FAC Explorer

Finding 496412 (2023-005)

Material Weakness Repeat Finding
Requirement
ABGHN
Questioned Costs
-
Year
2023
Accepted
2024-09-11
Audit: 319322
Organization: Marshall County Fiscal Court (KY)
Auditor: Allison Ball Auditor of Public Accounts

AI Summary

  • Core Issue: The Marshall County Fiscal Court has a material weakness in internal controls over the FEMA Disaster Grants program, leading to potential compliance risks.
  • Impacted Requirements: Key compliance areas such as activities allowed, allowable costs, and record keeping are not being adequately monitored.
  • Recommended Follow-Up: The fiscal court should strengthen internal controls by implementing a review process for all federal expenditures to ensure compliance and accuracy.

Finding Text

Federal Program: Assistance Listing #97.036 - Disaster Grants - Public Assistance (Presidentially Declared Disaster) Award Number and Year: FEMA 4630 - 2023 Name of Federal Agency and Pass-Thru Agency (if applicable): U.S. Department of Homeland Security, Passed Through Kentucky Department of Emergency Management Compliance Requirements: Activities Allowed & Allowable Costs, Matching, Level of Effort, Earmarking, Period of Performance, Special Tests and Provisions Type of Finding: Material Weakness Amount of Questioned Costs: None Noted Opinion Modification (if applicable): N/A COVID Related: No Repeat Finding: Repeat finding of 2022-006 This is a repeat finding and was included in the prior year audit report as finding 2022-006. The Marshall County Fiscal Court failed to implement adequate internal controls over the Disaster Grants – Public Assistance (Presidentially Declared Disaster) (FEMA) program to ensure all compliance requirements are being met and that record keeping was being done correctly. The fiscal court relied on a third-party administrator for the recording of all FEMA project activity. The fiscal court also relied on the third-party to satisfy compliance requirements and failed to establish any review process or independent internal controls that verified that activities performed, and amounts charged to the program were allowable under all applicable compliance requirements. By relying on a third-party administrator’s controls, without enacting any internal controls, the county increased the risk of misappropriation of funds, and noncompliance with federal grant guidelines. This could have potentially led to questioned costs that would have to be repaid, and less federal funding in the future. This also resulted in the county’s Schedule of Federal Awards and Expenditures (SEFA) being materially misstated, and several schedules and reports being incomplete or inaccurate. Strong internal controls dictate that the fiscal court should review all federal expenditure documentation and reports to ensure compliance requirements are being met and activities are being completed accurately. 2 CFR 200.303 states “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.” We recommend the fiscal court strengthen internal controls over the federal expenditure process by ensuring all activity related to federal expenditures is reviewed for accuracy and compliance.

Corrective Action Plan

This finding covers a fiscal year for which the first half concluded prior to Kevin Spraggs’ term as County Judge/Executive. Additionally, FY23, as well as the prior year FY22, audits were completed toward the end of FY24 – therefore any auditor recommendations and corrective actions would not be in place for a full year until FY25. This response is in relation to the repeat finding from prior year, FY22, that the Court failed to implement adequate controls over federal expenditures due to not having purchase orders for the December 2021 Tornado Disaster related expenses and that the third party hired by the court to be administrator for FEMA project activity resulting in a misstated SEFA and inaccurate record keeping. This finding repeats the finding of SEFA misstatement (2022-003). The SEFA was overstated for the Disaster Grant Public Assistance Program FEMA. The Court hired a third party company to administer the grant submissions for the December 2021 Tornado Disaster, and this created a disconnect between the submission process and later reporting process for the SEFA form. At the time that the SEFA was prepared submissions and approvals for FEMA related expenses had just started to occur. All expenses were included in the submission, even those that later were deemed ineligible for FEMA or were determined to be only partially covered by FEMA. There are still expenses as of May 2024 that are in the appeal stage of application for FEMA reimbursement with uncertainty of whether they will be approved with federal funding or will be denied. For the future planning, in the event that another disaster requires the County to contract with another outside agency for FEMA submission, the Court will strengthen the controls in the reporting process as well as seek out guidance from DLG and/or auditors and/or others on accurately reporting partially covered FEMA expenses as well as expenses that are in an ‘unknown coverage’ state at the time of the SEFA creation. Additionally, the court will comply with auditor recommendations listed with these findings regarding future third party administrators.

Categories

Matching / Level of Effort / Earmarking

Other Findings in this Audit

  • 1072854 2023-005
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
97.036 Disaster Grants - Public Assistance (presidentially Declared Disasters) $1.40M
21.027 Coronavirus State and Local Fiscal Recovery Funds $1.02M
10.923 Emergency Watershed Protection Program $69,735
97.042 Emergency Management Performance Grants $66,673