Finding 485012 (2023-006)

Finding Number: 2023-006 Prior Year Finding: No Federal Agency: U.S. Department of Treasury Federal Program: COVID 19 – Coronavirus State and Local Fiscal Relief Fund Assistance Listing: 21.027 Pass-Through Entity: Maryland Department of Housing and Community Development Pass-Through Award Number and Period: (7/1/2022 – 6/30/2023) Compliance Requirement: Reporting Type of Finding Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or Specific Requirement: Control – Per 2 CFR section 200.303(a), a non-Federal entity must: 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 comply with the 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). Compliance: Per the Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds, non-entitlement units are required to submit a project and expenditure report for the period ending March 31, 2022 no later than April 30, 2022 and then quarterly thereafter. Condition/Context: The town reported a revenue replacement summary amount of $2,336,349 in their quarterly SLFRF Compliance Report. Additionally, $35,927.66 was identified under various projects in the quarterly reports under the revenue replacement project expenditure category. However, the town did not have any expenditures during the fiscal year applicable to the standard $10,000,000 revenue replacement allocation. The expenditures related to the $35,927.66 amount were applicable to infrastructure projects. As such, both the project expenditure categories identified as “revenue replacement” and the revenue replacement summary were reported incorrectly. Questioned Costs: None noted. Cause: The Town’s procedures and internal controls were not sufficient to ensure that reports were filed accurately. Effect: The quarterly performance report was not filed accurately which could impact the Federal agency’s ability to monitor the program. Recommendation: The Town should review and enhance its reporting procedures and controls to ensure that quarterly performance reports are submitted with correct totals including those totals related to revenue replacement. Views of Responsible Officials: Management agrees with the finding.