Type of finding: Federal Award Situation: Material weakness; compliance with federal regulations. Program: ALN: 97.036 Program: Disaster Grants – Public Assistance Disaster Grants – Public Assistance Compliance Requirements: Reporting Prior-Year(s) Audit Finding(s): 2024-005, 2023-004, 2022-006 Questioned Costs: Not determined. Condition: The Municipality’s staff was unable to provide officially prepared and certified reports supporting compliance with the filing and submission requirements for reports and financial information, as established by federal award and regulatory agreements. Similarly, reconciliations were not provided between the information used to prepare the required and submitted reports and the formal data recorded in the Municipality’s official accounting system. Due to these conditions, compliance with the reporting requirements established by the federal grantor and effectiveness of related internal controls could not be verified. Context: The Municipality is required to submit quarterly progress reports to the state for each individual approved project worksheet. These progress reports consist of 10 questions that among other things report on the total amount of expenses incurred up to the reporting period, the estimated final cost of the project, percentage of completion, scope of work completion date, period of performance and the name and user category of the person that completed the report. As of June 30, 2025, the Municipality had 154 projects that were required to submit quarterly progress reports. Although the Municipality submitted to us the summary of these submitted reports, in excel, as they were extracted from the reporting platform, the Municipality did not submit for our review the individual reports, nor the accounting records that reconcile to these reports. Criteria: The state is required to make an accounting of eligible costs. Similarly, the subrecipient must make an accounting to the state. In submitting the accounting, the entity is required to certify that reported costs were incurred in performance of eligible work, that the approved work was completed, that the project in in compliance with the provisions of the State Agreement, all grants conditions were met, and the provisions for that project were made in accordance with the applicable payment provisions. Also, as established in the 2 CFR Section 200.302 (a) of the Uniform Guidance, the non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, 2 CFR Section 200.403, states that otherwise authorized by statue, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity and be adequately documented. Cause: There is a lack of adequate knowledge and training among personnel assigned to the management and preparation of reports required by this federal award. Additionally, the Municipality did not demonstrate, nor did it provide evidence, that it has designed and implemented an adequate system of procedures and internal controls to monitor the activity, filing, and custody of reports, as required by the federal award and the pass-through entity. These deficiencies limit the Municipality’s ability to document and support compliance with the reporting requirements. Effect: These conditions expose the program to noncompliance with the reporting requirements established in the grant agreement. Furthermore, the Municipality may be at risk of the grantor questioning the allowability and use of federal funds. Auditor’s recommendation: The personnel or Department responsible should identify, compile, and retain all reports required under the grant agreement, including reconciliation with the Municipality’s official accounting records and subsidiary ledgers. Additionally, it is essential for the Municipality to develop, document, and implement a comprehensive training program, along with written guidelines and procedures, for all personnel involved, directly or indirectly, in the management of these federal funds. Views of Responsible officials and Corrective Actions: In response to the Auditor’s recommendations and as corrective action, the staff responsible or department will locate and document all required reports that were filed in accordance with the grant agreement requirements, including reconciliations with the Municipality’s official accounting subsidiary ledgers. Furthermore, the Municipality will design, document, establish, and provide the necessary training, along with written guidelines and procedures, to all personnel who work directly or indirectly with the management of these federal funds. In addition, the Municipality will implement periodic reviews and monitoring mechanisms to ensure ongoing compliance with reporting requirements and the accuracy of financial information related to federal funds. Audit Status: Unresolved