Finding 597589 (2022-001)

2022-001 The County had inadequate internal controls for ensuring compliance with federal reporting and Emergency Rental Assistance funds reallocation requirements. Assistance Listing Number and Title: 21.023 ? COVID-19 ? Emergency Rental Assistance Program Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Commerce Pass-through Award/Contract Number: 21-4616C-121 21-4618C-121 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The Emergency Rental Assistance (ERA) program provides direct payments to eligible entities so they can award financial assistance to eligible households and provide housing stability services. ERA grantees may provide assistance directly to eligible households or landlords and utility providers on behalf of eligible households. During fiscal year 2022, the County spent $34,259,366 of its ERA award from the Washington State Department of Commerce and $14,368,316 of its award from the U.S. Department of the Treasury to provide financial assistance to eligible households, including payment of rent, utilities and other housing stability services. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Reporting To comply with reporting requirements, the County must submit monthly and quarterly ERA 1 and ERA 2 reports (special reporting 1505-0266 and 1505-0270, respectively) to Treasury. The monthly reports identify key information such as the number of participating households that received ERA assistance of any kind and the total amount of ERA funds expended by the County to or for participating households. The quarterly reports identify the total amount obligated by the County and total amount expended. Both reports are important because Treasury uses the amounts expended and obligated to determine grantees? eligibility to receive reallocation payments, as well as whether they are subject to involuntary recapture of funds to be reallocated to other grantees or returned to the department. Special Tests and Provision ? ERA Funds Reallocation The County must ensure that all financial information reported in the monthly and quarterly ERA reports are accurate and that amounts reported as expended and obligated accurately capture the County?s housing activity at the time of submission. Description of Condition Our audit found the County?s controls were inadequate for ensuring it retained the data it used to prepare the monthly and quarterly ERA reports submitted to Treasury. During the audit, the County attempted to provide documentation to support the monthly and quarterly reports. However, we noted significant variances from the reports submitted, and the County was unable to ensure the information reported was accurate and complete. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition The County staff responsible for preparing the reports relied on decentralized departments to provide the data needed for the monthly and quarterly reports. However, the County did not retain the information. Effect of Condition The U.S. Department of Treasury uses these reports to determine grantees? eligibility to receive reallocation payments, as well as whether they are subject to involuntary recapture of funds to be reallocated to other grantees or returned to the grantor. Any inaccurate information in these monthly and quarterly reports limits Treasury?s ability to make reallocation decisions, maintain transparency, and fulfill its legal obligations. Since the County was unable to provide the data used to prepare the reports, it cannot demonstrate the accuracy of the information reported. During the audit, we tested expenditures charged to the program and determined they were allowable; therefore, we are not questioning costs. Recommendation We recommend the County establish internal controls to ensure it retains the data used to prepare the monthly and quarterly federal reports to demonstrate that the information reported is accurate and complete. County?s Response Pierce County understands the importance of providing accurate reports to awarding agencies. Pierce County Human Services has streamlined reporting procedures for 2023 so that documentation, related data, and reconciliations are retained in a dedicated file. As a result, County staff will be able to more readily provide information as requested and reporting accuracy will be improved. Auditor?s Remarks We appreciate the County?s commitment to resolve this finding and thank the County for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular 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. Title 2 CFR Part 200, Uniform Guidance, section 329, Monitoring and reporting program performance, describes the requirements for auditees to perform oversight of the operations of the federal award supported activities to ensure compliance with applicable federal requirements and performance expectations. The Consolidated Appropriations Act, 2021, title V, Banking, subtitle A, Emergency Rental Assistance, section 501(g), Reporting requirements, describes the required performance and financial data and frequency of reports for this federal program. Section 501(b) describes the reallocation requirements.