Finding Text
In accordance with 2 CFR 200.303, the City is required to establish, document, and maintain effective internal control over Federal awards to provide reasonable assurance that Federal awards are managed in compliance with Federal statutes, regulations, and the terms and conditions of the award. In addition, 2 CFR §200.334 requires recipients and subrecipients to retain Federal award records, including financial records, supporting documentation, and other records pertinent to the Federal award, for the required retention period. For property and equipment, this period includes the entire holding period of the asset and extends to three years after final disposition. During the year, the City reported Federal expenditures for the Highway Planning and Construction Cluster, Assistance Listing Number 20.205, related to three infrastructure projects for which the Ohio Department of Transportation paid costs on behalf of the City. The City did not maintain adequate records related to these three projects, including sufficient supporting documentation to demonstrate the nature of the projects, the amounts paid on behalf of the City, and the City’s review and reconciliation of the on-behalf activity reported for the Federal program. Failure to maintain complete records for Federal award activity represents noncompliance with Uniform Guidance record retention and internal control requirements and results in a material weakness in internal control over compliance. Because the City did not maintain adequate documentation for the three infrastructure projects, Federal expenditures reported on the Schedule of Expenditures of Federal Awards may be misstated, project activity may not be adequately supported, and compliance with applicable Federal requirements may not be demonstrated. Without adequate supporting documentation, management and auditors may be unable to verify the completeness, accuracy, and allowability of the on-behalf expenditures reported. We recommend the City establish and implement formal internal control procedures to obtain, review, reconcile, and retain documentation for all Federal award activity paid on behalf of the City by the Ohio Department of Transportation. Such procedures should include identifying all applicable infrastructure projects, obtaining support for project costs and on-behalf payments, reconciling those amounts to the Schedule of Expenditures of Federal Awards, and maintaining documentation in accordance with the Uniform Guidance record retention requirements. The City should also assign responsibility to appropriate personnel to periodically monitor on-behalf activity, document the review performed, and ensure records are complete, accurate, and available for audit.