Finding 42767 (2022-001)

Material Weakness Repeat Finding
Requirement
L
Questioned Costs
-
Year
2022
Accepted
2023-07-05
Audit: 39079
Organization: Town of Shirley (IN)

AI Summary

  • Core Issue: The Town lacks a proper system of internal controls, leading to repeated noncompliance in reporting for Community Development Block Grants.
  • Impacted Requirements: Failure to adhere to Section 3 of the Housing and Urban Development Act, specifically regarding the submission and oversight of compliance reports.
  • Recommended Follow-Up: Management should establish a robust internal control system with clear segregation of duties and oversight for grant reporting to prevent future issues.

Finding Text

FINDING 2022-001 Subject: Community Development Block Grants/State's program and Non-Entitlement Grants in Hawaii - Reporting Federal Agency: Department of Housing and Urban Development Federal Program: Community Development Block Grants/State's program and Non-Entitlement Grants in Hawaii Assistance Listings Number: 14.228 Federal Award Number and Year (or Other Identifying Number): ST-18-104 Pass-Through Entity: Indiana Office of Community and Rural Affairs Compliance Requirement: Reporting Audit Finding: Material Weakness Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2021-002. Condition and Context The Town had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties that would likely be effective in preventing, or detecting and correcting, noncompliance. Recipients are required to adhere to the Section 3 of the Housing and Urban Development Act of 1968. As such, a grantee is required to submit annual reports related to hiring opportunities and labor hours. The Section 3 compliance form is to be submitted with the Semi-Annual report and at project's completion. The Town submitted two Section 3 compliance forms due to the project being completed during the audit period; however, the Town's grant administrator prepared and submitted the reports without a review or oversight process in place to prevent, or detect and correct, errors. The lack of internal controls was a systemic issue throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Farmwork', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Cause A proper system of internal controls over the Section 3 compliance forms was not designed by management of the Town, which would include segregation of key functions to ensure the Town provided complete and accurate information related to the award. The Town contracted with an outside grant administrator to manage the grant and complete reporting; however, the Town did not review work completed by the grant administrator. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the Town's management of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the Town design and implement a proper system of internal controls that would provide a segregation of duties and review of work performed by hired grants administrators for the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight are taking place. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

Corrective Action Plan

FINDING 2022-001 Contact Person Responsible for Corrective Action: Teresa Hester ? Clerk/Treasurer Contact Phone Number: 765-738-6381 Views of Responsible Official: We concur with finding: As stated in the Finding 2022-001 this finding is also a finding in the 2021-002. All of the transactions were already complete when the 2021 finding was noted. Difficult to change what already was. Internal controls were in place overall with the Grant Writer, Engineering Firm and Clerk/Treasurer, but the town was not provided with direct access to copies of the semi-annual reports. These reports were not accessible because OCRA does not give all unit?s rights to view. (Not being able to have access is where Government Officials should take into consideration when requiring units to be compliant.) Screen shots of the activity were provided to auditor. Description of Corrective Action Plan: The semiannual and other reporting was the responsibility/authority of our grant management. (Town officials have no log-in rights for the records) For future endeavors moving forward we will be implementing a more efficient internal controls. Collaborating with the grant management in knowing when the reports are being filed and that the Clerk/Treasurer is sent a copy of the reports for review. Anticipated Completion Date: This particular project has been finalized, therefore there is no an anticipated completion date. For future endeavors we will implement a more detailed and diversified internal controls process.

Categories

Internal Control / Segregation of Duties Material Weakness Reporting Matching / Level of Effort / Earmarking Subrecipient Monitoring

Other Findings in this Audit

  • 619209 2022-001
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
14.228 Community Development Block Grants/state's Program and Non-Entitlement Grants in Hawaii $744,553
21.027 Coronavirus State and Local Fiscal Recovery Funds $69,858
10.766 Community Facilities Loans and Grants $20,900