Finding 404158 (2023-003)

2023-003 – COVID 19: Coronavirus State and Local Fiscal Recovery Funds Federal Awarding Agency – U.S. Department of the Treasury Assistance Listing Number – 21.027 FAIN – n/a Award Year – 2021 Questioned costs – none Criteria: 2 CFR Part 200 in general and 2 CFR sections 200.303(a) require non-Federal entities to establish and maintain effective internal controls over Federal awards, including the requirements for allowable costs, cost principles, and earmarking. The related compliance requirements are set in 2 CFR Part 200 sections 200.514(c), 200.212, 200.318(h), 200.332, 180.300 and subpart E; 48 CFR section 52.209-6; 31 CFR section 19.300; sections 602 and 603 of the Social Security Act as added by section 9901 of the American Rescue Plan Act of 2021, Pub. L. No. 117-2 as codified at 42 USC 802 and 803 and 31 CFR Part 35, federal awarding agency regulations, and the terms and conditions of the award. Condition: Controls related to calculation and reporting of lost revenue were not effective and the amount calculated as base year revenue was incorrectly reported. Cause: Base year calculation of revenue was performed using interim financial information and was not reconciled to final audited reports. Base year calculation of revenue was not clearly documented. Subsequent year revenue calculations were performed by a consultant who was not engaged to review the base year calculation. Controls over such calculations were not effective. Effect: Calculation of lost revenue was incorrectly reported. Expenditures related to the provision of government services related to such lost revenue did not exceed the actual lost revenue. Recommendation: We recommend that the City ensure that all controls for grants be documented in written procedures which should include the name or title of the positions responsible for each control (preparation, review, reconciliation, etc.) and that the performance of the controls be documented in a clear, reperformable manner including the name and date of each responsible individual and which specific control they performed over compliance for the grant.