Finding 501661 (2023-002)

Criteria: According to 2 CFR 200.303, non-federal entities should establish and maintain effective internal control over a 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). Condition: During our single audit procedures over reporting compliance requirements for ARPA grants, we noted that grant expenditures in the Annual SLFR Compliance Report P&E 2024 were overstated by $56,850. Cause: Due to adjustments made throughout the fiscal year to address journal entries with incorrect general ledger codes, fund codes, etc., accounting reports provided by the finance department to grants department were not updated as of the date of ARPA reports submission. The grants department accidentally reported duplicate transactions for projects No. RC02 and No. GSP05. Per review of allowable expenses testwork, auditors verified transactions noted as duplicated in the general ledger detail were only paid once, and these expenditures were allowed under the program. Effect: Lack of proper expenditure reconciliation led to the City overstating reported expenses by $56,850. Failure to properly reconcile federal grants could result in misstatements in the financial statements, and non-compliance with federal grant requirements. Questioned costs: None. Recommendation: We recommend that management develop and implement a reconciliation process for ARPA grant expenditures. Reconciliation should be performed on a regular basis and be properly documented. Any discrepancies identified should be investigated and promptly resolved. We also recommend the City adjust and correct duplicate expenses for project RC02 and GSP05 when submitting its next required Annual Report to the U.S. Department of Treasury. Management’s response: Management agrees with auditor recommendation. Refer to Corrective Action Plan.