Finding Text
Criteria or Specific Requirement: A government must have internal controls sufficient to be aware of and properly tracking all funds received and spent by the government, its agents, and associated custodial organizations.
Condition: The government did not maintain records for, or reconciliation of funds received and spent related to the CDBG, CSLFRF, and FEMA grants received, as well as other grant funds paid directly to organizations they purchased from.
Context: The City employs a third party agency to oversee several projects approved by City authority and paid for via grant funds received. These funds are deposited into City accounts and spent from the same under the oversight of their third party. Other grants funds may be received directly by external vendors/organizations on behalf of the City.
Questioned Costs: None
Effect: The City did not have record of $766,551 in grant funding in the initial trial balance. In addition, they had to obtain the bank records in order to rebuild the activity in those funds, meaning that the City was not monitoring or tracking those projects other than to place full reliance on the external third party. The internal controls associated with monitoring and awareness of these awards and expenditures are not functioning correctly, and any issues or errors would not be caught by the City in a timely manner.
Cause: Reliance is placed on external agents to handle all requirements of spending, oversight, monitoring, and compliance.
Repeat: No
Auditor's Recommendation: We recommend that the City create procedures to ensure that the City is recording this activity regularly, that the City is part of the monitoring and oversight process, and that the City is at least spot-checking the third party agent's compliance with grant requirements and standards to ensure that the City is and remains in compliance. Further, for amounts paid directly to third party vendors, the City must create processes and procedures to verify that these revenues are properly recorded and all applicable expenditures are included in the records of the City. These steps will reduce the likelihood of error or fraud within the City and provide more accurate records for internal and external parties.
View of Responsible Officials: Management concurs with the Auditor’s recommendation and will review with the third-party North Central Illinois Council of Governments (NCICG) to establish appropriate City monitoring and review.