Finding 1074604 (2023-006)

FINDING 2023-006 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Reporting Federal Agency: Department of the Treasury Federal Program: Coronavirus State and Local Fiscal Recovery Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): CY 2021 Compliance Requirement: Reporting Audit Finding: Material Weakness Condition and Context Recipients of State and Local Fiscal Recovery Funds (SLFRF) grants 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 Town was classified as a Tier 5 auditee - a metropolitan city with a population below 250,000 residents which received less than $10 million in SLFRF funding. Tier 5 auditees are required to submit an annual P&E report due in April of each year. The Town was required to file an annual P&E report on April 30, 2023. The report was to cover the period of April 1, 2022 to March 31, 2023. The Town presented this report for audit; however, there were no documented internal controls in place over the Reporting compliance requirement. The lack of internal controls was a systemic issue during 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 27 TOWN OF FRANKTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls over the P&E reports was not designed by management of the Town. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the Town's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. The Town had a systemic lack of internal controls which resulted in the lack of internal controls over the annual P&E report. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, the Town did not complete a required report, and the Treasury does not have information on how the Town is spending its funding. 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 Town. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the Town's management design and implement a proper system of internal controls, including policies and procedures to ensure that the Town provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.