue loss calculation. Recipients that select the standard allowance may use that amount, in many cases their full award, for government services. The Municipality’s management selected the standard allowance, since the amount awarded of CSLFR funds were less than $10 million ad determined that the use of these funds was for governmental services, which are services traditionally provided by recipient governments. The Municipality determined that the payroll expenditures of several departments of the Municipality’s General Fund will be charged to the CSLFR fund as government services. The transfer of $1,468,197 of CSLFR to other Municipality’s bank accounts was to cover the payrolls related to governmental services accounted in the Municipality’s General Fund during the fiscal year 2021-2022. Due to an involuntary omission, these transfers were not recorded as expenditures in the CSLFR fund in the accounting system of the Municipality. To correct this accounting error the Municipality’s management gave instructions to the accounting staff to start reclassifying in the accounting system as soon as possible, these transfers to payroll expenditures accounts in the CSLFR fund. Municipality’s management believes that this finding should be related to an issue of reporting because the Municipality complied with the requirements of activities allowed or unallowed and allowable costs, since the Municipality disbursed CSLFR funds related to governmental services in accordance with the Department of Treasury Final Rule of January 2022. No actions are required related to this finding. Auditor Comments: The U.S Department of The Treasury Coronavirus Local Fiscal Recovery Fund Award Terms and Conditions establishes the following: Recipient shall maintain records and financial documents sufficient to evidence compliance with section 603 ( c ) of the Act, Treasury’s regulations implementing that section, and guidance issued by Treasury regarding the foregoing. Records shall be maintained by Recipient for a period of five (5) years after all funds have been expended or returned to Treasury, whichever is later. 2 CFR 200.302 states the other non-Federal entity’s financial management system must provide for the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statues, regulations, and the terms and conditions of the Federal Award. Appendix XI to Part 200 – Compliance Supplement identifies Allowable Costs/Cost Principle as a compliance requirement. Except where otherwise authorized by statue, cost must meet the following general criteria in order to be allowable under federal awards: (1) Be necessary and reasonable for the performance of the federal award and be allocable thereto under the principles in 2 CFR Part 200, Subpart E., and (2) be adequately documented, among other things. Although Government Services is an allowable expense category for the CSLFR program, and the Municipality’s management represent to us that the transfers to other accounts within the Municipality correspond to payroll expenditures, the Municipality did not provide us with a list of transactions, nor provided supporting documentation relating to these payroll transactions for the amount of $1,468,197. Program regulations states that records shall be maintained by the Recipient for a period of 5 years after all funds have been expended and federal regulation states that in order to be allowable, costs need to be properly documented. Audit Status: Unresolved
Condition: The Municipality could not provide supporting documentation for the disbursement of $173,454 of program funds. These disbursements were accounted for as increase in the due from other funds account. We could not ascertain that the disbursements of $173,454 complied with program regulations. Context: The Municipality received $123,938 of program funds during the fiscal year ended on June 30, 2022. A total of $173,454 of program funds were disbursed without sufficient and appropriate documentation. These funds were disbursed as electronic transfers to other municipal accounts and were accounted for as increases in the due from other funds account. The Municipality repaid during the current year the amount of $447,816 related to last year’s disbursements to the due from other funds account. As of June 30, 2022 the balance of the due from other funds account is $555,110. Program regulation states that costs must be directly tied to the performance of eligible work; adequately documented; reduced by all applicable credits, such as insurance proceeds and salvage values; authorized and not prohibited under Federal or State government laws or regulation; consistent with the applicant’s internal policies, regulations, and procedures that apply uniformly to both Federal awards and other activities of the applicant; and necessary and reasonable to accomplish the work properly and efficiently. We could not ascertain that these disbursements complied with program regulations. The Public Assistance Program is authorized under the Robert T. Stafford Disaster Relief and Emergency assistance Act, as Amended (Stafford Act). Assistance is provided so that communities can quickly respond to and recover from major disasters or emergencies declared by the President. The Municipality has approved grants for the Hurricane Irma and Maria disasters declared on September 2017 (disasters 3384EMPR, 4336 DRPR and 4339 DRPR). The program approves funding for debris removal, emergency protective measures, and the restoration of disaster-damaged, publicly owned facilities. It also encourages protection of damaged facilities from future incidents by providing assistance for hazard mitigation measures. Criteria: Uniform Guidance states in 2 CFR 200.403 that otherwise authorized by statue, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity and be adequately documented. As per 2 CFR 200.302 the other non-Federal entity’s financial management system must provide for the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statues, regulations, and the terms and conditions of the Federal Award. As per 44 CFR section 206.201 and 206.203, the public assistance program provides grant funding for emergency protective measures and debris removal (Emergency Work) and for permanent restoration of damaged facilities, including cost-effective hazard mitigation to protect facilities from future damage (Permanent Work). Cause: The Municipality applied inconsistent program procedures to the three disbursement transactions totaling $173,454. Effect: Remedies for noncompliance are described in 2 CFR 200.339. Grantor may impose additional conditions as described in 2 CRF 200.208 or take one or more of the actions listed on 2 CRF 200.339 as appropriate in the circumstances. Program regulations provide for recovery of assistance and penalty provisions on 44 CFR Part 206. Auditor’s recommendation: The Municipality must strengthen internal controls and procedures to assure that disbursement of program funds are properly documented, can be directly tied to the performance of eligible work, and is allowed under program regulations. Views of Responsible officials and corrective actions: The Municipality Administration is committed to identify the control of deficiency that allowed for the deficiency to happen. Additionally, the administration is committed to implementing the correct control structure to prevent the situation from happening in the future. The Municipality Management will continue the search of supporting documentation of the highlighted transactions. New proposed control structure to be evaluated by Municipality for adequacy. Audit Status: In process of completion.
