Finding 499092 (2023-002)

2023-002 Activities Allowed or Unallowed and Allowable Costs/Cost Principles Prior Year Finding Number: N/A Year of Finding Origination: 2023 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of Treasury Program: 21.027 COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Award Number and Year: SLFRP2192; 2021 Pass-Through Agency: N/A – Direct Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 U.S. Code of Federal Regulations §2 CFR 200.403(a) and §2 CFR 200.403(g) require costs to be necessary and reasonable, and be adequately documented. Condition: The County did not obtain itemized documentation for five out of 22 disbursements tested. The amount of disbursements that did not have supporting documentation totaled $818,036. Questioned Costs: $818,036 Context: The County disbursed funds to cities and towns as non-entitlement units of government (NEU), however; the NEU designation only applies to states providing funds to local governments. The sample size was originally based on guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing and Single Audits, but was expanded to include four additional payments identified by the County as payments to NEUs. Effect: The County has insufficient documentation to demonstrate expenditures were for allowable activities and met the requirements of allowable costs. Cause: The County believed funds could be disbursed to cities and towns as NEUs. Because of this determination, the County did not obtain itemized support for expenditures incurred. Recommendation: We recommend Chisago County obtain itemized documentation related to grant expenditures to document expenditures were for allowable activities and met the requirements of allowable costs. View of Responsible Official: Acknowledge