FINDING 2024-005 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): FY 2024 Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context The County elected to receive the standard revenue loss allowance, allowing it to claim a total COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) allocation of $2,054,458 as revenue loss to use for government services. As such, all SLFRF program funds expended from January 1, 2024 to December 31, 2024, were under the revenue loss eligible use category. The U.S. Department of the Treasury (Treasury) determined that there are no subawards under this eligible use category, and that recipients' use of revenue loss funds would not give rise to subrecipient relationships as there is no federal program or purpose to carry out in the case of the revenue loss portion of the award. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the Treasury. The reporting periods, as well as the respective due dates, are based on the type of recipient and the recipient's 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 County was classified as a metropolitan county with a population below 250,000 residents that received an allocation of less than $10 million in 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. INDIANA STATE BOARD OF ACCOUNTS 22 CRAWFORD COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The County submitted the P&E report by April 30, 2024, as required during the audit period. Although one employee prepared the P&E report and another reviewed the entries, the system of internal controls was not effective in preventing, detecting, or correcting errors. The data submitted included amounts which were not supported by the County's records. For the 2024 annual P&E report, current and cumulative obligations and expenditures were each overstated by $311,286. The County did not accurately report the breakdown of obligations by project in its P&E report. While project-specific financial data was available in the County's internal ledger, it was not transferred or summarized in a way that met the annual reporting requirements. The lack of effective internal controls and noncompliance was a systemic issue 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). . . ." Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds, page 13, 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 Management's actions contributed to the noncompliance. The financial figures were modified to bypass submission system error messages, a process not supported by the County's records. Additionally, management misinterpreted reporting requirements, incorrectly assuming a project-level breakdown was not necessary for revenue replacement funds. INDIANA STATE BOARD OF ACCOUNTS 23 CRAWFORD COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 County did not report current and cumulative obligations and expenditures properly when filing the P&E report for the period April 1, 2023 to March 31, 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 County. In addition, not meeting the SLFRF reporting requirements by reporting erroneous data increases the likelihood that the public and the Treasury 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 the management of the County establish a system of internal controls and develop policies and procedures over the preparation and review of federal reports to ensure appropriate reviews, approval, and oversight take place. Additionally, management should develop policies and procedures to ensure that the County provides the Treasury with complete and accurate information for all reports. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.