FINDING 2022-003
Subject: CDBG - Entitlement Grants Cluster - Reporting
Federal Agency: Department of Housing and Urban Development
Federal Program: Community Development Block Grants/Entitlement Grants
Assistance Listings Number: 14.218
Federal Award Numbers and Years (or Other Identifying Numbers): B-20-MC-0010,
B-21-MC-18-0010,
B-22-MC-18-0010,
M-20-MW-18-0010
Compliance Requirement: Reporting
Audit Findings: Material Weakness, Other Matters
Repeat Finding
This is a repeat finding from the immediately prior audit report. The prior audit finding number was
2021-003.
Condition and Context
The City 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. Recipients are required to submit financial, performance, and special reports
annually or quarterly depending on the specifics of their CDBG - Entitlement Grant.
Financial reports are entered into the Integrated Disbursement and Information System (IDIS).
Grantees may include reports generated by the IDIS as part of their annual performance and evaluation
reports that must be submitted 90 days after the end of the grantee's program year. Information to be
tested from the IDIS is in the following system-generated reports: PR-26 - CDBG Financial Summary
Report, PR26 - CDBG-CV Financial Summary Report, PR-26 CDBG Activity Summary by Selected Grant,
PR-29 CDBG Cash on Hand Quarterly Reporting, and the PR-29 CDBG-CV Cash on Hand Quarterly
Report. In addition, under the Federal Funding Accountability and Transparency Act (FFATA) grantees are
required to report first-tier subawards of $30,000 or more to the FFATA Subaward System.
The City, based on the grants received, was required to submit the following reports during the
audit period: the PR-29 CDBG Cash on Hand Quarterly Report, the PR-26 CDBG Financial Summary
Report, and the FFATA reports.
PR-29 CDBG CV Cash on Hand Reporting
The City submitted the four required quarterly reports; however, a single employee prepared
and submitted the reports without a review or oversight process in place to prevent, or detect
and correct, errors.
Federal Funding and Transparency Act (FFATA) Reporting
The City submitted the two required FFATA reports for the two subaward recipients that
received over $30,000. Although the reports were prepared by one individual and approved
by another, the internal control was not effective and did not detect and allow correction of
errors prior to submission. Due to the lack of effective internal controls the following key data
elements were missing: Subawardee DUNS number, Subaward obligation/action date, and
the date of report submission (report submitted timely).
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 200.334 states in part:
"Financial records, supporting documents, statistical records, and all other non-Federal entity
records pertinent to a Federal award must be retained for a period of three years from the date
of submission of the final expenditure report or, for Federal awards that are renewed quarterly
or annually, from the date of the submission of the quarterly or annual financial report,
respectively, as reported to the Federal awarding agency or pass-through entity in the case of
a subrecipient. . . ."
2 CFR 170, Appendix A(I)(a) states in part:
"Reporting of first-tier subawards.
Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must
report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-
Federal entity or Federal agency . . .
2. Where and when to report.
i. The non-Federal entity or Federal agency must report each obligating action
described in paragraph a.1. of this award term to http://www.fsrs.gov.
ii. For subaward information, report no later than the end of the month following the
month in which the obligation was made. (For example, if the obligation was made on
November 7, 2010, the obligation must be reported by no later than December 31,
2010.)
3. What to report. You must report the information about each obligating action that the
submission instructions posted at http://www.fsrs.gov specify . . ."
Cause
A proper system of internal controls was not designed by management of the City, 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 City'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 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. As a result, reports were not filed timely with all required key line items.
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 City.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the City establish a proper system of internal controls,
including strengthening their policies and procedures to ensure all required reports are filed and all required
information is provided and supported by the City's records in a timely manner.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.