Finding Text
FINDING 2023-003
Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Reporting
Federal Agency: Department of the Treasury
Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds
Assistance Listings Number: 21.027
Federal Award Number and Year (or Other Identifying Number): FY2022
Compliance Requirement: Reporting
Audit Finding: Material Weakness
Condition and Context
Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to
the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates,
are based upon type of recipient and its population, as well as the recipient's allocation amount. Information
to be reported includes projects funded, expenditures, and contracts for the appropriate reporting period.
The City was classified as a city with a population below 250,000 residents that received an allocation
of less than $10 million in State and Local Fiscal Recovery Funds. As such, the P&E report covering
the period from April 1, 2022 to March 31, 2023, was required to be submitted to the Treasury by April 30,
2023.
The P&E report submitted in April 2023 was prepared and submitted by one employee without
evidence of an oversight or review process to ensure accuracy.
The lack of internal controls was isolated to the April 2023 P&E report.
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
A proper system of internal controls was not designed by management of the City which would include
segregation of key functions. Embedded within a properly designed and implemented internal control
system should be internal controls consisting of policies and procedures. Policies reflect the City's management
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
INDIANA STATE BOARD OF ACCOUNTS 17
CITY OF HOBART
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Effect
Without the proper design and implementation of the components of a system of internal controls,
including policies and procedures that provide for segregation of duties and additional oversight as needed,
the system cannot be capable of effectively preventing, or detecting and corrections, material noncompliance.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the City design and implement a proper system of internal
controls, including policies and procedures that would provide segregation of duties to ensure appropriate
reviews, approvals and oversight are taking place.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.