Finding Text
Federal Agency: U.S. Department of Homeland Security (DHS), Federal Emergency Management Agency. (FEMA) Federal Program: Hazard Mitigation Grant Program (HMGP) Assistance Listing Number: 97.039 Federal Award Identification Number and Year: FEMA-4506-DR-PA - 2021, FEMA-4618-DR-PA - 2021, FEMA-4618-DR-PA - 2021 Pass-Through Agency: Pennsylvania Emergency Management Agency (PEMA) Pass-Through Number(s): PEMA-2023-060, C950004170, C950004177 Award Period: August 5, 2021 to August 5, 2027, September 10, 2021 to September 10, 2025 and September 10, 2021 to January 8, 2026 Finding Type: Significant Deficiency in Internal Control Over Compliance - Allowable Activities and Allowable Costs/Cost Principles Criteria: 2 CFR § 200.303 requires non-Federal entities to establish and maintain effective internal control over federal awards that provides reasonable assurance the entity is managing the award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Internal controls should include documented review and approval procedures sufficient to demonstrate control performance. Condition : Testing of nine federal expenditures disclosed that the invoices contained electronic annotations and comments; however, the documentation did not include a clear indication of supervisory review and approval. Management explained that the annotations were part of its review process, but the records maintained did not clearly evidence that review and approval had been completed prior to payment. Consequently, management was unable to demonstrate the operation of the review and approval control through documentation maintained with the expenditure records. Context : During testing of federal expenditures selected from the HMGP expenditure population, nine out of nine invoices contained electronic annotations and comments but did not include a clear indication of management review and approval. Management explained that the annotations were part of its review process and subsequently demonstrated that review procedures had been performed prior to payment. However, the documentation maintained with the expenditure records did not clearly evidence completion of the review and approval control. Cause : The Township's procedures did not require the retention of documentation clearly evidencing supervisory review and approval of grant-related expenditures. As a result, evidence of control performance was not consistently documented in a manner readily available for verification. Effect or Potential Effect : Without maintaining clear documentation of supervisory review and approval, the Township cannot demonstrate that expenditures charged to federal programs were reviewed in accordance with established control procedures. This increases the risk that unallowable, inaccurate, or unauthorized expenditures could be processed and charged to federal awards without timely detection. Questioned Costs : None identified. Repeat Finding : No Recommendation: We recommend the Township should strengthen its documentation retention procedures to ensure evidence of supervisory review and approval is clearly documented and maintained with supporting expenditure records. Documentation should demonstrate who performed the review, when the review was completed, and that approval was granted prior to payment. Electronic review processes should include a formal approval notation or workflow that can be readily retained and provided for audit purposes. Views of Responsible Officials and Corrective Action Plan There is no disagreement with the audit finding. Management understands the importance of reviewing and approving invoices prior to payment. Management believes that the invoices were reviewed and approved as evidenced by the annotations and comments. However, management recognizes the importance of clearly noting the approval of the invoice. The Township implemented policies and procedures to ensure that the Township will comply going forward. These policies include review of invoices and clear documentation of approval.