Finding 975841 (2021-009)

Finding 2021-009 – Noncompliance with Compliance Requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance; Reporting; and Special Tests and Provisions – Disaster Grants – Public Assistance (Presidentially Declared Disasters) PASS-THROUGH GRANTOR: Oklahoma Department of Emergency Management FEDERAL AGENCY: U.S. Department of Homeland Security ASSISTANCE LISTING: 97.036 FEDERAL PROGRAM NAME: Disaster Grants – Public Assistance (Presidentially Declared Disasters) FEDERAL AWARD NUMBER: DR-4438 FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance; Reporting; Special Tests and Provisions QUESTIONED COSTS: $105,935 Condition: Upon inquiry of county personnel, review of documentation and procedures, and a test of five (5) out of seventeen (17) project worksheets, the following weaknesses were noted: Project Worksheet 365 (D3) Questioned Cost – $1,257: • Supporting documentation retained from projects were not reviewed or approved by anyone other than the preparer. • Project expense documentation was not adequately retained to verify costs of the equipment used and FEMA equipment rates were not consistently used by the district. Total unsupported county equipment costs $402. • Project expense documentation was not adequately retained to verify costs of the materials used. Total material costs reported exceeded documentation by $855. Project Worksheet 872 (D2) Questioned Cost – $15,152: • Supporting documentation retained from projects were not reviewed or approved by anyone other than the preparer. • Project expense documentation was not adequately retained to verify costs of the labor used and correct labor rates were not consistently used by the District. Total unsupported County labor costs $939. • Project expense documentation was not adequately retained to verify costs of the equipment used and FEMA equipment rates were not consistently used by the District. Total unsupported County equipment costs $9,946. • Project expense documentation was not adequately retained to verify costs of the materials used. Total material costs reported did not exceed the total County documentation. • Unallowed management costs were included in total project expenditures totaling $4,267. Project Worksheet 888 (D2) Questioned Cost – $19,885: • Supporting documentation retained from projects were not reviewed or approved by anyone other than the preparer. • Project expense documentation was not adequately retained to verify costs of the labor used and correct labor rates were not consistently used by the District. Total unsupported County labor costs $2,298. • Project expense documentation was not adequately retained to verify costs of the equipment used and FEMA equipment rates were not consistently used by the District. Total unsupported County equipment costs $10,551. • Project expense documentation was not adequately retained to verify costs of the materials used. Total material costs reported exceeded documentation by $640. • Unallowed management costs were included in total project expenditures totaling $6,396. Project Worksheet 967 (D2) Questioned Cost – $4,137: • Project expense documentation was not adequately retained to verify costs of the labor used and correct labor rates were not consistently used by the District. Total unsupported County labor costs $940. • Project expense documentation was not adequately retained to verify costs of the equipment used and FEMA equipment rates were not consistently used by the District. Total unsupported County equipment costs $2,408. • Project expense documentation was not adequately retained to verify costs of the materials used. Total material costs reported exceeded documentation by $180. • Unallowed management costs were included in total project expenditures totaling $609. Further, upon additional inquiry of staff and review of documentation over 100% of federal expenditures the following was noted: Project Worksheet 365 (D3): • One (1) Quarterly Report was not submitted within 30 days of the end of a calendar quarter. Project Worksheet 756 (D2) Questioned Cost – $41,417: • Project expenditures totaling $41,417 occurred after the period of performance deadline. Project Worksheet 986 (D3) Questioned Cost – $24,087: • Project expenditures totaling $24,087 occurred after the period of performance deadline. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: These conditions resulted in noncompliance to federal grant requirements and could result in loss of federal funds to the County. Recommendation: OSAI recommends the County gain an understanding of the compliance requirements for federal programs and implement internal control procedures to ensure compliance with all requirements. We further recommend all documentation be properly maintained for inspection. Management Response: County Commissioner District 2: I was not in office at this time, but I will discuss with my Administrative Assistant and determine the best way to track all project costs. County Commissioners District 3: I will have my Administrative Assistant double check her numbers and I also will review the documentation. Criteria: 2 CFR § 200.303(a) Internal Controls reads as follows: 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. 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). Title 2 CFR § 200.318 (a) General procurement standards reads as follows: The Non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part. [….] Title 2 CFR § 200.84 Questioned Cost reads as follows: Questioned cost means a cost that is questioned by the auditor because of an audit finding: (a) Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a Federal award, including for fund used to match Federal funds; (b) Where the costs, at the time of the audit, are not supported by adequate documentation; or (c) Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Further, GAO Standards – Section 2 – Objectives of an Entity – OV2.23 states in part: Compliance Objectives Management conducts activities in accordance with applicable laws and regulations. As part of specifying compliance objectives, the entity determines which laws and regulations apply to the entity. Management is expected to set objectives that incorporate these requirements. [….]