Finding 1095568 (2022-012)

Finding 2022-012—Lack of Internal Controls and Noncompliance with Reporting Requirement – Emergency Rental Assistance Program (Repeat Finding 2021-010) FEDERAL AGENCY: U.S. Department of the Treasury ASSISTANCE LISTING NO: 21.023 FEDERAL PROGRAM NAME: Emergency Rental Assistance Program FEDERAL AWARD NUMBER: ERA0174, ERAE0225 FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Reporting QUESTIONED COSTS: $0 Condition: While performing a test over the reporting requirement for the Emergency Rental Assistance Program (ERA), the following was noted: • July 2021 monthly report for ERA2 was not submitted. • December 2021 monthly report for ERA2 was not timely submitted. • First Quarter report (January 2022 – March 2022) for ERA2 was submitted late. In addition, the County was not consistent in the reporting of expenditures on the quarterly reports. The expenditures were originally reported when the County spent the funds. However, beginning in the fourth quarter of 2021, the County began reporting expenditures when the subrecipient spent the funds rather than when the County spent the funds. This resulted in the following: • Two (2) of the four (4) quarterly report expenditure amounts reported did not match the supporting documents provided by the County. • Three (3) of the four (4) quarterly reports reviewed had supporting documentation that did not reconcile to other supporting documentation submitted to the U.S. Department of the Treasury. Cause of Condition: Policies and procedures have not been designed and implemented to ensure the County complies with federal laws and regulations and grant agreements. Effect of Condition: This condition resulted in noncompliance with grant requirements. Recommendation: OSAI recommends the County comply with federal laws and regulations and grant agreements by submitting required reports to the U.S. Department of the Treasury timely. In addition, OSAI recommends the County design and implement a system of internal controls to ensure the accuracy and completeness of information submitted. Management Response: Chairman of the Board of County Commissioners: Beginning in October of 2021, the U.S. Department of the Treasury changed the ERA1 and ERA2 reporting requirements. In fact, each quarter of 2021 had various reporting changes. The County changed the manner of reporting which did result in difficulty in reconciling. Previous reports had several changes and had to be re-reconciled and amended. Therefore, it was determined to change to reporting when the sub-recipient spent, rather than the county. The County contacted the U.S. Department of the Treasury, who stated any, and all reports should be corrected in the next reporting cycle, rather than retrospectively. The County agrees that some of the prior County Clerk’s records were not in proper order. The County has a new Clerk in place as of July 1, 2024, and is working diligently to improve processes and procedures to prevent this from occurring again in the future. Cleveland County takes the auditor's findings seriously and has already implemented several improvements in documentation, monitoring, and reporting practices. Cleveland County is working toward improvements for fiscal year 2025 and has reconciled billing to align with the contract scope of work. However, we recognize the need for documented internal controls and are committed to addressing all recommendations to ensure compliance and transparency in future programs. The County appreciates the constructive feedback and will continue to refine its processes to better serve its citizens. Criteria: GAO Standards – Section 2 – Establishing an Effective Internal Control System – OV2.23 states in part: Objectives of an Entity – Compliance Objectives Management conducts activities in accordance with applicable laws and regulations. As part of specifying compliance objectives, the entity determines which laws and regulations apply to the entity. Management is expected to set objectives that incorporate these requirements. 2 CFR § 200.303(a) Internal Controls reads as follows: The non-Federal entity must: 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).