FINDING 2025-003 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): FY2025 Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2024-004. Condition and Context Recipients are required to submit quarterly or annual Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its population, as well as the recipient's allocation amount. Information to be reported includes projects funded, expenditures, and contracts for the appropriate reporting period. The County was classified as a county with a population below 250,000 residents that received an allocation of less than $10 million in COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF). As such, the P&E report covering the period from April 1, 2024 to March 31, 2025, was required to be submitted to the Treasury by April 30, 2025. The P&E report was submitted April 30, 2025, as required; however, the information submitted did not match the County's ledgers for Total Period Expenditures. Total Period Expenditures were reported as $4,048,983. The ledger amount was $1,229,644, resulting in expenditures being overstated by $2,819,339. One person prepared and submitted the report with no review by an additional person. There were no internal controls in place to prevent, or detect and correct, noncompliance related to the P&E report. The lack of internal controls and noncompliance was a systemic issue throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 18 LAWRENCE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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 or her delegate, as applicable, periodic reports providing detailed accounting of the uses of funds, . . ." Cause The County's system of internal controls was not effective in detecting the errors noted in the Condition and Context above and did not allow for the appropriate supporting documentation to be retained for review. Effect Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, the County did not report current period expenditures properly when filing the P&E reports during the audit period. 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. In addition, not meeting the SLFRF reporting requirements increases the likelihood that the public will not have access to transparent and accurate information regarding expenditures of federal awards. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 19 LAWRENCE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the County design and implement a proper system of internal controls, including policies and procedures to ensure that effective internal controls are implemented over all grant compliance requirements for reporting. One person should prepare the report, and a second person, who is knowledgeable about the reporting requirement for the program, should review the report prior to submission. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.