Federal Agency: U.S. Department of Treasury
Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds (SLFRF) Emergency Rental Assistance Program
Assistance Listing Number: 21.027 and 21.023
Federal Award Identification Number and Year: ALN 21.027 -Pub. L. No. 117-2 2021
ALN 21.023 -ERA0335 2021
ALN 21.023 - ERAOl 14 2021
Award Period: ALN 21.027 - 5/10/2021 - 12/31/2026 ALN 21.023 - 1/20/2021 - 9/30/2022 ALN 21.023 - 5/17/2021 - 9/30/2025
Type of Finding:
• Material Weakness in Internal Control over Compliance
• Other Matters
Criteria or specific requirement: According to§ 200.302 Financial management of 2 CFR Part 200, the non-federal entity's financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program -specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. Further, the financial management system of each non-federal entity must provide accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements. According to § 200.303 Internal controls of 2 CFR Part 200, the non-federal entity must 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.
Condition: During our testing, it was noted that the City did not have effective internal controls in place to ensure accurate reporting.
Management's Progress for Repeat Findings: This is a repeated and modified finding. While the City has improved its efforts, there are still opportunities for improvement to reasonably
ensure compliance with Federal laws, regulations, and program compliance requirements as well as compliance with City policy.
Questioned costs: None
Context: During our testing, we noted the following exceptions related to reporting. ALN 21.027
• For the Project and Expenditure Report 5 and 6, it was noted that the City reported a total estimated revenue loss of
$76,951,947.00 with 2022 accounting for $10,042,104.00 of the total. However, the City did not have any revenue loss for 2022. According to the City, its gross receipts tax grew 20.7% over the previous year in fiscal year 2022.
• During the fiscal year 2023, the City incorrectly reported total cumulative expenditures of $29,700,000.00 for the Revenue Replacement First Responder Payroll project -Project Identifier Number 120. The amount reported should have been $27,130,906.00 resulting in a variance of $2,569,094.00.
ALN 21.023
• For three of the four quarterly financial reports, the City was unable to reconcile the expenditure reports used as supporting documentation to the current quarter expenditures reported to the Treasury nor the schedule of expenditures of federal awards. Total variance of approximately $404,951 with ERAl Q3 2022 of $173,499, ERA2 Q4 2022 of
$61,196, andERA2 Ql 2023 of$170,256.
• For one of the five performance reports, the City was unable to provide documentation supporting the Total Dollar Amount of ERA funds Paid (Expended) and (Obligated) for Administrative Expenses of$312,822 related to key line item one -Administrative Costs Ratio. This is ERA Compliance Report for ERAl Q3 2022.
• For one of the five performance reports, the City was unable to provide documentation supporting the number of unique households that received ERAl assistance over the award period of performance by income categories of 4,426 nor the number of unique recipient households whose income eligibility was determined based on their eligibility for other federal benefit programs of 9,489 related to key line item three -System for Prioritizing Assistance. This is ERA Compliance Report for ERAl Final Report.
• For two of the five performance reports, it was noted that the total households receiving assistance was greater than the sum of Area Median Income (AMI) banded eligible households with a 5 to 10% margin of error to avoid false positives for medium to large recipients by 513 and 5,355 for ERAl Q3 2022 and ERAl Final Report, respectively. This is key line item four -Participant Households at Certain Income Levels Eligibility.
• For one of the five performance reports, we were unable to trace the reported data to records that accumulate and summarize data for key line items one through four as the Demographics and Award Activity Amounts Approved (Obligated) and Amounts Paid (Expended) During the Quarter are blank in the Treasury report provided to us. This is ERA Compliance Report for ERA2 Ql 2023.
Cause: Specific to the Project and Expenditure Report 5 and 6, the 2022 estimated revenue loss of $10,042,104.00 is a duplicate of the 2020 estimated revenue loss of $10,042,104.00. The City failed to identify this error prior to submission of the reports to the Treasury. Specific to the Revenue Replacement First Responder Payroll project, the City did not perform a comparison of actual expenditures to the total estimated revenue loss to ensure the limit for the amount of SLFRF funds that can be used to "provide government services" was not exceeded by the City. During the audit, the City posted an entry moving the expenditures of $2,569,094 to the General Fund. Specific to the remaining, the City lacks effective internal controls over financial grant management to ensure submitted reports are accurate and agree to supporting documentation.
Effect: The auditor noted instances of noncompliance.
Recommendation: We recommend the City implement a secondary review process of reports and supporting documentation prior to certification and submission of reports to federal funding agencies.
Management Response: The City agrees with the finding. The Treasury Portal automatically fills in the amounts for revenue loss for 2022 with amounts reported in 2020. The Treasury portal has many flaws that would cause errors in reporting. In addition, the portal has changed every quarter, which makes it challenging to report accurately. The City will implement controls to ensure that a second review is completed prior to certification of the report.
Additionally, the Grant Administrator will work with department staff responsible for reporting and ensure that each report's supporting documentation is complete and ties to underlying subrecipient reports, the general ledger and grantor reports. All supporting documentation, along with a copy of the submitted report, will be stored in a central location to ensure that they are available for subsequent reviews and audits. This will be completed by June 30, 2024.
Timeline and Responsible Position: June 2024 - City Controller and Grants Administrator