Finding Text
2024-005 Improve Internal Controls Over Reporting Federal Agency: Department of the Treasury Award Name: 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 – Significant Deficiency Criteria: Under the requirements of the American Rescue Plan Act (ARPA) State and Local Fiscal Recovery Funds program, the Town must submit quarterly performance and evaluation reports reflecting accurate and complete financial information, including current period and cumulative expenditures, in accordance with program requirements and the Uniform Guidance. Reported expenditures should correspond to actual amounts expended in the entity’s general ledger for the reporting period. Condition: During testing of two quarterly performance and evaluation (P&E) reports, filed during fiscal year 2024, variances were identified in both current period and cumulative expenditures as compared to the general ledger detail. These variances were primarily due to timing differences. Specifically, the Town reported revenue replacement funds as current period expenditures upon appropriation and approval from the Town meeting in the P&E report, even though the corresponding actual expenditures in the general ledger occurred in a subsequent period. Cause: The Town did not have sufficient controls in place to ensure that expenditures reported on the P&E reports were aligned with the actual amounts expended and recorded in the general ledger for the reporting period. Effect: Reporting expenditures in the P&E report before they are actually incurred and recorded in the general ledger can result in inaccurate financial reporting to the federal awarding agency, reducing the reliability and transparency of the Town’s compliance reporting. Recommendation: The Town should develop and implement procedures to ensure that expenditures reported on quarterly performance and evaluation reports are based on actual amounts expended and recorded in the general ledger during the reporting period, rather than amounts approved or planned for future expenditure. Views of Responsible Official: Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.