Finding 1096675 (2024-009)

2024 - 009 Reporting - Capital Expenditures (2023-005 and 2022-008) Federal Agency: U.S. Department of Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds (SLFRF) Assistance Listing Number: 21. 027 Federal Award Identification Number and Year: Pub. L. No. 117-2-2021 Award Period: 5/10/2021 - l 2/3 l /2026 Type of Finding • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or specific requirement: According to §200.303 Internal controls of 2 CFR Part 200, the recipient and subrecipient must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. According to the 2022 Final Rule, for projects with total expected capital expenditures of $1 million or greater, recipients must complete and meet the substantive requirements of a written justification for their capital expenditure. Such written justification must include the following elements: (i) Describe the harm or need to be addressed; (ii) Explain why a capital expenditure is appropriate; and (iii) Compare the proposed capital expenditure to at least two alternative capital expenditures and demonstrate why the proposed capital expenditure is superior. Condition: During our testing, we noted two of the two written justifications did not include all the elements outlined in the 2022 Final Rule. Questioned costs: None Context: During our testing, it was noted that the written justifications for the WECH Kitchen and Gibson Medical Respite projects did not compare the proposed capital expenditure to at least two alternative capital expenditures and demonstrate why the proposed capital expenditure is superior. Total federal expenditures for WECH Kitchen and Gibson Medical Respite as of June 30, 2024 are $1,484,411 and $6,236,193, respectively. Cause: Management oversight. The City did not follow the requirements of a written justification for capital expenditures as outlined in the 2022 Final Rule. Effect: The auditor noted instances of noncompliance. Noncompliance results in inaccurate reporting. Recommendation: We recommend the City update the written justifications to include all the elements outlined in the 2022 Final Rule. Management Response: The City concurs with the finding. The City's Grant Administrator will work with the Department of Health, Housing and Homeless and the Department of Municipal Development to adequately document the comparison of capital expenditure options and demonstrate the superiority of the chosen capital project in the final written justifications. Timeline and Responsible Position: March 2025 - Grant Administrator