FAC Explorer

Finding 1081569 (2023-010)

Material Weakness
Requirement
A
Questioned Costs
$1
Year
2023
Accepted
2024-11-08
Audit: 327788
Organization: City of Long Beach (CA)
Auditor: Kpmg LLP

AI Summary

  • Core Issue: Payments were made to ineligible participants in the Guaranteed Income Program due to insufficient review controls.
  • Impacted Requirements: Compliance with allowability criteria under federal guidelines was not met, leading to unallowable costs of $2,500.
  • Recommended Follow-up: Evaluate and strengthen internal controls for application reviews to ensure all vendor-approved applications are properly vetted by the City.

Finding Text

Finding Number: 2023-010 Program: COVID-19 Coronavirus State and Local Fiscal Recovery Funds ALN #: 21.027 Pass-through Entity: N/A – Direct Award Federal Agency: U.S. Department of Treasury Federal Award Numbers: N/A Federal Award Year: 2021 Compliance Requirement: Allowability Criteria Recipients may use SLFRF payments for any eligible expenses subject to the restrictions set forth in sections 602 and 603 of the Social Security Act as added by section 9901 of the American Rescue Plan Act of 2021 codified at 42 USC sections 802 and 803 respectively. Recipients may use payments from CSLFRF to: a. Respond to the public health and negative economic impacts of the pandemic, by supporting the health of communities, and helping households, small businesses, impacted industries, and the public sector recover from economic impacts of the pandemic. b. Replace lost public sector revenue to provide government services; recipients may use this funding to provide government services to the extent of the reduction in revenue experienced due to the pandemic. c. Provide premium pay for essential workers, offering additional support to those who have borne and will bear the greatest health risks because of their service in critical infrastructure sectors; and d. Invest in water, sewer, and broadband infrastructure, making necessary investments to improve access to clean drinking water, support, vital wastewater and storm water infrastructure, and to expand access to broadband internet. Additionally, per 2 CFR 200.303, non-federal entities must establish and maintain effective internal control over federal awards that provide 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. This would include internal controls related to the review and approval of allowable costs. Conditions Found The City utilized a portion of the funds received under the Coronavirus State and Local Fiscal Recovery Funds program to establish and fund a Guaranteed Income Program. The Guaranteed Income Program provided payments to individuals who experienced negative economic impacts as a result of the pandemic. To determine who would be eligible to receive assistance under the Guaranteed Income Program, the City developed specific eligibility criteria whereby applicants that had a household income below the poverty line would meet the criteria of having a negative economic impact. The total amount paid under this program for the year ended September 30, 2023 was $623,500. During our testwork over the allowability of payments made under the Guaranteed Income Program, we identified that for 5 of 25 payments selected for testwork, the applicant did not meet the criteria of having a household income of less than the poverty line as established by the City. While each of the five applications reported household income that was lower than the poverty line, the additional documentation provided by the applicant to substantiate what their actual income was showed household income that exceeded the poverty line. As a result, these applicants were not eligible for the program and the payments made to the five applicants. Cause The cause of the condition found was due to insufficient review controls over the processing and approval of participant applications. The City utilized a vendor to assist in the processing of applications for this program. The City had implemented a policy whereby the City reviewed 10% of the applications approved by the vendor. The errors identified during our testwork related to applications that the City did not review. Effect The effect of the condition found is that payments under the Guaranteed Income program were made to ineligible participants resulting in unallowable costs. Questioned Costs $2,500 – The amount paid to the five ineligible applicants identified Repeat finding A similar finding was not reported in the prior year. Statistical sample The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend that the existing internal controls related to the review and approval of applications for the Guaranteed Income Program be evaluated to ensure that all applications approved by the vendor were appropriately approved by the City. View of Responsible Officials The utilization of a vendor to evaluate, approve and process applications was critical to the speedy and successful deployment of the Guaranteed Income Program in response to the COVID-19 pandemic. The Economic Development Department does not have the staff capacity to evaluate the volume of applications received under this and similar programs implemented under the Coronavirus State and Local Fiscal Recovery Funds program. Accordingly, the Economic Development Department relied on its contracted partner to verify applicants for enrollment in the program and conducted a secondary review of 10% of all applications approved by the vendor prior to authorizing disbursement. As noted in the finding, the errors identified in the test work related to applications that the Economic Development Department did not review. Nonetheless, the Economic Development Department acknowledges that insufficient review controls contributed to payments made to ineligible applicants. In response to the findings, Economic Development Department has worked with the vendor to improve evaluation processes related to the income eligibility verification process, including: a. Enhanced Training: The vendor will provide comprehensive training to all reviewers involved in verifying income documentation. This training will emphasize the importance of accurately inputting pay period frequency and using gross income for calculations. b. Secondary checks: The vendor will establish additional quality assurance checks to validate the accuracy of income calculations before final eligibility determinations are made. This may include double-checking calculations by a second reviewer or implementing automated systems to flag potential errors. Additionally, the Economic Development Department has re-evaluated and revised its policy for additional review by staff; increasing the number of applications reviewed by the Economic Development Department from 10% to 30%. In the view of Management of Economic Development Department, increasing the review sample size to 30% sufficiently mitigates the risk of further error while preserving the benefits and efficiencies that utilizing a contract processor provides. Further, the Economic Development Department worked with the vendor to review all applications manually qualified by the vendor to identify any further ineligible applications not found in the sample. Regarding the questioned costs, the Economic Development Department implemented a second round of the Guaranteed Income Program that was funded by non-grant funds. Costs associated with the ineligible applications identified in the audit were reclassified from American Rescue Plan Act funding to the City’s General Fund, and replaced by costs from confirmed eligible applications in the second round of the program. Finally, the City has sought restitution from the vendor for administrative costs of the improperly vetted applications. The City will not seek repayment from the ineligible applicants. The applicants were not responsible for the error.

