Finding 478711 (2023-002)

Finding: Allowable Costs and Allowable Activities Federal Assistance Listing Number 20.205 - Highway Planning and Construction Department of Transportation, Passed-through Colorado Department of Transportation Award Number - SHO-105A-016, Award Year 2022Award Number - 22-HA1-XC-00228, Award Year 2022 Criteria: According to 2 CFR Part 200.303 - 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 Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. Condition: During testing, we noted that two transactions totaling $1,501,269 related to 2022 activities and was included as an expenditure on the fiscal year 2023 Schedule of Expenditures of Federal Awards. The period of performance for the project began in 2022 and extended through 2023. Questioned Costs: None. Context: We tested 4 of the 15 nonpayroll transactions for the grants identified above and noted two instance in which 2022 activities were included as expenditures on the fiscal year 2023 Schedule of Expenditures of Federal Awards. The tested population covered expenditures of $7.0 million and the total population of expenditures were approximately $32.2 million. A non-statistical sampling methodology was used to select the sample. Effect: The County did not have adequate internal controls in place over the Highway Planning and Construction program, which resulted in a 2022 expense being reported in 2023. Cause: Grant management at the County is decentralized and thus departments are responsible for providing the required information to the County's Department of Finance to facilitate the preparation of the SEFA. The Engineering Department did not provide the Department of Finance all business units being used for grant activity or pending journal entries to record grant activity. Identification as a repeat finding: Not Applicable Recommendation: We recommend the County revise their internal process to require all grant agreements be provided to the Department of Finance at the time the agreement is signed. In addition, we recommend the Engineering Department complete monthly reconciliations over all grants which should then be subsequently provided to the Department of Finance for final review. Views of responsible officials and planned corrective actions: Agree. See separate report for planned corrective actions.