Finding Text
The Metcalfe County Fiscal Court Did Not Establish And Maintain Effective Internal Controls Over Compliance With Coronavirus State And Local Fiscal Recovery Fund (CSLFRF) Requirements Federal Program: Assistance Listing #21.027 Coronavirus State and Local Fiscal Recovery Fund Name of Federal Agency: U.S. Department of Treasury Pass-Through Agency: Not Applicable Award Number and Year: 2022 Amount Expended: $977,917 Compliance Requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles Type of Finding: Material Weakness, Noncompliance Amount of Questioned Costs: $11,219 Opinion Modification (if applicable): Adverse During fiscal year 2022, the Metcalfe County Fiscal Court received funds from the Coronavirus State And Local Fiscal Recovery Fund (CSLFRF). The fiscal court failed to establish effective internal controls over compliance requirements to ensure disbursements from the CSLFRF were not already reimbursed from another source, complied with fiscal court?s administrative code, and had proper supporting documentation. The following findings were noted regarding the fiscal court?s CSLFRF disbursements: ? Fifteen of 80 disbursements tested in amount of $11,219 did not qualify to be covered by CSLFRF because $10,181 had already been reimbursed by the state and $1,038 was an overpayment to the revolving payroll account for employer?s share retirement. ? Thirty-eight of 80 disbursements tested in amount of $193,278 did not have purchase orders issued before the item was purchased or service was performed as required by the fiscal court?s administrative code. ? Nineteen of 80 disbursements tested in amount of $130,013 exceeded available line-item appropriation. Twelve of these 19 disbursements in the amount of $70,199 were paid before the budget transfer was made. ? One of 80 disbursements tested in amount of $3,237 was on a contract amendment not approved by the fiscal court as required by the fiscal court?s administrative code. ? Nine of 80 disbursements tested in amount of $90,855 did not have supporting documentation showing how amounts paid for employer?s share retirement, employer?s share social security, employer?s share health insurance, and employer?s share health reimbursement account were calculated. ? One of 80 disbursements tested in amount of $60 did not agree to supporting documentation because the contractor was underpaid by $6. Due to the above material noncompliance with the compliance requirements ?activities allowed or unallowed? and ?allowable cost/cost principles? applicable to the Metcalfe County Fiscal Court for the year ended June 30, 2022, we will issue an adverse opinion on these compliance requirements. Our total sample included 80 disbursements in the amount of $413,534 from a universe of 518 transactions in the amount of $977,917 identified by the finance officer and a third-party administrator to be covered by the CSLFRF. The audit sample was selected using a non-statistical method. We then reviewed disbursements to determine if CSLFRF funds were used for ineligible uses and to determine whether the fiscal court significantly deviated from its established practices and policies regarding disbursements. The issues noted appear to be a systemic problem. The known questioned costs are $11,219. Questioned costs were computed by comparing reimbursements received from the state to disbursements included as covered by SLFRF and identifying disbursements made for overpayments. During testing, we found the following disbursements included that had already been reimbursed: ? $1,197 employer?s share retirement was reimbursed from the Kentucky Law Enforcement Foundation Program Fund (KLEFPF) on incentive pay received by law enforcement officers ? $8,984 regular operating expenses of janitorial costs, maintenance costs, ordinary repairs, and utilities were reimbursed from the Kentucky Administrative Office of the Courts (AOC). ? $1,038 employer?s share retirement was an overpayment to the revolving payroll account. An effective internal control system was not in place in Metcalfe County to ensure compliance with requirements related to the administration of ARPA funds and the Allowable Costs/Cost Principles compliance requirements. Failure to establish and maintain effective internal controls over compliance with federal program requirements could subject the county to the risk of reporting ineligible expenditures on the SEFA and using grant funds for unallowable purposes. The fiscal court may be required to repay the questioned costs back to the granting agency. 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.? The Metcalfe County Administrative Code and Employee Policy And Procedure Handbook General Purchase Procedures section A states ?[a]ll purchases must be verified and approved by the issuance of a purchase order if the County budget has the proper appropriation for the Department?s line item. When the vendor submits an invoice the purchase order number must be indicated; invoices without a purchase order number will not be paid. Sufficient funds must also exist in the department?s particular line item from which the purchases will be paid. The County Judge/Executive, County Treasurer, and/or Finance Officer shall complete the purchase order form and signify their approval of the purchases by their signature or other appropriate method.? In addition, the administrative codes states ?[e]very contract of the County shall be authorized or approved by the Fiscal Court, by Resolution if applicable, authorizing the County Judge/Executive to execute, sign and enter into same; and every contract of the County shall be approved as to form and reality by the County Attorney.? Not a repeat finding. We recommend the fiscal court establish and maintain internal controls over compliance for all federal program expenditures to ensure expenditures are for eligible purposes and have not been reimbursed by another source and comply with its established practices and policies regarding expenditures.