Finding 524218 (2020-002)

FINDING 2020-002 Subject: Water and Waste Disposal Systems for Rural Communities - Matching Federal Agency: Department of Agriculture Federal Program: Water and Waste Disposal Systems for Rural Communities Assistance Listings Number: 10.760 Federal Award Number and Year (or Other identifying Number): CY2020 Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 14 TOWN OF MONROEVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The Town had not designed or implemented adequate internal controls and procedures to ensure compliance with the requirements related to the grant agreement and the Matching compliance requirement. As part of the grant agreement with the U.S. Department of Agriculture (USDA), the Town was to contribute $15,000 of local funds toward bond council. The Clerk-Treasurer posted all grant activity in Fund 810, Water Line Construction. Through inspection of the Fund, the Indiana State Board of Accounts determined that no local funds were posted to be used to pay toward bond council. The lack of internal controls and noncompliance were systemic issues, which occurred throughout the audit period. 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). . . ." 7 CFR 1780.44(d) states: "Applicant contribution. An applicant contributing funds toward the project cost shall deposit these funds in its project account before start of construction. Project costs paid with applicant funds prior to the required deposit time shall be appropriately accounted for." Cause The lack of internal controls resulted in the required local fund contribution of $15,000 not being posted to Fund 810, Water Line Construction. Effect Without the proper implementation of an effectively designed system of internal controls, the omission of the local fund contribution posting of $15,000 occurred, allowing noncompliance with the matching requirement. Furthermore, 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 Town. Questioned Costs Known questioned costs of $15,000 were identified, as detailed in Condition and Context. Recommendation We recommended that the Town's management establish a system of internal controls to ensure compliance with the grant agreement and the Matching compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 15 TOWN OF MONROEVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.