Finding 3655 (2022-004)

Uniform Grant Guidance Implementation Federal Agency: All Federal Program Name: All Assistance Listing Number: All Pass-Through Agency: All Pass-Through Numbers: All Award Period: 01/01/2022 – 12/31/2022 Type of Finding Significant Deficiency in Internal Control over Compliance Criteria or Specific Requirement Uniform Guidance requires the City to maintain certain policies related to cash management, cost allowability, procurement, and conflict of interest provisions, along with appropriate financial management systems and internal controls over federal awards to safeguard federal funds. Condition The City has various policies and procedures in place to safeguard its assets and establish related controls over receipts, disbursements, payroll transactions and general ledger maintenance. Federal awards received and disbursed by the City are managed through these city-wide policies and procedures; however, the policies and procedures have not been evaluated to ensure compliance with the requirements of Uniform Guidance. As an example, the City is required to have an allowable cost policy which establishes the responsible officials who are able to determine if a cost is allowable. While expenditures tested had documentation of approval, implementing a formal policy in accordance with Uniform Guidance would improve transparency and effectiveness of the City’s documentation. Questioned Costs None. Context While performing audit procedures, it was noted the City does not have policies in place that conform to Uniform Grant Guidance requirements. Cause The City has not finalized an assessment of its financial management system and related internal controls over federal awards, along with an evaluation of existing policies for compliance with Uniform Guidance by year-end.Effect They City could become noncompliant with requirements of Uniform Guidance, resulting in future findings and questioned cost related to federal awards administered by the City. The City’s 2022 audit in accordance with the requirements of Uniform Guidance did not identify any instances of noncompliance with respect to direct and material compliance requirements of its major federal award programs. Recommendation We recommend the City finalized the assessment of its financial management system and related internal controls over federal awards during the 2023 fiscal year. This assessment should include an evaluation of existing policies and procedures to determine where additional enhancements should be made or new policies created, a plan to communicate these policies to City employees, and procedures to periodically review and update, as considered necessary. Views of Responsible Officials There is no disagreement with the audit finding. Refer to the management response per the corrective action plan.