Finding Text
Documentation of Written Internal Controls Over Compliance Required by Uniform Guidance Major Programs Impacted: U.S. Department of Transportation – Federal Transit Administration (FTA): 20.507; Federal Transit Formula Grant; 20.933 National Infrastructure Investment; Federal Highway Administration (FHWA) Passed Through Louisiana Department of Transportation of Development and Highways - 20.205 Highway Planning and Construction; U.S. Federal Aviation Administration - 20.106 Airport Improvement Program; U.S. Department of Treasury - 21.027 Coronavirus State and Local Fiscal Recovery Funds; U.S. Department of Health and Human Services - 93.600 Head Start Questioned Costs: None Grant No(s): All Associated Reported on SEFA Criteria: Pursuant to 2 CFR § 200.303(a), the non-Federal entity must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in Standards for Internal Control in the Federal Government issued by the Comptroller General of the United States or the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The City-Parish did not consistently maintain documentation to support internal controls over compliance with certain direct and material compliance areas related to Federal awards. While some documentation of control activities existed, documentation was incomplete across all applicable compliance requirements and departments responsible for administering Federal programs. Specifically, documentation demonstrating the design and operation of controls over certain compliance areas was not readily available or did not fully address all relevant requirements. As a result, sufficient evidence of the City-Parish’s internal control over compliance was not consistently maintained. Universe/Population: The population consisted of internal control activities over compliance for direct and material compliance requirements identified for the Federal programs selected for audit in accordance with Uniform Guidance (2 CFR Part 200, Subpart F). This included control processes and related documentation maintained by departments responsible for procurement, program administration, financial reporting, and other functions supporting compliance with Federal statutes, regulations, and terms and conditions of Federal awards. Effect: The lack of complete and consistent documentation of internal controls over compliance increases the risk that noncompliance with Federal statutes, regulations, and award requirements may occur and not be prevented or detected in a timely manner. In addition, the absence of sufficient documentation limits the City-Parish’s ability to demonstrate compliance during audit or oversight activities, which could result in questioned costs, audit findings, or increased scrutiny from Federal awarding agencies and pass-through entities. Cause: The City-Parish’s internal control processes over Federal award compliance were not fully formalized across departments responsible for administering Federal programs. Specifically, while certain controls were in place, management did not establish clear, organization-wide expectations for documenting the design and operating effectiveness of controls over all direct and material compliance requirements. In addition, responsibilities for maintaining control documentation were decentralized, and sufficient oversight and monitoring procedures were not in place to ensure completeness and consistency of documentation across all compliance areas. As a result, documentation practices varied by department, and not all applicable compliance requirements were adequately documented. Recommendation: We recommend that management strengthen internal control documentation processes across all departments supporting Federal programs to ensure compliance with 2 CFR § 200.303. Specifically, management should: • Establish and document formal policies and procedures that clearly define internal controls over each applicable compliance requirement for Federal programs; • Ensure that all departments responsible for Federal program administration consistently document the design and operation of key controls over compliance; • Implement a centralized or coordinated approach for maintaining internal control documentation to promote completeness and consistency across the organization; • Perform periodic reviews to verify that documentation is complete, current, and aligned with applicable Federal requirements; and • Provide training to relevant personnel to reinforce expectations for documenting internal controls in accordance with Uniform Guidance and recognized frameworks (e.g., COSO or Green Book). Strengthening documentation practices will enhance the entity’s ability to demonstrate compliance, support audit requirements, and reduce the risk of noncompliance with Federal award requirements. Views of Responsible Officials:The EBR Head Start Program follows the established financial policies, procedures, and approval processes administered through the City of Baton Rouge and Parish of East Baton Rouge. EBR Head Start does not maintain a separate set of finance procedures independent of the City-Parish. Rather, the program operates within the existing City-Parish framework. These processes include the review, approval, and monitoring of activities necessary to support compliance with applicable Federal requirements. The finding identified an opportunity for the Head Start Program to demonstrate how it applies and maintains evidence of these existing controls within the department.procedures, identifying and maintaining required compliance documentation, establishing consistent record-retention practices, periodically reviewing documentation for completeness and accuracy, providing guidance to appropriate staff, and implementing any additional controls identified as necessary to comply with 2 CFR Part 200.303.