FAC Explorer

Finding 3083 (2022-005)

Material Weakness Repeat Finding
Requirement
I
Questioned Costs
-
Year
2022
Accepted
2023-12-01
Audit: 5029
Organization: City of West Haven, Ct (CT)
Auditor: Pkf O'Connor Davies LLP

AI Summary

  • Core Issue: Funds were embezzled through fictitious vendors linked to the Coronavirus Relief Fund, violating internal controls.
  • Impacted Requirements: The City failed to follow established procedures for grant monitoring and reporting, leading to fraudulent expenditures being reported.
  • Recommended Follow-Up: Ensure due diligence on vendors, have knowledgeable staff review invoices, and reinforce monitoring by the Grants Coordinator.

Finding Text

Criteria The City must establish proper internal controls to ensure that expenditure of federal grant monies is in compliance with the grant requirements and for actual goods or services provided. Condition Funds were embezzled from the City using fictitious vendors established by the City employees who were managing the Coronavirus Relief Fund (CRF) program. The invoices for the fictitious vendors were charged to a line item designated for the CRF program. The grant reporting to the State for the CRF program was performed by the Finance Director and not by the Grant Coordinator Department. The original reporting of the specific disbursements for the program included the invoices for the fictitious vendors. The reporting was subsequently revised to remove the fraudulent invoices. Questioned costs None noted. The reporting was subsequently revised as there were other expenditures that were allowable costs under the grant Context Although the City has a Grant Coordinator that is responsible for the monitoring, accounting and reporting for federal and state grants, the CRF grant program was managed by another employee and the reporting was performed by the Finance Director. This circumvented the City’s internal control policies and procedures that were designed to ensure proper grant administration and reporting. Effect Fraudulent expenditures were reported to the State as disbursements for the CRF program. The grant program was not properly monitored in accordance with established policies and procedures and related internal controls. Cause The City did not follow the established procedures and internal controls for grant monitoring and reporting. Vendors were added to the vendor file without proper due diligence and approval. Recommendation We recommend the following: • Adequate due diligence be performed on all vendors before invoices are approved and paid (See finding 2021-001) • Invoices for grant programs should reviewed and approved by employees who are knowledgeable about grant requirements and allowable and unallowable costs • All grant programs should be properly monitored by the Grants Coordinator for compliance and reporting Views of responsible officials and planned corrective actions Management agrees with the finding. The City will implement the proper policies and procedures and internal controls over grants.

Corrective Action Plan

Compliance Finding Funds were embezzled from the City using fictitious vendors established by the City employees who were managing the Coronavirus Relief Fund (CRF) program. The invoices for the fictitious vendors were charged to a line item designated for the CRF program. The grant reporting to the State for the CRF program was performed by the Finance Director and not by the Grant Coordinator Department. The original reporting of the specific disbursements for the program included the invoices for the fictitious vendors. The reporting was subsequently revised to remove the fraudulent invoices. Beginning in Fiscal 2023, several policies and procedures were implemented over Grants and all other spending to reduce the risk of embezzlement. These policies include the Vendor Approval process including segregation of duties, the Debarment Check process (federal grant specific), and Finance Director and Treasurer invoice review prior to check printing. All elements were fully implemented in Fiscal 2024.

Categories

Allowable Costs / Cost Principles Subrecipient Monitoring

Other Findings in this Audit

Programs in Audit

ALN Program Name Expenditures
84.425 Education Stabilization Fund $4.90M
84.010 Title I Grants to Local Educational Agencies $2.96M
84.027 Special Education_grants to States $1.76M
10.553 School Breakfast Program $1.42M
97.044 Assistance to Firefighters Grant $628,830
10.555 National School Lunch Program $408,109
84.367 Improving Teacher Quality State Grants $332,124
21.019 Coronavirus Relief Fund $258,917
84.424 Student Support and Academic Enrichment Program $186,902
14.218 Community Development Block Grants/entitlement Grants $176,954
84.048 Career and Technical Education -- Basic Grants to States $154,763
93.323 Epidemiology and Laboratory Capacity for Infectious Diseases (elc) $138,349
10.560 State Administrative Expenses for Child Nutrition $109,226
16.922 Equitable Sharing Program $77,637
10.928 Emergency Watershed Protection Program - Floodplain Easements Ð Disaster Relief Appropriations Act $44,868
84.002 Adult Education - Basic Grants to States $30,000
10.582 Fresh Fruit and Vegetable Program $24,917
93.074 Hospital Preparedness Program (hpp) and Public Health Emergency Preparedness (phep) Aligned Cooperative Agreements $19,643
10.935 Urban Agriculture and Innovative Production $19,496
84.173 Special Education_preschool Grants $17,388
17.225 Unemployment Insurance $12,352
84.365 English Language Acquisition State Grants $10,000
10.649 Pandemic Ebt Administrative Costs $8,589
21.027 Coronavirus State and Local Fiscal Recovery Funds $7,070
97.042 Emergency Management Performance Grants $2,753
93.575 Child Care and Development Block Grant $750