Categories

Questioned Costs Allowable Costs / Cost Principles Eligibility Subrecipient Monitoring

Other Findings in this Audit

  • 505102 2023-002
    Material Weakness Repeat
  • 505103 2023-002
    Material Weakness Repeat
  • 505104 2023-002
    Material Weakness Repeat
  • 505105 2023-002
    Material Weakness Repeat
  • 505106 2023-002
    Material Weakness Repeat
  • 505107 2023-003
    Material Weakness
  • 505108 2023-003
    Material Weakness
  • 505109 2023-003
    Material Weakness
  • 505110 2023-003
    Material Weakness
  • 505111 2023-003
    Material Weakness
  • 505112 2023-004
    Material Weakness
  • 505113 2023-004
    Material Weakness
  • 505114 2023-004
    Material Weakness
  • 505115 2023-004
    Material Weakness
  • 505116 2023-004
    Material Weakness
  • 505117 2023-005
    Material Weakness
  • 505118 2023-005
    Material Weakness
  • 505119 2023-006
    Material Weakness
  • 505120 2023-006
    Material Weakness
  • 505121 2023-007
    -
  • 505122 2023-007
    -
  • 505123 2023-008
    Material Weakness
  • 505124 2023-008
    Material Weakness
  • 505125 2023-009
    Material Weakness
  • 505126 2023-009
    Material Weakness
  • 505127 2023-010
    Material Weakness
  • 505128 2023-011
    Material Weakness
  • 1081544 2023-002
    Material Weakness Repeat
  • 1081545 2023-002
    Material Weakness Repeat
  • 1081546 2023-002
    Material Weakness Repeat
  • 1081547 2023-002
    Material Weakness Repeat
  • 1081548 2023-002
    Material Weakness Repeat
  • 1081549 2023-003
    Material Weakness
  • 1081550 2023-003
    Material Weakness
  • 1081551 2023-003
    Material Weakness
  • 1081552 2023-003
    Material Weakness
  • 1081553 2023-003
    Material Weakness
  • 1081554 2023-004
    Material Weakness
  • 1081555 2023-004
    Material Weakness
  • 1081556 2023-004
    Material Weakness
  • 1081557 2023-004
    Material Weakness
  • 1081558 2023-004
    Material Weakness
  • 1081559 2023-005
    Material Weakness
  • 1081560 2023-005
    Material Weakness
  • 1081561 2023-006
    Material Weakness
  • 1081562 2023-006
    Material Weakness
  • 1081563 2023-007
    -
  • 1081564 2023-007
    -
  • 1081565 2023-008
    Material Weakness
  • 1081566 2023-008
    Material Weakness
  • 1081567 2023-009
    Material Weakness
  • 1081568 2023-009
    Material Weakness
  • 1081570 2023-011
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
14.871 Section 8 Housing Choice Vouchers $109.58M
14.871 Covid-19 Section 8 Housing Choice Vouchers $9.90M
97.036 Disaster Grants - Public Assistance (presidentially Declared Disasters) $8.84M
21.023 Covid-19 Emergency Rental Assistance Program $6.76M
10.557 Wic Special Supplemental Nutrition Program for Women, Infants, and Children $4.81M
14.218 Community Development Block Grants/entitlement Grants $3.83M
93.391 Activities to Support State, Tribal, Local and Territorial (stlt) Health Department Response to Public Health Or Healthcare Crises $2.97M
14.231 Covid-19 Emergency Solutions Grant Program $2.63M
14.267 Continuum of Care Program $2.49M
17.259 Wioa Youth Activities $1.82M
93.354 Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response $1.50M
21.027 Covid-19 Coronavirus State and Local Fiscal Recovery Funds $1.38M
20.106 Covid-19 Airport Improvement Program $1.34M
93.498 Covid-19 Provider Relief Fund and American Rescue Plan (arp) Rural Distribution $1.17M
93.917 Hiv Care Formula Grants $1.11M
93.086 Healthy Marriage Promotion and Responsible Fatherhood Grants $1.10M
15.514 Reclamation States Emergency Drought Relief $1.08M
