Finding 497033 (2023-002)

Material Weakness
Requirement
L
Questioned Costs
-
Year
2023
Accepted
2024-09-17
Audit: 319764
Organization: City of Plymouth (IN)

AI Summary

  • Core Issue: The City submitted an inaccurate Project and Expenditure report, missing key projects and containing significant errors in financial data.
  • Impacted Requirements: Compliance with federal reporting standards under 2 CFR 200.303 and related guidance was not met, leading to a material weakness in internal controls.
  • Recommended Follow-Up: Establish a robust internal control system to ensure accurate reporting and timely verification of financial data before submission.

Finding Text

FINDING 2023-002 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Reporting 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): IN0387 Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context Recipients are required quarterly or annually to submit Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its population, as well as the recipient's allocation amount. Information to be reported includes projects funded, expenditures, and contracts for the appropriate reporting period. The City was classified as a city with a population below 250,000 residents that received an allocation of less than $10 million in State and Local Fiscal Recovery Funds. As such, the P&E report, covering the period from March 3, 2022 to March 31, 2023, was required to be submitted to the Treasury by April 30, 2023. The P&E report was prepared by one employee without an oversight or review process in place to ensure accuracy. The P&E report submitted was not mathematically accurate or complete. Per Resolution 2022-1028, approved on December 12, 2022, the City obligated funds for six separate projects, totaling $2,257,927. However, the P&E report submitted on April 18, 2023, only included one project, resulting in an understatement of total obligations of $1,807,927. Additionally, for the one project submitted, the key line items of "Current Period Expenditures," "Total Cumulative Expenditures," and "Current Period Obligations" as reported on the P&E report did not agree to the City's financial ledger. Errors were as follows:  The "Current Period Expenditures" and "Total Cumulative Expenditures" were overstated by $68,609.  "Current Period Obligations" were understated by $381,391. The lack of internal controls and noncompliance were systemic issues throughout the audit period. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 16 CITY OF PLYMOUTH SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, states in part: ". . . 10. Reporting. All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. . . ." 31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the uses of funds." Cause The City did not have procedures in place to verify that the information contained within the P&E report accurately reflected the City's expenditures and obligations prior to, or in a timely manner following, submission. Effect Without the proper implementation of an effectively designed system of internal controls, the City cannot ensure that P&E reports are materially accurate and correct. The P&E reports contained the errors identified in the Condition and Context. In addition, not meeting the reporting requirements increases the likelihood that the public will not have access to transparent and accurate information regarding expenditures of federal awards. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the City's management establish a system of internal controls to ensure that the City provides the Clerk-Treasurer with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

Corrective Action Plan

FINDING: 2023-002 Finding Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Reporting Summary of Finding: The P&E report was prepared by one employee without an oversight or review process in place to ensure accuracy. The report submitted was not mathematically accurate or complete. Per Resolution 2022-1028, approved on December 12, 2022, the City obligated funds for six separate projects totaling $2,257,927. However, the P&E report submitted on April 18, 2023 only included one project resulting in an understatement of total obligations of $1,807,927. Additionally for the one project submitted the key line items of “Current Period Expenditures”, “Total Cumulative Expenditures”, and “Current Period Obligations” as reported on the P&E report did not agree to the City’s financial ledger Contact Person Responsible for Corrective Action: Lynn M. Gorski, Clerk-Treasurer Contact Phone Number: 574-936-2124 Views of Responsible Official: We concur with the finding from SBOA. Description of Corrective Action Plan: There was very little training on how to enter information into the Treasury website for the 2022 year. When it was entered there was only one obligation in the amount of $68,609 even though Resolution No. 2022-1028 noted the intent on spend. Because of lack of training on entering the information it was understated. When the information was entered for the April 2024 report all obligations were entered. When the next report is processed, I will have another staff member verify what is entered prior to submission to the Treasury Department. Anticipated Completion Date: April 30, 2025 Lynn M. Gorski Title: Clerk-Treasurer Date: August 26, 2024

Categories

Internal Control / Segregation of Duties Allowable Costs / Cost Principles Material Weakness Period of Performance Reporting Matching / Level of Effort / Earmarking

Other Findings in this Audit

  • 497032 2023-001
    Material Weakness
  • 1073474 2023-001
    Material Weakness
  • 1073475 2023-002
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
21.027 Coronavirus State and Local Fiscal Recovery Funds $911,052
14.228 Community Development Block Grants/state's Program and Non-Entitlement Grants in Hawaii $560,000
20.205 Highway Planning and Construction $519,221
15.916 Outdoor Recreation_acquisition, Development and Planning $250,000
20.106 Airport Improvement Program $220,777
97.039 Hazard Mitigation Grant $152,124