Finding Text
Condition:
The Municipality could not provide supporting documentation for the disbursement of $173,454 of program funds. These disbursements were accounted for as increase in the due from other funds account. We could not ascertain that the disbursements of $173,454 complied with program regulations.
Context:
The Municipality received $123,938 of program funds during the fiscal year ended on June 30, 2022. A total of $173,454 of program funds were disbursed without sufficient and appropriate documentation. These funds were disbursed as electronic transfers to other municipal accounts and were accounted for as increases in the due from other funds account. The Municipality repaid during the current year the amount of $447,816 related to last year’s disbursements to the due from other funds account. As of June 30, 2022 the balance of the due from other funds account is $555,110.
Program regulation states that costs must be directly tied to the performance of eligible work; adequately documented; reduced by all applicable credits, such as insurance proceeds and salvage values; authorized and not prohibited under Federal or State government laws or regulation; consistent with the applicant’s internal policies, regulations, and procedures that apply uniformly to
both Federal awards and other activities of the applicant; and necessary and reasonable to accomplish the work properly and efficiently. We could not ascertain that these disbursements complied with program regulations.
The Public Assistance Program is authorized under the Robert T. Stafford Disaster Relief and Emergency assistance Act, as Amended (Stafford Act). Assistance is provided so that communities can quickly respond to and recover from major disasters or
emergencies declared by the President. The Municipality has approved grants for the Hurricane Irma and Maria disasters declared on September 2017 (disasters 3384EMPR, 4336 DRPR and 4339 DRPR). The program approves funding for debris removal, emergency protective measures, and the restoration of disaster-damaged, publicly owned facilities. It also encourages protection of damaged facilities from future incidents by providing assistance for hazard mitigation measures.
Criteria:
Uniform Guidance states in 2 CFR 200.403 that otherwise authorized by statue, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity and be adequately documented. As per 2 CFR 200.302 the other non-Federal entity’s financial management system must provide for the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statues, regulations, and the terms and conditions of the Federal Award. As per 44 CFR section 206.201 and 206.203, the public assistance program provides grant funding for emergency protective measures and debris removal (Emergency Work) and for permanent restoration of damaged facilities, including cost-effective hazard mitigation to protect facilities from future damage (Permanent Work).
Cause:
The Municipality applied inconsistent program procedures to the three disbursement transactions totaling $173,454.
Effect:
Remedies for noncompliance are described in 2 CFR 200.339. Grantor may impose additional conditions as described in 2 CRF 200.208 or take one or more of the actions listed on 2 CRF 200.339 as appropriate in the circumstances. Program regulations provide for recovery of assistance and penalty provisions on 44 CFR Part 206.
Auditor’s recommendation:
The Municipality must strengthen internal controls and procedures to assure that disbursement of program funds are properly documented, can be directly tied to the performance of eligible work, and is allowed under program regulations.
Views of Responsible officials and corrective actions:
The Municipality Administration is committed to identify the control of deficiency that allowed for the deficiency to happen. Additionally, the administration is committed to implementing the correct control structure to prevent the situation from happening in the future. The Municipality Management will continue the search of supporting documentation of the highlighted transactions. New proposed control structure to be evaluated by Municipality for adequacy.
Audit Status:
In process of completion.