10.561 State Administrative Matching Grants for the Supplemental Nutrition Assistance Program $1.03M
97.056 Port Security Grant Program $931,745
93.069 Public Health Emergency Preparedness $917,989
15.504 Title Xvi Water Reclamation and Reuse Program $850,412
14.900 Lead Hazard Reduction Grant Program $795,149
14.905 Lead Hazard Reduction Demonstration Grant Program $790,056
93.268 Immunization Cooperative Agreements $765,063
93.967 Centers for Disease Control and Prevention Collaboration with Academia to Strengthen Public Health $686,801
14.228 Community Development Block Grants/state's Program and Non-Entitlement Grants in Hawaii $645,239
93.323 Epidemiology and Laboratory Capacity for Infectious Diseases (elc) $424,261
97.067 Homeland Security Grant Program $369,977
16.825 Smart Prosecution Initiative $353,473
14.896 Family Self-Sufficiency Program $344,211
93.977 Sexually Transmitted Diseases (std) Prevention and Control Grants $321,057
15.916 Outdoor Recreation Acquisition, Development and Planning $310,615
20.205 Highway Planning and Construction $296,991
14.231 Emergency Solutions Grant Program $270,907
16.835 Body Worn Camera Policy and Implementation $252,470
14.239 Home Investment Partnerships Program $239,741
17.277 Wioa National Dislocated Worker Grants / Wia National Emergency Grants $236,914
20.106 Airport Improvement Program $227,664
16.738 Edward Byrne Memorial Justice Assistance Grant Program $212,696
10.559 Summer Food Service Program for Children $207,866
16.838 Comprehensive Opioid, Stimulant, and Other Substances Use Program $197,989
20.616 National Priority Safety Programs $179,047
16.560 National Institute of Justice Research, Evaluation, and Development Project Grants $151,117
93.994 Maternal and Child Health Services Block Grant to the States $150,165
20.600 State and Community Highway Safety $144,593
93.778 Medical Assistance Program $140,991
21.016 Equitable Sharing $133,000
15.557 Applied Science Grants $112,593
66.472 Beach Monitoring and Notification Program Implementation Grants $102,678
93.070 Environmental Public Health and Emergency Response $93,711
93.197 Childhood Lead Poisoning Prevention Projects, State and Local Childhood Lead Poisoning Prevention and Surveillance of Blood Lead Levels in Children $91,128
14.895 Jobs-Plus Pilot Initiative $87,063
97.042 Emergency Management Performance Grants $82,000
93.914 Hiv Emergency Relief Project Grants $69,207
93.558 Temporary Assistance for Needy Families $68,144
14.241 Housing Opportunities for Persons with Aids $57,714
93.940 Hiv Prevention Activities Health Department Based $51,943
97.106 Securing the Cities Program $37,947
93.354 Covid-19 Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response $36,190
17.278 Wioa Dislocated Worker Formula Grants $34,027
93.421 Strengthening Public Health Systems and Services Through National Partnerships to Improve and Protect the Nation�s Health $25,000
16.742 Paul Coverdell Forensic Sciences Improvement Grant Program $16,009
93.116 Project Grants and Cooperative Agreements for Tuberculosis Control Programs $14,250
15.530 Water Conservation Field Services (wcfs) $14,069
93.008 Medical Reserve Corps Small Grant Program $10,000
14.256 Neighborhood Stabilization Program (recovery Act Funded) $6,429
97.042 Covid-19 Emergency Management Performance Grants $4,880
16.710 Public Safety Partnership and Community Policing Grants $3,968
17.258 Wioa Adult Program $3,890
97.024 Emergency Food and Shelter National Board Program $2,646
14.218 Covid-19 Community Development Block Grants/entitlement Grants $172