Finding 23221 (2022-001)

Finding 2022-001: Allowable Costs/Activities Allowed Federal Award and Specific Award Identification: U.S. Environmental Protection Agency Clean Water State Revolving Fund Cluster - Assistance Listing # 66.458 Drinking Water State Revolving Fund Cluster - Assistance Listing # 66.468 Criteria: Proper internal controls over allowable costs and allowable activities include the maintenance of detailed records that provide for easy reconciliation of supporting invoices to amounts reported as expenditures of federal awards for each federal program. Statement of Condition: The City received awards under two federal programs - the Clean Water State Revolving Fund Cluster and the Drinking Water State Revolving Fund Cluster ? both of which were passed through the Illinois Environmental Protection Agency (?IEPA?). The funds were to be used for two projects occurring simultaneously. One was the replacement of water mains and lead service lines in the City and the other was for sewer system improvements. While supporting invoices and other necessary documentation, which we examined, were provided to the IEPA who approved disbursement under the specific federal programs, the City was unable to provide us with a detailed listing of which invoices related to which project. Cause The recordkeeping issues were a result of the City not summarizing and organizing the detailed information provided to the State of Illinois for reimbursement purposes in a manner that was readily auditable by federal program. Effect The specific invoices comprising federal expenditures under each of the two federal programs could not be readily determined from the documentation maintained by the City. While invoices supported the total expenditures of the two federal programs, there is a risk that costs intended to be paid for by one federal program could be paid for by the other in error. Questioned Costs None identified. Recommendation We recommend that the City make the necessary changes with their existing accounting system and procedures to ensure that expenditures for each award are supported by a detailed listing of invoices that total the program expenditures reported on the schedule of expenditures of federal awards. Management Response See corrective action plan.