FINDING 2023-002
Subject: Coronavirus State and Local Fiscal Recovery Funds - Reporting
Federal Agency: U.S. Department of Treasury
Assistance Listing Number: 21.027
Federal Award Number: FY 2022
Pass-Through Entity: N/A
Compliance Requirements: Reporting
Audit Findings: Material Weakness, Modified Opinion
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 10, states
in part:
". . . 10. Reporting. All recipients of federal funds must complete financial, performance, and compliance
reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or
accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be
consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should
appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in
accordance with appropriate accounting standards and principles. . . ."
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, . . ."
Condition: The City had not properly designed or implemented a system of internal controls, which would
include appropriate segregation of duties that would likely be effective in preventing, or detecting and
correcting, noncompliance. Recipients are required to submit quarterly or annually Project and Expenditure
(P&E) reports to the Department of 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 received an
allocation of less than $10 million in Coronavirus State and Local Fiscal Recovery Funds (CSLFRF). As,
annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year.
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 CSLFRF 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 of what should be done to effect internal control, and procedures
should consist of actions that would implement these policies.
Context: The City submitted one P&E report during the audit period; however, a single employee prepared
and submitted the P&E report without a review or oversight process in place to prevent, or detect and
correct errors.
In addition, the P&E report was not properly supported by the City’s records. All but $100,000 of the
expenditures were reported under the Eligible Use Category of “Administrative Expenses.” However, the
City’s expenditures during the audit period consisted of assistance to business and households, sewer
infrastructure, and tourism support, none of which qualified as Administrative Expenses. Furthermore, the
City reported that it was electing to take the Revenue Loss Standard Allowance, but the amount reported
as Revenue Loss was $0.
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 City.
Identification as a repeat finding, if applicable: Yes. The finding appeared in the prior year report as
Finding 2022-001.
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 and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.