Finding Text
Condition - The Municipality’s staff could not provide us with the officially prepared and certified reports that supported compliance with the filing or submission of reports and financial information, as required by federal award and regulatory agreements. Likewise, reconciliations were not provided between the information used to prepare the required and submitted reports with the formal information presented and accounted for in the official
Municipality’s accounting system. According to an analysis of the related transactions prepared by the Municipality’s consultants for financial statements and Schedule of Expenditures of Federal Awards purposes for the fiscal year ended June 30, 2021, $1,082,613 has been expended or transferred to the general fund to cover eligible expenses under the terms allowed by the CDL grant. As a consequence of these conditions, compliance with reporting requirements established by the grantor entity, and related internal controls, could not be verified. Criteria - Code of Federal Regulations, 44 CFR Section 206, establishes, among other requirements, that the borrower must maintain complete and accurate accounts and other records for the program in accordance with the CDL requirements and regulations. Also, as established in the 2 CFR Section 200.302 (a) of the Uniform Guidance, 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. In addition, 2 CFR Section 200.403, states that otherwise authorized by statue, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity and be adequately documented. Cause - The Municipality has not properly established a formal recording system to identify and itemize the transactions that must be reported as eligible expenditures under the expense / cost category allowed by the provisions of the CDL. Also, there is a lack of knowledge and training to the personnel assigned to the management and reports preparation, as required by this federal award. Additionally, the Municipality does not have an adequate monitoring and internal control regarding the activity, filing and custody of reports, as required by the federal awards and the pass-through entity, and in a way that documents and supports the compliance with reporting requirements. Effect - The Municipality is exposed to the Grantor questioning the use of funds and affecting aspects and amounts associated with the qualification for the Loan Cancellation, if eligible at the end of the term to request this cancellation. Recommendation - We recommended management to prepare the necessary analyses, according to the requirements of the CDL, to identify and detail the expenditures that have been charged against the CDL funds. Also, it is absolutely necessary for the Municipality to design, document, establish and provide the necessary and required training, including guidelines and procedures, to all personnel who work directly or indirectly with the management of these federal funds.