Finding Text
2025-017 Controls Over SRF Reimbursement Requests ALN Title: Drinking Water State Revolving Fund ALN Number: 66.468 Pass-through Entity: Montana Department of Natural Resources and Conservation Condition: The City did not have adequate internal controls over the preparation, review, reconciliation, and timely submission of SRF reimbursement requests. Context: As part of our audit of the SRF program, we tested reimbursement requests and related supporting documentation, including the City's project tracking schedule and allocation of project costs among SRF, ARPA, and local funding sources. We noted the following: • $19,052 of engineering costs were included in both an ARPA funding request and an SRF reimbursement request. DNRC identified the duplicate request, and the City subsequently worked with DNRC to correct the request by replacing the duplicated costs with other eligible project expenditures. We verified the replacement expenditures were allowable, within the applicable period of performance, and were not reimbursed from another funding source. • Approximately $880,440 of eligible project expenditures incurred between February and May 2025 were not initially submitted for SRF reimbursement until October 2025. The reimbursement request required subsequent correction related to the duplicate funding issue and was resubmitted in January 2026. Criteria: The City should maintain adequate internal controls over federal reimbursement requests to ensure expenditures are properly supported, allowable, allocated to the appropriate funding source, and not submitted for reimbursement from more than one funding source. Controls should also provide for periodic review of unreimbursed expenditures and timely preparation, review, and submission of reimbursement requests. Effect: The lack of adequate controls resulted in $19,052 being submitted for reimbursement from two funding sources and significant eligible project costs remaining unreimbursed for an extended period. DNRC identified the duplicate request before duplicate reimbursement occurred, and the City subsequently corrected the requests. We identified no questioned costs. However, these conditions increase the risk that reimbursement requests could be inaccurate, duplicated, unsupported, or not submitted timely. Cause: The City did not have formal procedures to reconcile project expenditures and funding allocations among the SRF program, ARPA, and other funding sources or to periodically identify and submit eligible unreimbursed expenditures. Recommendation: We recommend the City establish procedures over SRF reimbursement requests. Procedures should require monthly review and submission of eligible unreimbursed expenditures, reconciliation of expenditures to the project tracking schedule and other funding sources, and documented independent review and approval before submission. The review should verify that costs are eligible, properly supported, assigned to the appropriate funding source, and have not previously been submitted for reimbursement.