Finding Text
Finding 2023-002 – Internal Controls Over Reporting (Material Weakness)
Condition: The City did not report accurate expenditures during the year in its Project and Expenditure Quarterly Reports
for the uses of ARPA funding. The reports contained incorrect project amounts and expenditure classifications due to
internal control failures, including insufficient review by someone other than the preparer.
Criteria: Per 2 CFR 200.302(b)(3) and 2 CFR 200.328, recipients of federal funds are required to maintain accurate
financial records and report expenditures in accordance with federal award terms. Specifically, recipients of ARPA funding
are required to submit accurate quarterly Project and Expenditure Reports to provide transparency and ensure funds are
used in compliance with allowable purposes.
Cause: The inaccuracies resulted from a lack of sufficient internal controls over the reporting process.
Specifically:
No independent review was performed to validate the accuracy and completeness of the quarterly reports.
Documentation of the expenditure allocation process was not consistently maintained to support the
reported amounts.
Effect: The lack of accurate reporting undermines compliance with the reporting requirements of the federal award.
Although no unallowable costs were identified, the inaccuracies may necessitate correction of reported amounts in the
future.
Recommendation: We recommend that the City strengthen its internal controls over the reporting process by:
1. Implementing a formal review process where quarterly reports are reviewed and approved by a designated
individual other than the preparer.
2. Establishing a documented process for reconciling expenditures reported to the underlying accounting records
and federal award guidelines.
3. Providing training to staff responsible for the preparation and review of federal compliance reports to ensure
familiarity with reporting requirements.
Management’s Response: See Corrective Action Plan.