Finding 1170826 (2024-002)

Finding 2024-002 (Significant Deficiency) AL# 21.027: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds, U.S. Department of Treasury Condition: The City’s control procedures for the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) requires the department personnel to authorize payment and the program manager to certify the expenditures to the CSLFRF program prior to being paid. The program manager did not approve four invoices prior to the expenditure being charged to the grant. Criteria: Per 2 CFR 200.303, the Non-Federal entity must establish and maintain effective internal controls over federal awards to ensure compliance with federal statutes, regulations and the terms and conditions of the awards. Questions Costs: None Context: During testing of grant expenditures, we identified 4 out of 21 items were missing the program manager certification prior to being charged to the grant program. All four invoices were approved at the department level and one of the invoices was subsequently reviewed by the department head. The expenditures were allowable under the CSLFRF program. The sample size was determined based upon guidelines provided by the AICPA which is not a statistically valid sample. Cause: Purchase orders are created that identify projects that are part of the CSLFRF program and expenditures coding is assigned at that time prior to the purchase. Once the invoice was approved by department personnel, the expenditures were applied to the assigned purchase order coding. Effect: Failure to follow established internal controls increases the risk of noncompliance with the grant requirements and processing unallowable costs towards the grant. Recommendation: We recommend the City review the processing of payments applied to the CLSFRF program to ensure program manager certification is complete prior to charging expenditures to the program. Views of Responsible Officials (Unaudited): The City concurs with the finding. Although the expenditures tested were allowable under the CSLFRF program and approved at the department level, the required program manager certification was not consistently documented prior to charging expenditures to the grant. The City acknowledges that this represents a deviation from established internal control procedures. Upon identification of this issue, Internal Audit worked with Accounts Payable and department personnel to address issues and made recommendations to correct the control gap. Additional review steps will be implemented within Accounts Payable to help ensure required approvals are obtained prior to payment processing. In addition, Accounting Services has developed a monitoring report to review CSLFRF expenditures and provide an additional level of oversight to verify that program manager certification is completed prior to charging expenditures to the grant. This monitoring serves as a secondary control to support compliance with grant requirements.