Finding 2022-007 — Lack of Internal Controls and Noncompliance with Subrecipient Monitoring – Emergency Rental Assistance Program (Repeat Finding 2021-013) FEDERAL AGENCY: U.S. Department of the Treasury ASSISTANCE LISTING: 21.023 FEDERAL PROGRAM NAME: Emergency Rental Assistance Program FEDERAL AWARD NUMBER: ERA0174, ERAE0225 FEDERAL AWARD YEAR: 2022 CONTROL CATEGORY: Subrecipient Monitoring QUESTIONED COSTS: $6,397,374 Condition: During the process of documenting the County’s internal controls regarding federal disbursements for the Emergency Rental Assistance Program (ERA), we noted that Cleveland County has not established the following procedures to ensure compliance with the Subrecipient Monitoring requirements: • Evaluate subrecipient’s risk of noncompliance for the purposes of determining the appropriate subrecipient monitoring related to the subaward. • Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals. Further, while documenting controls over the subrecipient program and administrative expenditures for the ERA1, we noted the following: • The County was unable to provide supporting documents for the administrative costs of the consultant for this grant totaling $64,800. • The County was unable to provide supporting documentation of the subrecipient’s administrative expenditures totaling $453,067. Cause of Condition: Policies and procedures have not been designed and implemented to ensure the County complies with federal laws and regulations and grant agreements; and adequate subrecipient monitoring policies and procedures had not been established by the County prior to entering into agreements with subrecipients. Effect of Condition: This condition resulted in noncompliance with grant requirements. Also, the subrecipient may not be in compliance with the award terms and there is an increased risk of mismanagement and fraud by the subgrantees. Recommendation: OSAI recommends the County design and implement internal controls to ensure that it administers current and future ERA grants in accordance with applicable federal laws and grant requirements, including ensuring that grant subrecipients are properly informed of federal requirements related to allowable costs and that subrecipient monitoring procedures are designed and implemented. Subrecipients should be reimbursed for administrative costs based on supporting documentation for actual costs incurred rather than making advance payments for a set percentage of program funds advanced. Management Response: Chairman of the Board of County Commissioners: Cleveland County takes the auditor's findings seriously and has already implemented several improvements in documentation, monitoring, and reporting practices. Cleveland County is working toward improvements for fiscal year 2025 and has reconciled billing to align with the contract scope of work. However, we recognize the need for documented internal controls and are committed to addressing all recommendations to ensure compliance and transparency in future programs. The County appreciates the constructive feedback and will continue to refine its processes to better serve its citizens. Criteria: GAO Standards – Section 2 – Establishing an Effective Internal Control System – OV2.23 states in part: Objectives of an Entity – Compliance Objectives Management conducts activities in accordance with applicable laws and regulations. As part of specifying compliance objectives, the entity determines which laws and regulations apply to the entity. Management is expected to set objectives that incorporate these requirements. 2 CFR § 200.332 states in part: (e) Monitor the activities of a subrecipient as necessary to ensure that the subrecipient complies with Federal statutes, regulations, and the terms and conditions of the subaward. The pass-through entity is responsible for monitoring the overall performance of a subrecipient to ensure that the goals and objectives of the subaward are achieved. In addition, identify procedures necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: 1. Reviewing financial and programmatic (performance and special reports) required by the Pass-Through Entity (PTE). The Consolidated Appropriations Act§ Section 501 (c)(5) Use of Funds - Administrative Costs states in part: (A) IN GENERAL. —Not more than 10 percent of the amount paid to an eligible grantee under this section may be used for administrative costs attributable to providing financial assistance and housing stability services under paragraphs (2) and (3), respectively, including for data collection and reporting requirements related to such funds. (B) NO OTHER ADMINISTRATIVE COSTS. —Amounts paid under this section shall not be used for any administrative costs other than to the extent allowed under subparagraph (A). In addition, the U.S. Department of Treasury Emergency Rental Assistance (ERA) FAQ #29 What are the applicable limitations on administrative expenses, states in part: Under ERAl, not more than 10 percent of the amount paid to a grantee may be used for administrative costs attributable to providing financial assistance and housing stability services to eligible households. Under ERA2, not more than 15 percent of the amount paid to a grantee may be used for administrative costs attributable to providing financial assistance, housing stability services, and other affordable rental housing and eviction prevention activities. 