FINDING 2024-001
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): CY2021
Compliance Requirement: Reporting
Audit Findings: Material Weakness, Other Matters
Repeat Finding
This is a repeat finding from the immediately prior audit report. The prior audit finding number was
2023-001.
Condition and Context
Recipients are required to submit quarterly or annually 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 more 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 quarterly reports were to
cover one calendar quarter and must be submitted to the Treasury by the last day of the month following
the end of the period covered.
The City submitted four P&E reports during the audit period; however, the internal controls in place
were not effective to prevent, or detect and correct, errors. As a result, errors in reporting were identified.
The current period and cumulative expenditures reported consisted of the amounts expended by the beneficiaries
who were awarded funds from the City, rather than total amounts expended to the beneficiaries,
resulting in current period expenditures and cumulative expenditures being incorrectly reported on three of
the four reports as follows:
Quarterly Report: October 1, 2023 to December 31, 2023
Current period expenditures were overstated by $666,417. Cumulative expenditures were
understated by $964,879.
Quarterly Report: January 1, 2024 to March 31, 2024
Current period expenditures were overstated by $860,312. Cumulative expenditures were
understated by $104,567.
Quarterly Report: April 1, 2024 to June 30, 2024
Current period expenditures were overstated by $104,567.
The lack of effective 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 or her delegate, as applicable, periodic reports
providing detailed accounting of the uses of funds, . . ."
2 CFR 200.1 states in part:
". . . Expenditures means charged made by a non-Federal entity to a project or program for
which a Federal award was received. . . .
(2) For reports prepared on a cash basis, expenditures are the sum of:
(i) Cash disbursements for direct charges for property and services;
(ii) The amount of indirect expense charged;
(iii) The value of third-party in-kind contribution applied; and
(iv) The amount of cash advance payments and payments made to subrecipients.
. . ."
Cause
The City's oversight process for filing the P&E reports for the period of October 1, 2023 to
September 30, 2024, did not detect errors in the P&E reports. The City's understanding was that the
expenditures in its report should be based on when the beneficiaries expended the funds and not when the
City disbursed the funds to the beneficiaries. The City officials did not understand the requirements until
the prior audit was finished, which was after multiple of these reports had already been submitted.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As such, the City did not report cumulative expenditures and current period expenditures
properly when filing the P&E reports for periods from October 1, 2023 to September 30, 2024.
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 develop policies and procedures to ensure the City
provides the Treasury with complete and accurate information as it relates to the City in its P&E reports.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.