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FINDING 2022-006 Subject: COVID-19 - Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response - Period of Performance Federal Agency: Department of Health and Human Services Federal Program: COVID-19 - Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response Assistance Listings Number: 93.354 Federal Award Number and Year (or Other Identifying Number): 1NU90TP922179 Pass-Through Entity: Indiana State Department of Health Compliance Requirement: Period of Performance Audit Findings: Material Weakness, Modified Opinion Condition and Context The County had not designed, nor implemented a system of internal controls to ensure grant funds were expended during the grant's period of performance. A grant's period of performance is the time frame during which the grant funds may be expended. The period of performance for the grant was identified in the grant agreement. The County received $220,000 in advance funding for the grant with a period of performance beginning July 1, 2022. The entirety of the grant funds were receipted into the County's Supp PH Workforce GRT 93.354 fund (grant fund); however, the County disbursed $36,150 from the grant fund prior to the start of the grant's period of performance. As the grant did not allow for expenditures prior to the beginning of the period performance and approval from the grantor for the costs was not obtained, the total $36,150 was considered questioned costs. The lack of internal controls and noncompliance were systemic issues 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). . . ." 2 CFR 200.1 states in part: ". . . Period of performance means the total estimated time interval between the start of an initial Federal award and the planned end date, which may include one or more funded portions, or budget periods. Identification of the period of performance in the Federal award per ? 200.211(b)(5) does not commit the awarding agency to fund the award beyond the currently approved budget period. . . ." 2 CFR 200.458 states: "Pre-award costs are those incurred prior to the effective date of the Federal award or subaward directly pursuant to the negotiation and in anticipation of the Federal award where such costs are necessary for efficient and timely performance of the scope of work. Such costs are allowable only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. If charged to the award, these costs must be charged to the initial budget period of the award, unless otherwise specified by the Federal awarding agency or pass-through entity." Cause A proper system of internal controls was not designed by management of the County. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the County's management 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 implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, expenses were paid outside of the period of performance. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the County. Questioned Costs Questioned costs of $36,150 were identified as outlined in the Condition and Context. Recommendation We recommended that management of the County establish a proper system of internal controls and develop policies and procedures to ensure all expenditures are within the period of performance or appropriate approval is obtained for pre-award costs. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.