2 CFR § 200.332 states: All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward… (b) Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section,… (c) Consider imposing specific subaward conditions upon a subrecipient if appropriate as described in § 200.208. (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. . . . (e) Depending upon the pass-through entity's assessment of risk posed by the subrecipient (as described in paragraph (b) of this section), the following monitoring tools may be useful for the pass-through entity to ensure proper accountability and compliance with program requirements and achievement of performance goals (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501. (g) Consider whether the results of the subrecipient's audits, on-site reviews, or other monitoring indicate conditions that necessitate adjustments to the pass-through entity's own records. (h) Consider taking enforcement action against noncompliant subrecipients as described in § 200.339 of this part and in program regulations.
Finding 2021-002: Material Weakness – Lack of Documentation on Sole Source Contracts and Verification of Vendors Federal grantor: Department of Commerce Condition: The Chamber contract with a vendor on a sole-source basis and did not document justification for the use of a sole source vendor. In addition, the Chamber did not verify that the vendor was not on the list of vendors suspended or debarred from federal contracting before contracting with the vendor. Criteria: Entities are required to follow the procurement standards in 2 CFR sections 200.318 through 200.327, including ensuring that the procurement method used for the contracts are appropriate based on the dollar amount and conditions specified in 2 CFR section 200.320 and noncompetitive procurements. Entities also must comply with 2 CFR Part 1326 that prohibits entities that have been debarred, suspended or voluntarily excluded from participating in Federal procurement. Cause: The Chamber’s Procurement Policy allows for a sole source vendor but requires staff to document sole source procurements prior to initial purchase. It appears staff did not follow its policy. The Policy also contains a requirement to verify or receive vendor certification that they are not debarred, suspended, ineligible or voluntarily excluded from Federal procurements, but this procedure was not followed. Effect: The Department of Commerce may impose additional conditions on the receipt of a subsequent tranche of future award funds, if any, or take other available remedies as set forth in 2 C.F.C. section 200.339. Recommendation: We recommend the Chamber review policies with staff to ensure procurement requirements are followed, and that staff are familiar with federal procurement requirements. Management’s Response: Management’s response to the finding is discussed in the Corrective Action Plan.
Finding 2021-002: Material Weakness – Lack of Documentation on Sole Source Contracts and Verification of Vendors Federal grantor: Department of Commerce Condition: The Chamber contract with a vendor on a sole-source basis and did not document justification for the use of a sole source vendor. In addition, the Chamber did not verify that the vendor was not on the list of vendors suspended or debarred from federal contracting before contracting with the vendor. Criteria: Entities are required to follow the procurement standards in 2 CFR sections 200.318 through 200.327, including ensuring that the procurement method used for the contracts are appropriate based on the dollar amount and conditions specified in 2 CFR section 200.320 and noncompetitive procurements. Entities also must comply with 2 CFR Part 1326 that prohibits entities that have been debarred, suspended or voluntarily excluded from participating in Federal procurement. Cause: The Chamber’s Procurement Policy allows for a sole source vendor but requires staff to document sole source procurements prior to initial purchase. It appears staff did not follow its policy. The Policy also contains a requirement to verify or receive vendor certification that they are not debarred, suspended, ineligible or voluntarily excluded from Federal procurements, but this procedure was not followed. Effect: The Department of Commerce may impose additional conditions on the receipt of a subsequent tranche of future award funds, if any, or take other available remedies as set forth in 2 C.F.C. section 200.339. Recommendation: We recommend the Chamber review policies with staff to ensure procurement requirements are followed, and that staff are familiar with federal procurement requirements. Management’s Response: Management’s response to the finding is discussed in the Corrective Action Plan.