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Finding 2024-004: Improve Internal Controls Over Reporting Federal Program(s) Information Federal Agency: Department of the Treasury Award Name: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Award Year: 2024 Compliance Requirement: Reporting Type of Finding - Compliance Internal Control over Compliance – Material Weakness Criteria or Specific Requirement Under the American Rescue Plan Act (ARPA) State and Local Fiscal Recovery Funds (SLFRF), the Town is required to submit accurate and complete quarterly performance and evaluation reports in accordance with program requirements. Amounts reported, including current period and cumulative expenditures, must be supported by the entity’s general ledger and any variances be explained. When electing to calculate revenue loss rather than applying the standard $10 million allowance, the recipient must maintain adequate support for the calculation and ensure the amounts reported are accurate and supported. Recipients are also required to maintain effective internal controls, including documented review of reports prior to submission. Condition and Context During our audit, we sampled two quarterly performance and evaluation reports submitted for the ARPA program and identified discrepancies in both current period and cumulative expenditures reported as compared to the amounts recorded in the general ledger detail. Further, there was no evidence of a documented, independent review of the reports prior to their submission to the agency. Additionally, the Town elected to calculate revenue loss using the Treasury’s revenue loss formula rather than taking the standard one-time $10 million allowance. The underlying documentation provided to support the Town’s revenue loss calculation did not agree to the amounts reported on the quarterly performance and evaluation reports. The discrepancies resulted from issues in the original report query used to build the calculation and from the Town not maintaining reports used to build the calculation. Cause The Town did not maintain effective internal controls over the reporting process to ensure reported expenditures and revenue loss amounts are accurate and supported by underlying accounting records. There were no formal procedures in place for independent review of the reports prior to submission and supporting records for the revenue loss calculation were not properly maintained. Effect or Potential Effect Inaccurate reporting and lack of sufficient documentation could lead to misstatements in federally required reports and increase the risk of administrative noncompliance. No questioned costs are reported as the Town did not overclaim lost revenue amounts and the requirement is administrative in nature. Recommendation The Town should establish and implement formal procedures to ensure quarterly reports submitted to the federal agency are reconciled to the general ledger, subject to a documented independent review, and supported by retained source documentation. In addition, we recommend the Town maintain all underlying records used in the calculation of revenue loss for audit and reporting purposes and adjust performance and evaluation reports on a prospective basis to reflect appropriate amounts. Views of Responsible Official See corrective action plan included herein.