2022-001 The County did not have adequate internal controls over and did not comply with reporting requirements for the Coronavirus State and Local Fiscal Recovery Funds program.
Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Federal Grantor Name: U.S. Department of the Treasury
Federal Award/Contract Number: 1505-0271
Pass-through Entity Name: N/A
Pass-through Award/Contract Number: N/A
Known Questioned Cost Amount: $0
Prior Year Audit Finding: N/A
Background
The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected, and make necessary investments in water, sewer or broadband infrastructure. In 2022, the County spent $10,650,795 in SLFRF program funds. Of this amount, the County spent $4,194,866 of funds received directly from the U.S. Department of the Treasury (Treasury).
Under the SLFRF program, direct recipients are required tomust submit quarterly Project and Expenditure RrReports to Treasury. Treasury identified the following key line items in the quarterly report that contain critical information and must be accurate and complete:
1. Obligations and Expenditures
• Current period obligation
• Cumulative obligation
• Current period expenditure
• Cumulative expenditure
2. Subawards
3. Detailed information on any loans issued; contracts and grants awarded; transfers made to other government entities; and direct payments made by the recipient that are greater than $50,000. For amounts less than $50,000, the recipient must report in the aggregate for these same categories of loans issued; contracts and grants awarded; transfers made to other government entities; and direct payments made by the recipient.
Federal regulations require recipients to establish and follow internal controls to that ensure compliance with program requirements. These controls include understanding grant reportingprogram requirements, retaining source data, and monitoring the effectiveness of established controls.
Description of Condition
The County did not have an effective process or understanding to for ensureing it prepared accurate and complete quarterly reports based on supporting documentation and Treasury’s guidance provided by the U.S. Department of the Treasury foradequate internal controls over and did not comply with reporting requirements for the SLFRF .
Specifically, Tthe County submitted four four quarterly Project and Expenditure Reports with information applicable to the audit period that included incorrect information .:
• Report No. 1 (covering activity from January 1, 2022 to March 31, 2022)
• Report No. 2 (covering activity from April 1, 2022 to June 30, 2022)
• Report No. 3 (covering activity from July 1, 2022 to September 30, 2022)
• Report No. 4 (covering activity from October 1, 2022 to December 31, 2022)
We examined all four reports and the County’s supporting documentation related to each. We found that each report was inaccurate when compared to the supporting documentation and reporting guidance.
We consider these internal control deficiencies to be a material weakness that led to material noncompliance.
This issue was not reported as a finding in the prior audit.
Cause of Condition
County staff responsible for preparing the quarterly reports misinterpreted the U.S. Department of the Treasury’s guidance addressing regarding what information required tothey must include be included in them reports and how to report informationit. Additionally, the review process was inadequate for not adequate to identifying errors before submitting the reports to Treasury.
Effect of Condition
We examined reviewed all four quarterly Project and Expenditure RrReports related to 2022 and found the following errors. We identified errors in all quarterly reports as detailed below:
• Report No. 4’sQuarter 4 report:
•o cCurrent period expenditures were underreported by $2,027,818.
•o Report No. 4’sC cumulative expenditures were underreported by $270,548.
• In all four reports, tThe subaward section listed the incorrect subaward type on all four quarterly reports for all 51 subawards reported. This totaled 51 instances of inaccurate reporting.
• In all four reports, the expenditures for awards more than $50,000 line item listed the incorrectthe subaward type was incorrect on all four quarterly reports for all 51 subawards listed. This totaled 51 instances of inaccurate reporting.
By not establishing adequate internal controls, the County cannot ensure that information reported to the federal grantor awarding agency is complete and accurate.
Recommendation
We recommend the County:
• Establish internal controls to prepare accurate and complete reports, and ensure information submitted included in reportsis are accurate, supported by accounting records, and reviewed and reconciled prior tofor accuracy before submitting submission and certifying themcertification of the report
• Provide resources necessary for staff to improve report preparation so that it complies with federal reporting guidance and system requirements
• Refer to Treasury’s Project and Expenditure Report User Guide for instructions on correcting the data.
County’s Response
An internal audit of ARPA disbursements and reporting was conducted in 2023. Quarterly reporting was adjusted to correct variances found during the internal audit. Staff was provided further training on ARPA reporting requirements and secondary review of quarterly reports was provided.
Further corrective action was taken in the 2023 4th Quarter to identify grant recipients in the ARPA reporting system as recipients.
Auditor’s Remarks
We thank the County for its commitment to resolving this issue. We will follow up on the status of this finding during our next audit.
Applicable Laws and Regulations
Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements.
The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
Office of Management and Budget, 2 CFR Part 200, Appendix XI, 2022 Compliance Supplement, for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds, states in part:
L. Reporting
3. b. Special Reporting
a. a. There are three types of reporting requirements for the CSLFRF program:
2. i. Project and Expenditure Report: Report on financial data, projects funded, expenditures, and contracts and subawards over $50,000, and other information. Project and Expenditure Reports are due on a regular recurring basis after the Interim Reports. The reporting frequency and deadlines vary by type of recipient and total allocation amount.
d. b. Key Line Items – The following line items contain critical information for the Project and Expenditure Report:
1. i. Obligations and Expenditures
• Current period obligation
• Cumulative obligation
• Current period expenditure
• Cumulative expenditure
2ii. Subawards
3. iii. Detailed information on any loans issued; contracts and grants awarded; transfers made to other government entities; and direct payments made by the recipient that are greater than $50,000. For amounts less than $50,000, the recipient must report in the aggregate for these same categories of loans issued; contracts and grants awarded; transfers made to other government entities; and direct payments made by the recipient.
Please see Treasury’s Compliance and Reporting Guidance at (https://home.treasury.gov/policy-issues/coronavirus/
assistance-for-statelocal-and-tribal-governments/state-and-local-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities) for more information.