Finding Text
Finding 2024-007 – Reporting
Federal Program: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds
Assistance Listing Number (ALN): 21.027
Federal Agency: U.S. Department of the Treasury
Grant Year: 2023
Criteria
In accordance with 2 CFR §200.303, the City is required to establish and maintain effective internal controls over federal awards to ensure accurate and timely reporting of expenditures in compliance with federal regulations. Additionally, 2 CFR §200.327 and the terms of the award require timely and accurate submission of required reports.
Condition
The City did not submit the required federal financial reports in a timely basis. Additionally, the amounts reported in the SLFRF Compliance Report – WY4581 – P&E Report – 2024 included encumbered amounts rather than actual expenditures incurred during the reporting period.
Cause
The City does not have adequate internal controls in place to ensure the timely preparation, reconciliation, review, and submission of required reports for federal awards. Additionally, turnover in key personnel during the reporting period contributed to these issues, as new staff did not have access to the proper login credentials or training necessary to prepare and submit reports timely and accurately. There was also no established process for reconciling reported expenditures to the City’s general ledger and supporting documentation prior to submission.
Effect or Potential Effect
As a result of the lack of internal controls and reconciliation procedures, the City submitted inaccurate and untimely financial reports. Reporting encumbrances instead of actual expenditures misrepresents program activity and may impact the City’s compliance with federal requirements. Continued inaccuracies could result in questioned costs, increased oversight by federal agencies, or delays in future funding.
Questioned Costs
None noted, as expenditures were ultimately supported by documentation; however, the reporting inaccuracies are considered a significant deficiency in internal control over compliance.
Context
The State and Local Fiscal Recovery Funds (SLFRF) program, established under the American Rescue Plan Act, provides significant funding to municipalities for pandemic recovery and infrastructure initiatives. Accurate and timely reporting of expenditures is not only a regulatory requirement but also essential for transparency, accountability, and continued eligibility for funding. Internal control deficiencies in reporting may compromise the City’s ability to demonstrate effective stewardship of federal funds and could trigger additional scrutiny, audits, or corrective action plans from federal agencies. Given the substantial financial and operational impact of SLFRF funds on the City’s budget and community initiatives, it is imperative that robust processes are in place to ensure reports reflect actual expenditures and are reconciled to the City’s general ledger. Strengthening these controls will protect the City from potential compliance risks, maintain public trust, and ensure uninterrupted access to federal resources critical for ongoing community projects.
Identification as a Repeat Finding
This is a new finding for the fiscal year ended June 30, 2024.
Recommendation
We recommend that the City develop and implement formal policies and procedures to ensure timely preparation, reconciliation, and submission of all federal reports. Management should assign clear oversight responsibility for federal reporting and establish a formal reconciliation process requiring that all reported amounts be reviewed and compared to the City’s accounting records and supporting documentation prior to submission. Additionally, procedures should be developed to ensure that login credentials and system access for federal reporting platforms are promptly updated and assigned during periods of staff turnover.
Views of Responsible Officials
The City concurs with the finding. The City will implement new internal control procedures by June 30, 2025, to ensure timely submission and reconciliation of federal reports and the Treasurer will review and approve all submissions prior to filing.
See Corrective Action Plan.