Finding 485909 (2023-002)

FINDING 2023-002 Subject: CDBG - Entitlement Grants Cluster - Reporting Federal Agency: Department of Housing and Urban Development Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listings Number: 14.218 Federal Award Numbers and Years (or Other Identifying Numbers): B-18-MC-180004, B-19-MC-180004, B-20-MC-180004, B-21-MC-180004, B-22-MC-180004, B-23-MC-180004 Compliance Requirement: Reporting Audit Finding: Material Weakness Condition and Context Recipients are required to submit quarterly the CDBG Cash on Hand Quarterly report (PR29). The report is generated from information entered by the City into HUD's Integrated Disbursement Information System (IDIS). The City did not have internal control procedures in place over the PR29 Quarterly Reports. The reports were generated and submitted by one individual, without a review or oversight process to detect and correct errors. The lack of internal controls was isolated to the quarterly reports noted above. 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 Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Cause A proper system of internal controls was not designed by the management of the City. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management statements 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 over reporting, the City cannot ensure that the reports submitted are materially accurate and correct. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the management of the City design and implement a proper system of internal controls, including a segregation of duties, to ensure the accuracy and correctness of the PR 29 reports. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.