Finding 971399 (2023-001)

2023-001 U.S. Department of Treasury & Passed through the Commonwealth of Massachusetts Executive Office of Public Safety and Homeland Security COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – AL# 21.027 Criteria: Per 2 CFR section 200.328 of the Uniform Guidance, each recipient must report program outlays and program income on a cash or accrual basis, as prescribed by the federal awarding agency. The compliance supplement identifies four Key Line Items required to be reported to the federal awarding agency which include (1) current period obligation, (2) cumulative obligation, (3) current period expenditure and (4) cumulative expenditure. Condition: As of the June 30, 2023 reporting date, the City’s Project and Expenditure Reports understated expenditures by $629,040. Also, obligations were overstated by approximately $15,000,000. Cause: The City did not reconcile the Project and Expenditure report with the City’s general ledger before submitting. The City also considered City departments as subrecipients which caused them to report departmental agreements as obligations. Effect: The City did not properly report grant expenditures and obligations in the Project and Expenditure reporting. Questioned Costs: None Repeat Finding from Prior Year: Yes; Finding 2022-002 Recommendation: The City should implement procedures to reconcile the financial information in the Project and Expenditure reports to the City’s general ledger and contract files before submission. Views of Responsible Official: Management agrees with the finding, but notes that there was confusion with the US Treasury portal and the City reached out to the US Treasury and received clarification on reporting obligations moving forward. Additionally, the US Treasury issued in November 2023 the Obligation Interim Final Rule to address questions and comments regarding the definition of obligation by recipients. In addition, it revises the definition of “obligation” in US Treasury’s SLFRF program. Anticipated completion date of the corrective action is April 30, 2024.