FINDING 2024-004 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): FY 2021 Pass-Through Entity: Indiana Department of Health 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 2023-004. Condition and Context Recipients are required to submit quarterly or annually 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 are allocated more than $10 million in COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF). As such, the P&E quarterly reports were to cover one calendar quarter and must be submitted to the Treasury by the last day of the month following the end of the period covered. INDIANA STATE BOARD OF ACCOUNTS 22 FLOYD COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The County's current policy and procedure for complying with reporting requirements is to have the Director of Operations prepare the P&E reports with assistance from his Administrative Assistant and then the President of the Board of County Commissioners certifies the P&E reports. The current internal control has been determined to be ineffective since the P&E reports do not agree with the County's financial records. The County submitted four P&E reports during the audit period; however, the errors as identified below were noted on all four reports. Quarterly Report: October 1, 2023 to December 31, 2023 • Current period obligations reported 8 projects with errors cumulatively totaling $846,032. • Current period expenditures reported 3 projects with errors cumulatively totaling $52,645. • Cumulative expenditures reported 19 projects with errors cumulatively totaling $1,142,929. Quarterly Report: January 1, 2024 to March 31, 2024 • Current period obligations reported 5 projects with errors cumulatively totaling $501,694. • Current period expenditures reported 3 projects with errors cumulatively totaling $159,815. • Cumulative expenditures reported 19 projects with errors cumulatively totaling $1,174,814. Quarterly Report: April 1, 2024 to June 30, 2024 • Current period obligations reported 5 projects with errors cumulatively totaling $580,935. • Current period expenditures reported 1 project with errors cumulatively totaling $44,288. • Cumulative expenditures reported 19 projects with errors cumulatively totaling $1,088,021. Quarterly Report: July 1, 2024 to September 30, 2024 • Current period obligations reported 3 projects with errors cumulatively totaling $291,992. • Current period expenditures reported 1 project with errors cumulatively totaling $144,863. • Cumulative expenditures reported 20 projects with errors cumulatively totaling $1,232,884. The lack of effective internal controls and noncompliance were systemic issues throughout the entire audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 23 FLOYD COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (a) Establish and maintain effective internal control over 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). . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, 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, . . ." Cause The County's oversight process for filing the P&E reports did not detect errors. The errors were the result of including expenditures from the incorrect time periods. 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 obligations, current period expenditures, and cumulative 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. Recommendation We recommended that management of the County strengthen its system of internal controls to provide for a segregation of duties in the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight are taking place. We also recommended the development of policies and procedures to ensure the County provides the Treasury with complete and accurate information for the P&E reports. INDIANA STATE BOARD OF ACCOUNTS 24 FLOYD COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.