Finding Text
Improve Internal Controls Over Reporting and Period of Performance Federal Program(s) Information : Federal Agency: U.S. Department of Treasury Award Name: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Award Year: 2021 Compliance Requirement: Reporting, Period of Performance Type of Finding: Compliance Internal Control Over Compliance – Significant Deficiency Criteria or Specific Requirement: Recipients of State and Local Fiscal Recovery Funds are required to submit complete, accurate, and supported Project and Expenditure Reports in accordance with U.S. Department of the Treasury reporting requirements. Effective internal controls over compliance should ensure that information reported to the Federal agency is supported by underlying accounting records and is subject to an independent review prior to submission. Pursuant to 2 CFR §200.303, non-Federal entities must establish and maintain effective internal control over Federal awards that provides reasonable assurance of compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, recipients were required to obligate funds by December 31, 2024 and report obligations on their Project and Expenditure Report. Recipients must maintain adequate supporting documentation demonstrating that funds reported as obligated as of December 31, 2024, met the applicable Treasury requirements and were supported by executed contracts, purchase orders, subaward agreements, or other legally binding commitments. Condition and Context: The Town was required to submit an annual Project and Expenditure Report during the fiscal year. During testing of the report, we were unable to materially reconcile the cumulative obligations reported as of December 31, 2024, to the Town’s underlying supporting documentation and accounting records. In addition, we noted that the same individual was responsible for both the preparation and submission of the report. No documented supervisory review was performed prior to submission. Accordingly, adequate segregation of duties and review controls over the reporting process had not been established. Cause: Management had not implemented formal procedures to ensure reported amounts were reconciled to supporting records prior to submission and had not established a review process providing adequate segregation of duties over Federal reporting activities. Effect or Potential Effect: Reported information submitted to the U.S. Department of the Treasury may be inaccurate, incomplete, or unsupported. Without adequate documentation supporting obli+B2gations as of December 31, 2024, the Town cannot demonstrate compliance with Treasury’s obligation requirements. Consequently, expenditures associated with unsupported obligations may have been improperly charged to the award. The lack of independent review increases the risk that reporting errors, omissions, or unsupported amounts could occur and remain undetected, potentially resulting in noncompliance with Federal reporting requirements. Questioned Costs: No questioned costs are reported. Identification as a Repeat Finding: This is a repeat of finding 2024-001. Recommendation The Town should establish formal reporting procedures requiring reconciliation of all amounts reported to supporting accounting records and other relevant documentation prior to submission, as well as retention of documentation supporting all reported balances, including cumulative obligations and expenditures. An independent supervisory review of each report prior to submission should be performed to verify completeness, accuracy, and consistency with underlying records.