FINDING 2023-003
Subject: COVID-19: Coronavirus State and Local Fiscal Recovery Funds - Body Camera - Activities
Allowed or Unallowed, Allowable Costs/Cost Principles, Period of Performance
Federal Agency: Department of the Treasury
Federal Program: COVID-19: Coronavirus State and Local Fiscal Recovery Funds
Assistance Listings Number: 21.027
Federal Award Number and Year (or Other Identifying Number): 71391
Pass-Through Entity: Indiana Department of Homeland Security
Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/
Cost Principles, Period of Performance
Audit Findings: Material Weakness, Other Matters
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Condition and Context
The City's Police Department applied for and was awarded a body camera grant from the Indiana
Department of Homeland Security (IDHS). The City's Police Department sought reimbursement from the
IDHS in October of 2023. An invoice from Utility, dated October 28, 2022, in the amount of $600,000 for
body cameras was submitted for the reimbursement. The invoice was originally paid by the City with
American Rescue Plan Act (ARPA) funds on April 3, 2023.
The City received reimbursement of $61,740 from the IDHS on December 5, 2023, which was
receipted into the City's Grant Fund along with the City's local match in the amount of $30,870. The
Controller's Office did an adjustment on December 31, 2023, in the amount of $92,610, to reimburse the
ARP Coronavirus LF Recovery Fund and decrease the Grant Fund, for the reimbursement of $61,740 and
the local share of $30,870. However, per the grant agreement with the IDHS, "If the subrecipient incurs a
financial obligation prior to approval of the State, then the subrecipient will be required to reimburse the
State for the amount of funds that were not approved." As such, the expenditure was not an allowable
activity or allowable cost and was outside of the period of performance due to the City incurring the expense
prior to signing the grant agreement with the IDHS on March 3, 2023.
The lack of internal controls and noncompliance were isolated to the purchase 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). . . ."
2 CFR 200.403 states in part:
"Except where otherwise authorized by statute, costs must meet the following general criteria
in order to be allowable under Federal awards: . . .
(c) Be consistent with policies and procedures that apply uniformly to both federallyfinanced
and other activities of the non-Federal entity. . . .
(f) Not be included as a cost or used to meet cost sharing or matching requirements of
any other federally-financed program in either the current or a prior period. . . ."
2 CFR 200.306(b) states:
"For all Federal awards, any shared costs or matching funds and all contributions, including
cash and third-party in-kind contributions, must be accepted as part of the non-Federal entity's
cost sharing or matching when such contributions meet all of the following criteria:
(1) Are verifiable from the non-Federal entity's records;
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(2) Are not included as contributions for any other Federal award;
(3) Are necessary and reasonable for accomplishment of project or program objectives;
(4) Are allowable under subpart E of this part;
(5) Are not paid by the Federal Government under another Federal award, except where
the Federal statute authorizing a program specifically provides that Federal funds
made available for such program can be applied to matching or cost sharing requirements
of other Federal programs;
(6) Are provided for in the approved budget when required by the Federal awarding
agency; and
(7) Conform to other provisions of this part, as applicable."
The Grant Agreement states in part:
"Any purchases made by the Subrecipient that are not authorized by the U.S. Department of
the Treasury allowability guidelines, the Subrecipient's Project or State, will not be reimbursed
under this grant."
"Pre-award costs, as defined in 2 CFR 200.458, may not be paid with funding from this award."
2 CFR 200.458 states:
"Pre-award costs are those incurred prior to the effective date of the Federal award or subaward
directly pursuant to the negotiation and in anticipation of the Federal award where such costs
are necessary for efficient and timely performance of the scope of work. Such costs are
allowable only to the extent that they would have been allowable if incurred after the date of
the Federal award and only with the written approval of the Federal awarding agency. If
charged to the award, these costs must be charged to the initial budget period of the award,
unless otherwise specified by the Federal awarding agency or pass-through entity."
Cause
Management had not developed a system of internal controls that would have prevented or
detected material noncompliance. The City did not ensure that the policies and procedures in place related
to allowable or unallowable activities, allowable costs and cost principles, and period of performance were
complied with at the acceptance of the grant from the IDHS.
Effect
Without the proper implementation of an effectively designed system of internal controls, the internal
control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance.
As a result, an invoice that was previously paid with other federal award funds was submitted
for reimbursement to another agency. The original invoice was outside of the period of performance and
unallowable as related to the award from the IDHS. Furthermore, noncompliance with the provisions of
federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of
future federal funding to the City.
Questioned Costs
We identified $61,740 in questioned costs as noted above in the Condition and Context.
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Recommendation
We recommended that management of the City establish a proper system of internal controls,
including strengthening its policies and procedures to ensure all costs submitted for reimbursement are not
already reimbursed by another federal award and are within the period of performance.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.