Finding Text
Reporting Type of Finding - Material noncompliance and material weakness in internal control over compliance. Program: COVID-19 - Coronavirus Capital Projects Fund Assistance Listing Number: 21.029 Federal Agency: U.S. Department of Treasury Criteria - The grant agreement for the Coronavirus Capital Projects Fund requires the Organization to submit periodic expenditure reports that accurately reflect allowable program expenditures incurred during the reporting period in accordance with the terms and conditions of the award. The Organization is responsible for establishing and maintaining internal controls to ensure expenditures reported to the pass-through entity are complete, accurate, supported, allowable, and reported in the proper period.Condition - During our testing of reporting compliance, we noted that expenditure reports submitted by the Organization were not prepared in accordance with the requirements of the grant agreement. Specifically: • Certain expenditures were reported on a basis other than accrual accounting. • Certain construction expenditures were reported when construction contracts were executed rather than when the related work was performed and the costs were incurred. • Certain administrative costs were included on expenditure reports even though those costs were not eligible expenditures under the grant agreement. As a result, expenditure reports submitted to the grantor were materially inaccurate and did not accurately reflect allowable expenditures incurred during the reporting periods. Cause - The Organization did not maintain adequate internal controls over the preparation and review of grant expenditure reports to ensure reported expenditures were supported, allowable under the grant agreement, and reported in the appropriate reporting period. In addition, personnel responsible for preparing the reports did not have sufficient procedures in place to verify compliance with program reporting requirements prior to submission. Effect - Expenditures reported to the grantor were materially misstated. Amounts were reported in incorrect reporting periods and included certain costs that were not allowable under the grant agreement. Although the Organization ultimately used grant funds for eligible project purposes and no questioned costs were identified, the expenditure reports submitted to the grantor did not comply with the reporting requirements of the award. This resulted in material noncompliance with the Reporting compliance requirement and increased the risk that noncompliance would not be prevented, detected, or corrected on a timely basis. Questioned costs – None identified. While the Organization reported certain expenditures inaccurately and included certain costs not eligible for reporting under the grant agreement, we identified no questioned costs because grant proceeds were ultimately expended for allowable project purposes. Context - Reports submitted for 2024 included expenditures totaling $3,874,592 when only $2,481,415 was eligible to report. Recommendation - Management should strengthen controls over grant reporting by implementing procedures to ensure that: • Expenditures reported to the grantor are based on expenditures incurred during the reporting period. • Construction costs are reported when the related work is performed and costs are incurred, rather than when contracts are executed.• Expenditures included in reports are reviewed for allowability under the grant agreement. • All reports are independently reviewed and approved prior to submission to verify completeness, accuracy, and compliance with program requirements. Views of responsible official - Management agrees with the finding and plans to implement enhanced review and approval procedures over grant reporting, including reconciliation of reported expenditures to the accounting records, verification of expenditure allowability, and review of reporting requirements contained within the grant agreement before reports are submitted to the grantor.