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FINDING 2025-002 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Reporting Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): Account ID 20-1982-0-1-806 Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2024-001. Condition and Context The County was required to submit an annual Project and Expenditure (P&E) report to the U.S. Department of the Treasury (Treasury). The P&E report data to be submitted included, but was not limited to, current period and total cumulative obligations and current period and total cumulative expenditures. INDIANA STATE BOARD OF ACCOUNTS 15 GIBSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The County had not designed, nor implemented, a system of internal controls to ensure that the annual P&E report was complete and accurately submitted. The Grant Administrator prepared the annual P&E report based on reports provided by the County and then emailed the report to the County Auditor for review prior to submission. However, the internal control was not effective as the review of the annual P&E report was not compared to the County's ledger or accounting records. During a comprehensive review of the 2025 annual P&E report submitted to the federal portal, the annual P&E reported figures were not supported by the County's ledger and accounting records. The specific variances identified were as follows: The 2025 annual P&E report current expenditures were understated by $167,928. The 2025 annual P&E report cumulative expenditures were overstated by $60,845. The 2025 annual P&E report for current period obligations lacked supporting documentation to verify the reported numbers. These variances were discussed with County management, who stated they were already aware that the numbers submitted through the federal portal did not match their local financial records. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish 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 be in compliance with 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). . . ." Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds, page 13, states in part: ". . . 10. Reporting. All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. . . ." 31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds, . . ." INDIANA STATE BOARD OF ACCOUNTS 16 GIBSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause The Grant Administrator reported that, due to persistent error messages in the submission system, the financial figures were manually modified to enable successful submission without performing a formal reconciliation to the general ledger. In addition, County management failed to establish secondary review process, provide proper administrative oversight, or perform any verification of the portal entries against the County's accounting records prior to submission. Effect Without a proper system of internal controls in place that operated effectively, the County did not file an accurate annual P&E report as required under the federal award. As a result, material noncompliance occurred and remained undetected. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the County. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the management of the County establish a system of internal controls and develop policies and procedures over the preparation and review of federal reports to ensure appropriate reviews, approval, and oversight take place. Additionally, management should develop policies and procedures to ensure that the County provides the Treasury with complete and accurate information for all reports. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. INDIANA STATE BOARD OF ACCOUNTS 17