Finding Text
FINDING 2023-001
Information on the federal program:
Subject: Community Development Block Grants/State's program and Non-Entitlement Grants in Hawaii
- Internal Controls
Federal Agency: Department of Housing and Urban Development
Assistance Listing Number: 14.228
Compliance Requirement: Reporting
Audit Finding: Significant Deficiency
Criteria: 2 CFR section 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards 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). . . ."
Condition: An effective internal control system was not in place at the City in order to ensure compliance with requirements related to the grant agreement and the reporting compliance requirement.
Cause: The City's management had not developed a system of internal controls to ensure compliance with the reporting requirements.
Effect: The failure to establish an effective internal control system placed the City at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs.
Questioned Costs: There were no questioned costs identified.
Context: We noted that for the two semi-annual reports selected for testing, the City did not perform a documented review and approval of the reporting package prepared by the City’s consultant before the submission of the report.
Identification as a repeat finding, if applicable: No.
Recommendation: We recommended that the City implement a documented, formal review of the semi-annual reports before they are submitted for reimbursement.
Views of Responsible Officials and Planned Corrective Actions: For the views of the responsible officials, refer to the Corrective Action Plan that is part of this report.