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FINDING 2022-003 Subject: Staffing for Adequate Fire and Emergency Response (SAFER) ? Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Period of Performance Federal Agency: Department of Homeland Security Federal Program: Staffing for Adequate Fire and Emergency Response (SAFER) Assistance Listings Number: 97.083 Federal Award Number and Year (or Other Identifying Number): EMW-2019-FF-00944 Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Period of Performance Audit Finding: Material Weakness Condition and Context The Township had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties that would likely be effective in preventing, or detecting and correcting, noncompliance. The Township incurred and paid for payroll and other related expenses. Then requested reimbursement from the federal agency for these costs. Costs requested for reimbursement from the federal agency are to be allowable per the grant, adequately supported, and within the period of performance for the grant. The Township submitted five reimbursement requests during the audit period. The Director of Finance compiled the payroll and benefit amounts to be submitted for reimbursement and provided it to the Assistant Fire Chief. The reimbursement request was then filed by the Assistant Fire Chief without evidence of an oversight or review process in place to prevent, or detect and correct, errors and ensure the payroll was an allowable activity, allowable cost and within the period of performance. The lack of internal controls was a systemic issue 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). . . ." Cause A system of internal controls was not designed or implemented by management of the Township which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the management's expectation of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the Township design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.