FINDING 2023-004
Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Reporting
Federal Agency: Department of the Treasury
Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds
Assistance Listings Number: 21.027
Federal Award Number and Year (or Other Identifying Number): 2023
Compliance Requirement: Reporting
Audit Findings: Material Weakness, Other Matters
Condition and Context
Recipients are required to quarterly or annually submit Project and Expenditure (P&E) reports to
the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates,
are based upon type of recipient and its population, as well as the recipient's allocation amount. Information
to be reported includes projects funded, expenditures, and contracts for the appropriate reporting period.
The City was classified as a metropolitan city with a population below 250,000 residents that
received an allocation of less than $10 million in COVID-19 - Coronavirus State and Local Fiscal Recovery
Funds (SLFRF). As such, the initial P&E report, covering the period from March 3, 2021 to March 31, 2022,
was required to be submitted to the Treasury by April 30, 2022. The subsequent annual reports are to
cover one calendar year and must be submitted to the Treasury by April 30 each year.
The City submitted one P&E report during the audit period; however, the internal controls in place
were not effective and did not prevent, or detect and correct, errors. As a result, errors in reporting were
identified. The total cumulative expenditures and current period expenditures were incorrectly reported and
were overstated in the amounts of $780,740 and $308,766, respectively, based on the City's financial
records.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"The non-Federal entity must:
(a) 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). . . ."
Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page
10, states in part:
". . . 10. Reporting. All recipients of federal funds must complete financial, performance, and
compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be
reported on a cash or accrual basis, as long as the methodology is disclosed and consistently
applied. Reporting must be consistent with the definition of expenditures pursuant to
2 CFR 200.1. Your organization should appropriately maintain accounting records for
compiling and reporting accurate, compliant financial data, in accordance with appropriate
accounting standards and principles. . . ."
31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of
performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the
uses of funds, . . ."
Cause
The City's management did not have properly designed internal controls in place to review reports
prior to submission. Due to the lack of a proper oversight process for filing the P&E report for the period
April 1, 2022 to March 31, 2023, the errors note in the Condition and Context were not detected.
Effect
Without the proper implementation of an effectively designed system of internal controls, including
policies and procedures that provide segregation of duties and additional oversight as needed, the internal
control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance.
As such, the City did not report total cumulative expenditures and current period expenditures
properly when filing the P&E report for the period April 1, 2022 to March 31, 2023.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the City.
In addition, not meeting the SLFRF reporting requirements increases the likelihood that the public
will not have access to transparent and accurate information regarding expenditures of federal awards.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the City strengthen its system of internal controls to provide
for a segregation of duties in the preparation and review of federal reports to ensure appropriate reviews,
approvals, and oversight are taking place. We also recommended the development of policies and
procedures to ensure the City provides the Treasury with complete and accurate information for the P&E
report.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.