Finding Text
FINDING 2023-001
Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Internal Controls
Federal Agency: Department of the Treasury
Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds
Assistance Listings Number: 21.027
Federal Award Numbers and Years (or Other Identifying Numbers): YR 2023; CONTRACT 64511;
FR-2023-ILBC-00020
Pass-Through Entities: Indiana State Department of Health, Indiana Department of Homeland Security
Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost
Principles, Period of Performance
Audit Finding: Material Weakness
Condition and Context
Prior to receipt of direct State and Local Fiscal Recovery Funds (SLFRF) award funds, all eligible
entities were required to execute a Financial Assistance Agreement (Agreement), which included the Award
Terms and Conditions that recipients must comply with in carrying out the objectives of their award. Per
the Agreement, the County was responsible for the effective administration of the federal award, as well as
the application of sound management practices and administration of federal funds in a manner consistent
with program objectives and terms and conditions of the award.
Recipients may use SLFRF funds 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. The SLFRF program provides substantial flexibility for each recipient to meet local needs
within four separate eligible use categories. Recipients may use SLFRF funds to:
Respond to the COVID-19 public health emergency and its negative economic impacts;
Respond to workers performing essential work during the COVID-19 public health
emergency by providing premium pay to eligible workers of eligible employers that have
eligible workers who are performing essential work;
Provide government services, to the extent COVID-19 caused a reduction in revenues
collected in the most recent full fiscal year of the recipient; and
Make necessary investments in water, sewer, or broadband infrastructure.
Pursuant to the Agreement, the period of performance for the award began on the date the funds
were disbursed to the County and ends on December 31, 2026. Recipients may only use funds to cover
costs incurred during the period that began on June 7, 2021, and ends on December 31, 2024. Recipients
must liquidate all obligations incurred by December 31, 2024, under the award no later than December 31,
2026, which is the end of the period of performance.
In addition, prior to receipt of SLFRF award funds passed through from other entities, the County
was required to execute a subrecipient agreement which included terms and conditions that recipients must
comply with in carrying out the objectives of its award. Recipients were to use SLFRF funds to develop
and improve health outcomes and acquire body cameras for law enforcement. Furthermore, pursuant to
the subrecipient agreements, the period of performance for the award began on 8/1/22 and 1/1/23 and ends
on 6/30/24 and 12/31/23, respectively.
INDIANA STATE BOARD OF ACCOUNTS
16
KNOX COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Accounts payable vouchers paid from the SLFRF fund were processed by one County employee.
The employee reviewed and approved the accounts payable voucher to ensure all expenditures were for
allowable activities, allowable costs, and were within the period of performance prior to issuing payment
from the SLFRF fund. Of the 60 accounts payable vouchers tested during the audit period, 4 were not
properly reviewed or approved by the employee responsible for ensuring compliance.
The lack of internal controls was a systemic issue throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over the Federal award that provides
reasonable assurance that the non-Federal entity is managing the Federal award in
compliance with Federal statutes, regulations, and the terms and conditions of the Federal
award. These internal controls should be in compliance with guidance in 'Standards for
Internal Control in the Federal Government' issued by the Comptroller General of the
United States or the 'Internal Control Integrated Framework', issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). . . ."
Cause
Accounts payable vouchers were not approved when the employee that ensured compliance was
on vacation. Embedded within a properly designed and implemented internal control system should be
internal controls consisting of policies and procedures. Policies reflect the County's management of what
should be done to effect internal controls, and procedures should consist of actions that would implement
these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, including
policies and procedures that provide segregation of duties and additional oversight as needed, the internal
control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions
of the federal award could result in the loss of future federal funding to the County.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the County design and implement a proper system of
internal controls to ensure appropriate reviews, approvals, and oversight are taking place prior to payment
on a regular basis and when individuals are absent.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.