Finding Text
2023-010 U.S. Department of the Treasury
COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – ALN 21.027
Material Weakness in Internal Controls over Compliance and Compliance Finding
Criteria: Recipients can calculate lost revenue for the years 2020, 2021, 2022 and 2023 based on the formula provided in the Final Rule to determine the amount of SLFRF funds that can be used for the “provision of government services”.
Condition: The City did not reconcile its 2021 and 2022 revenue loss calculations with the final adjusted general ledger. Calendar year 2021 revenue was understated by $5,040,960 and calendar year 2022 revenue was understated by $1,455,486 in the 2021 and 2022 revenue loss calculations, respectively.
Cause: Numerous adjusting journal entries were posted to the City’s general ledger for state education aid that were not properly reflected in the revenue loss calculations.
Effect: As of June 30, 2023, the City has yet to spend more than the revenue loss calculated, net of the understated revenue. However, the City is at risk of spending in excess of allowable revenue loss if the calculations are not updated and performed timely and accurately.
Questioned Costs: None
Repeat Finding from Prior Year: No.
Recommendation: Revenue loss calculations should be updated to reflect the accurate revenues of the City as posted on the general ledger. The City should implement procedures to reconcile future revenue loss calculations to the revenue as reported in the general ledger.
Views of Responsible Official: Management agrees with the finding.