Finding Text
FINDING 2022-004
Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Reporting
Federal Agency: Department of the Treasury
Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds
Assistance Listings Number: 21.027
Federal Award Number and Year (or Other Identifying Number): FY 2022
Pass-Through Entity: Department of the Treasury
Compliance Requirement: Reporting
Audit Finding: Material Weakness
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 quarterly or annually Project and Expenditure
(P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the
respective due dates, are based upon type of recipient and its population, as well as the recipient's
allocation amount. Information to be reported includes projects funded, expenditures, and contracts for the
appropriate reporting period.
The City was classified as a City with a population below 250,000 residents that received an
allocation of more than $10 million in State and Local Fiscal Recovery Funds (SLFRF). As such, the initial
P&E report, covering three calendar quarters from March 3, 2021 to December 31, 2021, was required to
be submitted to the Treasury by January 31, 2022. The subsequent quarterly reports are to cover one
calendar quarter and must be submitted to the Treasury by the last day of the month following the end of
the period covered.
The City submitted four P&E reports during the audit period; however, a single employee prepared
and submitted the P&E reports without a review or oversight process in place to prevent, or detect and
correct, errors.
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). . . ."
INDIANA STATE BOARD OF ACCOUNTS
21
CITY OF MUNCIE
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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 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, 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 the City's management design and implement a proper system of internal
controls, that would include segregation of duties for the preparation and review of federal reports 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.