Finding 623488 (2022-002)

2022-002 Activities Allowed and Unallowed, Allowable Costs/Cost Principles, and Period of Performance Prior Year Finding Number: N/A Repeat Finding Since: N/A Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of the Treasury Program: 21.023 COVID-19 ? Emergency Rental Assistance Program Award Number and Year: ERA0166, ERAE0477, and B-20-MW-27-0003; 2021 Pass-Through Agency: N/A Criteria: Title 2 U.S. Code of Federal Regulations ? 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The City?s subrecipient agreements state, ?invoice, admin cost summary report and payroll reports, and randomly selected files for monitoring must be submitted by provider for reimbursement.? Condition: In the sample of seven disbursements tested for Activities Allowed and Unallowed and Allowable Costs/Cost Principles, all seven did not have itemized documentation supporting the expenditures. In addition, in the sample of six disbursements tested to verify they were expended within the period of performance, two did not have itemized documentation supporting the expenditures, thus, it could not be determined that they were expended within the period of performance. Questioned Costs: None. Context: The City passed through $12,285,250 of the $12,299,743 expended of its Emergency Rental Assistance funds to subrecipients. The City completed monitoring procedures over its subrecipients and its applicants throughout 2022, which included reviewing spending of the subrecipients against budgets established at the beginning of the program and viewing data entered by its subrecipients into portals noting rent and utility assistance provided. The sample size was based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: By not obtaining itemized documentation, the City cannot be assured that its subrecipients were expending funds on allowable activities and met the requirements of allowable costs, or that the subrecipients expended funds within the period of performance. In addition, the City's subrecipients were not meeting the requirements outlined in their agreements with the City. Cause: The City considered its procedures sufficient in lieu of obtaining itemized invoices. Recommendation: We recommend the City obtain itemized documentation prior to paying invoices to ensure compliance with grant requirements. In addition, we recommend the City implement procedures to ensure its subrecipients are in compliance with established agreements. View of Responsible Official: Concur.