Finding 571142 (2023-001)

The Authority did not have adequate internal controls for ensuring compliance with federal maintenance of effort requirements. Assistance Listing Number and Title: 97.044 – Assistance to Firefighters Grant Federal Grantor Name: Federal Emergency Management Agency; Department of Homeland Security Federal Award/Contract Number: EMW-2019-FG-00226 EMW-2019-FG-05161 EMW-2020-FG-17135 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes , Finding 2021-001 Background The purpose of the Assistance to Firefighters Grant (AFG) is to enhance the safety of firefighters and the public by providing direct financial assistance for critically needed resources that equip and train emergency personnel to recognized standards. During fiscal year 2023, the Authority spent $352,580 in AFG program funds to pay for a fire apparatus and personal protective equipment, $30,000 for project manager payroll costs and $70,350 on a health and wellness brochure. Federal regulations require award recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established internal controls. During the term of the award, federal regulations requires recipients to maintain aggregate expenditures relating to the allowable uses of the award to at least 80% of the average amount of such expenditures in the two fiscal years before the fiscal year in which they receive the award. Description of Condition The Authority has an established process to monitor its budget to ensure that revenues and expenditures are increasing year-over-year. However, this process was ineffective for demonstrating that it complied with maintenance of effort requirements and identified allowable or unallowable costs, as stated in the Notice of Funding Opportunity (NOFO), and performed the required calculation. We consider this deficiency in internal control to be a material weakness that led to material noncompliance. Cause of Condition The Authority experienced turnover in finance staff responsible for managing this program. Current employees said they were unable to locate documentation showing former staff identified allowable expenditures and performed the maintenance of effort calculation to demonstrate the Authority complied with this requirement. Effect of Condition and Questioned Costs Without adequate internal controls over maintenance of effort, the Authority cannot demonstrate it complied with the requirement to maintain program expenditures at a certain level. During the audit, we performed the maintenance of effort calculation and found the Authority met the requirement. Recommendation We recommend the Authority establish internal controls to monitor allowable program expenditures stated in the NOFO, and calculate maintenance of effort to ensure its aggregate expenditures relating to activities allowable remain above 80% of the average amount of such expenditures in the two fiscal years before it received the award. Authority’s Response Puget Sound Fire respectfully disagrees with the Auditor's decision to elevate the two issues identified below to the level of a finding. Puget Sound Fire believes it substantially complied with the MOE and other grant requirements identified in issue 1 and worked closely with the granting agency, FEMA, to comply with all grant requirements. Based on the specific responses below, and Puget Sound Fire's good faith and reasonable efforts to cooperate and comply with the grant requirements, we respectfully request that the items be addressed in a management letter rather than a finding. Maintenance of Effort Puget Sound Fire respectfully disagrees with the Auditor's proposed finding. Puget Sound Fire did maintain and document the Maintenance of Effort attestation as described in the AFG grant's Notice of Funding Opportunity and followed best practices for tracking fiscal budget information as previously prescribed by SAO personnel. Puget Sound Fire's compliance is demonstrated in the 3-year budget history within the grant application/contract itself and Puget Sound Fi re provided SAO support Maintenance of Effort calculations for the years the grant was awarded. Puget Sound Fire Puget Sound Fire's governing board also approved budget increases year over year for the duration of the grant that exceeded the 80% average requirement. There is no 2 CFR Part 200 guidance on MOE other than what is included in the NOFO, and as an attestation, and the 3-year budget history was acceptable by FEMA, the grantor. Additionally, a finding is not warranted as following receipt of the same finding for the 2021 audit Puget Sound Fire adopted the SAO's feedback and has been following that guidance since then. Basing a finding for the current audit for actions that have been corrected pursuant to a prior audit is unreasonable. Puget Sound Fire complied with the MOE requirements following the 2021 finding and has no ability to go back to 2021 and change the past. Puget Sound Fire also notes that Puget Sound Fire's MOE efforts were reviewed, approved and monitored by FEMA, the grantor without issue. Puget Sound Fire has worked with and will continue to work with the grantor moving forward to implement best practices in calculating and maintaining MOE. AFG NOFO Statement - Maintenance of Effort A maintenance of effort is required under this program for all recipients, unless modified by a waiver, subject to waiver eligibility. An applicant seeking an award under this NOFO shall agree to maintain during the term of the grant, the applicant's aggregate expenditures relating to the activities allowable under this NOFO at not less than 80 percent of the average amount of such expenditures in the two fiscal years preceding the fiscal year in which the grant award is received. For more information on waiver eligibility, please see Appendix C-Award Administration Information, Section I. Economic Hardship Waivers of Cost Share and Maintenance of Effort Requirements for the FP&S Grant Program for more information. Auditor’s Remarks We have considered the Authority’s response and have determined it does not bring forward any new information that would change our conclusions over controls and non-compliance. We appreciate the actions taken by the Authority to implement corrective action over the weaknesses identified. We reaffirm our finding and will review the status of the Authority’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. 15 U.S.C. 2229(k)(3), Firefighter assistance, establishes requirements for maintenance of expenditures.