Finding Text
Federal Program 23.002 - Appalachian Area Development Award Number ARC-22699 Federal Agency Appalachian Regional Commission (ARC) Compliance Requirement Matching Type of Finding Internal Control over Compliance - Significant Deficiency Compliance - Noncompliance Questioned costs None Criteria Per 2 CFR §200.306, federal awards may require non-federal entities to contribute a specific percentage of matching funds. ARC grant 23.002 requires a minimum match of 66.9456%. Internal controls should be designed to ensure compliance with such requirements prior to requesting reimbursement. Condition During testing of the ARC grant 23.002, we noted the City of Batesville's initial reimbursement request included ARC charges exceeding the allowable federal share by $26, 180, representing 1.6426% of total allocable expenditures for the year. The overstatement resulted in a cumulative match percentage below the required 66.9456%. The error was identified by the State oversight agency prior to disbursement, and the City subsequently revised Request #4 to bring the overall match into compliance. No federal funds were improperly drawn. Cause The City's internal controls over grant reimbursement requests did not include sufficient review procedures to ensure compliance with federal match requirements prior to submission. The error was not detected internally and was instead identified by the State. Effect Although the error was corrected· before reimbursement and no questioned costs resulted, the lack of internal detection indicates a control deficiency that could lead to future noncompliance or improper use of federal funds if not addressed. Recommendation We recommend the City strengthen its internal controls over grant reimbursement requests by implementing formal review procedures to verify compliance with federal match requirements before submission. This may include checklist protocols, supervisory sign-off, or automated validation tools. Views of Responsible Officials Management concurs with the finding. The City acknowledges that the initial reimbursement request exceeded the allowable federal share and appreciates the State's oversight in identifying the issue prior to disbursement. Moving forward, the City will implement a formal review process for reimbursement submissions, including supervisory approval and automated checks to ensure compliance with match requirements. Staff will also receive training on ARC match calculations and documentation standards.