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): CY 2023
Compliance Requirement: Reporting
Audit Findings: Material Weakness, Modified Opinion
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 metropolitan city with a population below 250,000 residents that was
allocated more than $10 million in Coronavirus State and Local Fiscal Recovery Funds. As such, the P&E
quarterly reports were to cover one calendar quarter and must be submitted to the Treasury by the last day
of the month following the end of the period covered.
The City submitted the required P&E reports during the audit period; however, a single employee
prepared and submitted the reports without evidence of a review or oversight process in place to prevent,
or detect and correct, errors.
Due to the lack of internal controls, the P&E reports were not supported by the City's ledger. The
following errors were identified:
Quarter 1 2023 (January 1, 2023 to March 31, 2023)
Current period expenditures for Quarter 1 2023 were $79,169 per the City's ledger; however,
the P&E report reported $0 for the quarter. As a result, the reported amounts for current period
obligations and current period expenditures were incorrect.
Quarter 2 2023 (April 1, 2023 to June 30, 2023)
Current period expenditures for Quarter 2 2023, were $178,326 per the City's ledger; however,
the P&E report reported $0 for the quarter. As a result, the reported amounts for current period
obligations and current period expenditures were incorrect.
In addition, as of June 30, 2023, the City's ledger reflected cumulative program expenses of
$4,693,765; however, the P&E report for that period reported total expenditures of $4,644,475,
resulting in a variance of $49,290. As a result, the reported amounts for cumulative obligations
and cumulative expenditures were incorrect.
Quarter 3 2023 (July 1, 2023 to September 30, 2023)
As of September 30, 2023, the City's ledger reflected cumulative program expenses of
$7,858,115; however, the P&E report for that period reported total expenditures of
$10,244,475, resulting in a variance of $2,386,360. As a result, the reported amounts for
cumulative obligations and cumulative expenditures were incorrect.
The lack of internal controls and noncompliance were systemic issues 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). . . ."
Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page
4, states in part:
". . . 4. Reporting. States, territories, and freely associated states are required to submit Project
and Expenditure Reports on a quarterly basis according to the due dates noted in Table 1. A
Project and Expenditure Report must be completed for each Project included in an approved
Program Plan, beginning after a Project has been selected and a subaward has been executed (if
applicable). Project and Expenditure Reports will be due each quarter thereafter for the remainder
of the period of performance to continue to collect performance data. Additionally, to provide public
transparency, Treasury will seek information from Recipients regarding their plans and practices
related to promoting on-time and on-budget delivery related to CPF Projects.
Following the initial report, all Project and Expenditure Reports will cover one three-month period
and must be submitted to Treasury within 30 calendar days after the end of each period, except for
the final report, which is due 120 calendar days after the end of the period of performance 1.
Treasury may provide additional closeout instructions prior to the end of the period of performance."
31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of
performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the
uses of funds. . ."
Cause
A proper system of internal controls over the P&E report was not designed by management of the
City, which would include segregation of key functions, to ensure the City provided the Treasury with
complete and accurate information related to the SLFRF awards. 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 statements 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 did not prevent or detect 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 City.
In addition, not meeting the SLFRF reporting requirements increases the likelihood that the public
will not have access to transparent and accurate information regarding expenditures of federal awards.
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 that would provide a segregation of duties for the preparation and review of federal reports to
ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should
develop policies and procedures to ensure that the City 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.