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FINDING 2022-003 Subject: Staffing for Adequate Fire and Emergency Response (SAFER) - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Cash Management, 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 Numbers and Years (or Other Identifying Numbers): EMW-2017-FH-00374, EMW-2019-FF-01116 Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Cash Management, Period of Performance Audit Finding: Material Weakness Condition and Context The District had designed, but did not adequately document implementation of a system of internal controls that would likely be effective in preventing, or detecting and correcting, material noncompliance. The District incurred and paid for payroll and other related expenses, and 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, paid prior to reimbursement, and paid within the period of performance. The District submitted seven reimbursement requests during the audit period. The Financial Coordinator compiled the payroll and benefit amounts to be submitted for reimbursement and provided it to the Fire Chief. The reimbursement request was then filed by the Fire Chief without evidence of an oversight or review process in place to prevent, or detect and correct, errors to ensure the payroll was an allowable activity, allowable cost, paid prior to reimbursement, 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 The system of internal controls, as documented by management of the District, could not be verified as being implemented. While the District had a written policy outlining the procedures to ensure the activity was allowable per the grant, adequately supported, paid prior to reimbursement, and paid within the period of performance documentation of the implementation of the procedures as intended was not maintained. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect management's statements 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 District 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.