Finding Text
Information on the federal program: Federal Agency: Department of Commerce Pass-Through Entity: N/A – Direct Grant Federal Program: Economic Development Cluster (EDC) Assistance Listing Number: 11.307 Compliance Requirement: Reporting Audit Findings: Material Weakness, Noncompliance Criteria: The Department of Commerce requires semi-annual reporting and project expenditure reports to be completed. The SF-425 Federal Financial Report tracks expenditures and must be submitted semi-annually. Reports for the period ending March 31 are due by April 30, and reports for the period ending September 30 are due by October 31. Condition: An effective internal control system was not in place at the City to ensure compliance with requirements related to the reporting requirements for the Economic Development Cluster grants. Cause: The City does not have an effective system of internal controls in place to effectively review Economic Development Cluster semi-annual reporting data prior to submission to the Department of Commerce and to ensure the reports are accurate and submitted timely. Effect: The absence of formal review and approval controls over grant reporting and reimbursement requests increases the risk that inaccurate or untimely information may be submitted to the grantor and that federal funds may be requested in excess of allowable amounts. Questioned costs: There are questioned costs of $109,233. Context: The City is responsible for establishing and maintaining internal controls over compliance with federal grant requirements, including controls designed to ensure required financial reports are submitted timely and accurately and reimbursement requests include only eligible expenditures applicable to the reporting period. During our testing, Crowe noted that the City did not have formal segregation of duties or documented review and approval controls over the preparation and submission of semi-annual financial reports and project expense reimbursement requests. Specifically, the process did not include an independent review to verify the accuracy, completeness, and appropriate reporting period of amounts submitted prior to submission to the grantor. As a result, we identified one semi-annual Federal Financial Report (SF-425) that was submitted approximately three months after the required due date. Additionally, we identified that the city overclaimed $109,233 in federal reimbursement over the course of the grant. The overclaim occurred because the City included the cumulative project cost in a reimbursement request rather than only the portion of project costs applicable to the current reimbursement period, resulting in previously claimed expenditures being included in the reimbursement calculation. Identification as a repeat finding, if applicable: No. Not a repeat finding. Recommendation: We recommend the City strengthen its internal controls over federal grant reporting and reimbursement requests by establishing formal, documented review procedures for the preparation, review, approval, and submission of required reports and reimbursement requests. These procedures should clearly assign responsibilities among appropriate personnel and incorporate segregation of duties, where practicable, between he preparation and approval functions. Additionally, the City should establish a process to track applicable grant reporting deadlines and reimbursement activity throughout the grant period to promote timely submissions and prevent duplicate or excess reimbursement requests. Views of responsible officials and planned corrective actions: Management acknowledges the finding. See management’s corrective action plan attached to this audit report.