Finding Text
Federal Program: 21.019 Coronavirus Relief Fund
Award Number and Year: C139 and C2-069
Name of Federal Agency and Pass-Through Agency: U.S. Department of the Treasury and Kentucky Department for Local Government
Compliance Requirements: Activities Allowed/Unallowed, Allowable Costs/Principles
Type of Finding: Noncompliance
Amount of Questioned Costs: $214,179
Modified Opinion: Adverse
This is a repeat finding and was included in prior year audit report as finding 2020-008. The fiscal court did not implement adequate internal controls over federal program, CFDA 21.019, Coronavirus Relief Fund. There were no procedures or review processes in place to ensure that compliance requirements were met for this federal program. The fiscal court did not define, maintain, or periodically evaluate the skills and expertise needed among its members to enable them to ask relevant questions of financial staff related to the federal program oversight. Further, the fiscal court did not maintain an organizational structure that facilitated effective reporting and other communications about internal control over compliance among various functions and positions of management. The fiscal court did not have job descriptions for employees managing federal programs nor did they document significant processes that explain the flow of transactions, controls to address key risk areas, and related reporting responsibilities. The fiscal court staff believed that they had appropriate procedures in place and did not realize that they were not sufficient. The fiscal court budgets for training in every department, however, training is not mandatory and the fiscal court does not ensure that training is sufficient for relevant employees. The fiscal court staff also believed that they were using job descriptions for employees outlined in the “County Budget Preparation and State Local Finance Officer Policy Manual”, however, the positions of employees managing the federal programs are not outlined in the budget manual.
Failure to implement internal controls over federal programs creates a greater risk that compliance requirements will not be met and increases the risk of undetected errors in financial reporting, or misappropriation of federal funds due to fraud. Due to the lack of internal controls, the county was noncompliant with federal requirements over CFDA 21.019, resulting in ineligible expenditures.
Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance)
§200.303 Internal Controls
The non-Federal entity must:
(a) 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).
(b) Comply with Federal Statues, regulations, and the terms and conditions of the Federal awards.
(c) Evaluate and monitor non-Federal entity’s compliance with statutes, regulations and the terms and conditions of Federal awards.
(d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings.
(e) Take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designated as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, state, local, and tribal laws regarding privacy and obligations of confidentiality.
Strong internal controls dictate that management should implement procedures to ensure that there is compliance with requirements related to federal funds received and expended, including providing adequate training to staff overseeing these procedures. To ensure these procedures are properly implemented by staff, the procedures should be in writing and easily accessible for staff to refer to while performing their job duties. Further, management should ensure that staff overseeing controls and compliance related to federal funds are continually and adequately trained to allow them to meet internal control and compliance requirements
We recommend the fiscal court, in regard to controls over compliance for CFDA 21.019:
1. Implement procedures to ensure that expenditures related to the federal program meet all federal compliance requirements, including documented review procedures to ensure that all federal expenditures are allowable and fall within the correct period of performance,
2. document job descriptions for all employees and significant processes that explain the flow of transactions, controls to address key risk areas, and related reporting responsibilities, and 3. ensure that all employees receive sufficient training in relevant areas to ensure that they develop and retain sufficient and competent personnel to oversee the federal program compliance.