Finding 1030228 (2022-001)

Reference Number: 2022-001Prior Year Finding: NoFederal Agency: U.S. TreasuryFederal Program: Coronavirus State and Local Recovery Funds (CSLRF)Assistance Listing Number: 21.027Federal IdentificationAward Number and Year:None, March 3, 2021- December 31, 2024Compliance Requirement:Allowable Costs and ActivitiesAward YearJuly 1, 2021-June 30, 2022Type of FindingSignificant Deficiency in Internal Control Over Compliance, Other MattersCriteria or specific requirement:Compliance: Recipients may use CSLFRF payments for any eligible expenses subject to the restrictions set forth in sections 602 and 603 of the Social Security Act as added by section 9901 of the American Rescue Plan Act of 2021 (codified as 42 USC 802 and 42 USC 803 respectively).21 U.S.C. ? 812 - U.S. Code - Unannotated Title 21. Food and Drugs ? 812. Schedules of controlled substances. There are established five schedules of controlled substances, to be known as schedules I, II, III, IV, and V. CSA identifies cannabis as schedule 1, despite studies finding it to have medical uses.(1) Schedule I:(A) The drug or other substance has a high potential for abuse.(B) The drug or other substance has no currently accepted medical use in treatment in the United States.(C) There is a lack of accepted safety for use of the drug or other substance under medicalsupervision.Internal Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non- Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).Condition:The City used CSLRF funds to support the marketing and production of a Cannabis Summit which supported the use of cannabis. Although the use of cannabis is legal in the Commonwealth of Virginia and the summit was approved by the Commonwealth, cannabis is a schedule I controlled substance under the federal Controlled Substance Act (CSA).Federal funds are not allowed to support activities that are illegal federal activity.Context:CLA noted two of five disbursements selected for testing were used to support the Cannabis Summit. CLA reviewed all CSLRF disbursements and noted that only two were made to support the Cannabis Summit.Questioned costs:$130,000, relates to the total CSLRF used to support the Cannabis Summit.Cause:City obtained approval from the State to use the funds in support of the Cannabis Summit.Effect:Federal funds were used to support an illegal federal activity.Recommendation:We recommend that the City ensure that federal funds are used to support allowable costs and activities, and to determine when federal requirements may be more restrictive than the State or grantor? requirements.Views of responsible officials:The City agrees with the finding, see corrective action plan.