Finding Text
Finding Number: 2024-006
Program: Coronavirus State and Local Fiscal Recovery Funds
ALN #: 21.027
Pass-through Entity: N/A- Direct Award
Federal Agency: U.S. Department of Treasury
Federal Award Year: July 1, 2023–June 30, 2024
Compliance Requirement: Allowability
Type of finding: Material weakness and noncompliance
Criteria
Per the activities allowed or unallowed requirement within Part 4 of the Compliance Supplement, recipients
may use payments from CSLFRF to:
1. Respond to the public health and negative economic impacts of the pandemic, by supporting the health
of communities, and helping households, small businesses, impacted industries, and the public sector
recover from economic impacts of the pandemic.
2. Replace lost public sector revenue to provide government services; recipients may use this funding to
provide government services to the extent of the reduction in revenue experienced due to the
pandemic.
3. Provide premium pay for essential workers, offering additional support to those who have borne and
will bear the greatest health risks because of their service in critical infrastructure sectors; and
4. Invest in water, sewer, and broadband infrastructure, making necessary investments to improve access
to clean drinking water, support, vital wastewater and storm water infrastructure, and to expand access
to broadband internet.
For beneficiary payments (expenditures), evaluate whether the entity's records identify the individual or
group as eligible to receive beneficiary payments for the applicable period.
Additionally, according to 2 CFR 200.303, the nonfederal entity must establish and maintain effective
internal control over the federal award that provides reasonable assurance that the nonfederal 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
The City set specific requirements for small businesses to be eligible to receive beneficiary payments under
the CSLFRF program. Businesses were required to submit an application to the City with supporting
documentation to confirm they were eligible for the payment. One of the requirements to be eligible is that
the business must show a loss between the years of 2019 and 2021. We noted during our testing that the
City awarded beneficiary payments to businesses that did not meet this requirements set by the City. We
noted 3 exceptions from a sample selection of 40.
Cause
Due to improper review and approval, the City approved three business applications to receive a
beneficiary payment that were ineligible.
Proper perspective
During our testing, we noted that 3 of 40 selections did not meet the eligibility criteria to be awarded a
beneficiary payment. One exception showed a business loss in 2022, which is outside the period of the
program requirements to submit loss documentation (2019-2021). One additional exception relates to a
businesses showing an increase in sales/revenue for the 2021-2022 years. The City was unable to provide
documentation that this business had a loss in either 2019 or 2020. The last exception relates to an
individual that was awarded a small business grant where the business nor the individual is domiciled in
Cambridge. As such, the City should not have approved these businesses for payment when reviewing
their applications.
Possible asserted effect
Approving businesses that are not eligible to receive a beneficiary payment could cause the City to be
charging the grant unallowable costs.
Questioned costs
$13,500
Statistical sampling
That same was not intended to be, and was not, a statistically valid sample.
Repeat finding
A similar finding was not reported in the prior year.
Recommendation
We recommend the City review applications to ensure only eligible businesses are approved to receive
beneficiary payments.
Views of responsible officials and corrective actions
The City has implemented additional controls over the review of all applicant information related to program
funds being disbursed only to eligible applicants.