Finding 498821 (2023-006)

FINDING 2023-006 Subject: COVID-19 - Community Development Block Grants/State's program and Non-Entitlement Grants in Hawaii- Reporting Federal Agency: Department of Housing and Urban Development Federal Programs: COVID-19 - Community Development Block Grants/State's program and Non-Entitlement Grants in Hawaii Assistance Listings Number: 14.228 Federal Award Number and Year (or Other Identifying Number): CV-CV1-233 Pass-Through Entity: Indiana Office of Community and Rural Affairs Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 25 JEFFERSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context An effective internal control system was not in place at the County in order to ensure compliance with requirements related to the grant agreement and the Reporting compliance requirement. The passthrough agency required the County to submit a CDBG-CV report on Jobs Retained. The County collected the required information via phone calls made by one individual who compiled the information and submitted the required CDBG-CV report on Jobs Retained for the grant program without a documented oversight or review process. Furthermore, supporting documentation for the report was not retained for audit. Due to the lack of supporting documentation, we were unable to determine the accuracy of the report submitted. The lack of internal controls and the failure to maintain adequate supporting documentation was isolated to the CDBG-CV Report on Jobs Retained report. 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 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." Cause Management had not established a system of internal controls that would have ensured that adequate supporting documentation would have been maintained and made available for audit. Effect Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, we could not determine the County's compliance with the CDBG-CV Report on Jobs Retained report. 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 County. INDIANA STATE BOARD OF ACCOUNTS 26 JEFFERSON COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County strengthen its system of internal controls to provide for a segregation of duties in the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight are taking place. We also recommended strengthening its policies and procedures to ensure appropriate supporting documentation is retained to be presented for audit. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.