Finding 26251 (2022-002)

Significant Deficiency
Requirement
ABG
Questioned Costs
-
Year
2022
Accepted
2023-04-26
Audit: 22994
Auditor: Eide Bailly LLP

AI Summary

  • Core Issue: The Cooperative misapplied FEMA equipment rates and duplicated vehicle usage costs in reimbursement claims.
  • Impacted Requirements: Internal controls over compliance were inadequate, violating 2 CFR 200.303(a) regarding effective management of federal awards.
  • Recommended Follow-Up: The Cooperative should enhance its tracking process for equipment costs to ensure accurate future reimbursement submissions.

Finding Text

2022-002 Department of Homeland Security, State of South Dakota Office of Emergency Management, 97.036, 4440DR-SD-116955 Disaster Grants ? Public Assistance Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Matching Significant Deficiency in Internal Control over Compliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: Equipment costs were claimed for reimbursement and match that used the 2019 FEMA equipment rates for combination rate vehicles instead of the applicable 2017 FEMA equipment rates for combination rate vehicles. In addition, the Cooperative submitted equipment costs for reimbursement and match that duplicated usage of certain vehicles. Cause: The Cooperative recognized that 2017 FEMA equipment rates applied to the project, but failed to update the applied 2017 FEMA equipment rates to vehicles with more than one rate (i.e. truck with bucket attachment). An incorrect formula in the Cooperative?s summary of equipment costs spreadsheet caused some equipment costs to be erroneously duplicated. Effect: The Cooperative?s control process and procedures did not detect or correct the errors. Concerning the amount of equipment costs relating to incorrect FEMA rates, the Cooperative initially claimed an additional $1,431 for reimbursement and 25% match of $477. Concerning the duplication in usage costs of equipment, the Cooperative initially claimed an additional $7,956 for reimbursement and 25% match of $2,652. Once the errors were identified, a revised claim was calculated and submitted for reimbursement. Questioned Costs: No questioned costs over $25,000. Context/Sampling: Nonstatistical sampling was used. Sample size was 60 transactions which accounted for $681,043 out of $1,908,126 of federal program expenditures of which $1,431,095 was submitted for reimbursement and $477,032 was considered the 25% matching portion. Repeat Finding form Prior Year: No Recommendation: We recommend the Cooperative review the process over tracking equipment costs to ensure accuracy of future costs submitted for reimbursement. Views of Responsible Officials: Management agrees with the finding.

Corrective Action Plan

Finding 2022-002 Federal Agency Name: Department of Homeland Security & Emergency Management Program Name: Disaster Grants ? Public Assistance Federal Financial Assistance Listing # 97.036 Finding Summary: Equipment costs were claimed for reimbursement and match that used the 2019 FEMA equipment rates for combination rate vehicles instead of the applicable 2017 FEMA equipment rates for combination rate vehicles. In addition, the Cooperative submitted equipment costs for reimbursement and match that duplicated usage of certain vehicles. Responsible Individuals: Jon Wunder, Chief Financial Officer and Jay Cleveland, Accounting Manager. Corrective Action Plan: The Cooperative met the threshold for a single audit for the first time in several years. To make the process as efficient as possible, the Cooperative developed an excel template that summarizes the Cooperative?s accounting data into formats that are summarized for FEMA submission, review and audit. Once the errors were identified by the auditors, a revised claim was calculated and submitted for reimbursement. The Cooperative used this template for two FEMA submissions in 2022 and continues to refine the output measured by input from reviewers and auditors. In addition, the Cooperative will develop a written process that details the preparation and review of the excel template and submitted costs. Anticipated Completion Date: June 30, 2023

Categories

Allowable Costs / Cost Principles Cash Management Significant Deficiency Equipment & Real Property Management Matching / Level of Effort / Earmarking

Other Findings in this Audit

  • 602693 2022-002
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
10.850 Rural Electrification Loans and Loan Guarantees $128.76M
97.036 Disaster Grants - Public Assistance (presidentially Declared Disasters) $1.43M