FAC Explorer

Finding 994938 (2022-002)

Material Weakness Repeat Finding
Requirement
L
Questioned Costs
-
Year
2022
Accepted
2023-09-28
Audit: 312191
Organization: City of Seattle (WA)
Auditor: Office of the Washington State Auditor

AI Summary

  • Core Issue: The City’s internal controls are inadequate, leading to noncompliance with federal reporting requirements for Community Development Block Grants.
  • Impacted Requirements: Key reports such as the Financial Summary Report (PR26), Cash on Hand Quarterly Report (PR29), and FFATA subaward reporting were inaccurately submitted or not submitted at all.
  • Recommended Follow-Up: Strengthen internal controls by training staff on reporting requirements and ensuring proper documentation is maintained to prevent future inaccuracies.

Finding Text

2022-002 The City?s internal controls were inadequate for ensuring compliance with federal reporting requirements.Assistance Listing Number and Title: 14.218 Community Development Block Grants /Entitlement Grants14.218 ? COVID-19 Community Development Block Grants /Entitlement GrantsFederal Grantor Name: U.S Department of Housing and Urban DevelopmentFederal Award/Contract Number: B17MC530005, B18MC530005, B20MC530005, B21MC530005, B22MC530005, B20MW530005 COVID-19 1153014Pass-through Entity Name: N/APass-through Award/ContractNumber:N/AKnown Questioned Cost Amount: $0Prior Year Audit Finding: Yes, Finding 2021-002Description of ConditionThe City spent $5,605,767 in Community Development Block Grants/EntitlementGrants (CDBG) funds in 2022. Of that amount, the City passed through $1,101,720to nine subrecipients. The purpose of the CDBG program is to help provide decentand affordable housing, particularly for people with moderate, low, and very lowincomes. Funds also help recipients implement strategies for achieving an adequatesupply of decent housing and providing a suitable living environment and expandedeconomic opportunities for people with low incomes. Federal regulations require recipients to establish and follow internal controls thatensure compliance with program requirements. These controls includeunderstanding grant requirements and monitoring the effectiveness of establishedcontrols.To comply with federal reporting requirements, the City must submit certainfinancial and special reports to the U.S. Department of Housing and UrbanDevelopment (HUD). Financial reporting requirements require CDBG fundingrecipients to submit the Financial Summary Report (PR26), Cash on HandQuarterly Report (PR29) and special reporting requirements require FederalFunding Accountability and Transparency Act (FFATA) reports.Financial Summary ReportThe City must accurately prepare and submit the Financial Summary Reports(PR26 and PR26-CV) to include information on overall low-to-moderate incomebenefit compliance, percent of funds obligated to the public services, and percentof funds obligated to the planning and administrative activities during the programyear. We found the City?s internal controls were ineffective for ensuring itaccurately prepared these reports based on supporting records.The City did not submit accurate information on the PR26 and PR26-CV reports in2022.Cash on Hand Quarterly ReportThe City must accurately prepare and submit the Cash on Hand Quarterly Reports(PR29 and PR29-CV) to include information such as cash on hand, program incomeand revolving funds. We found the City?s internal controls were ineffective forensuring it accurately prepared these reports based on supporting records.The City did not submit accurate information in one of the required quarterly PR29reports and the four required quarterly PR29-CV reports submitted in 2022.Specifically, the PR29-CV reports did not report any activity even though the Cityhad CDBG-CV funds.FFATA ReportingThe FFATA requires direct recipients that make first-tier subawards of $30,000 ormore to report them in the FFATA Subaward Reporting System (FSRS). The Citymust report subawards by the end of the month following the month in which itmade the subaward or subaward amendment. We found the City?s internal controlswere ineffective for ensuring it reported nine subawards obligated in 2022 in theFSRS, as federal regulations require. We consider these internal control deficiencies to be material weaknesses, whichled to material noncompliance.Cause of ConditionFinancial Summary Report and Cash on Hand Quarterly ReportThe person responsible for these reporting activities retired at the end of 2022. Thecurrent employee performing this duty was not able to identify the cause of thevariances and was unable to locate documentation demonstrating the amountsreported were correct.FFATAThe Department was facing staffing challenges and did not have an individual withtime to complete the requirement in addition to their regular duties. Also, due toturnover, none of the Department employees had access to the FSRS.Effect of ConditionFinancial Summary ReportThe PR26 and PR26-CV reports document that the City is in compliance with theprimary objective of the Housing and Community Development Act of 1974(HCDA) which is to ensure that CDBG funds are primarily used for the benefit oflow and moderate income persons. Just as importantly, the report is also used todetermine if the entitlement grantee has remained in compliance with thelimitations placed on planning and administrative costs and public service costs.The reports include funding data that HUD then reports to Congress and is used tomonitor grantees. Failing to submit accurate information to HUD diminishes thefederal government?s ability to ensure proper monitoring of grantees and impairsthe accuracy of information reported to Congress.Cash on Hand Quarterly ReportThe PR29 and PR29-CV reports document a grantee?s compliance with the low tomoderate income benefit requirement, the amount obligated and expended forpublic services, and the amount obligated for planning and administration for theselected program year. The reports include funding data that HUD then reports toCongress and is used to monitor grantees. Failing to submit accurate information toHUD diminishes the federal government?s ability to ensure proper monitoring ofgrantees and impairs the accuracy of information reported to Congress. FFATAFailing to submit the required reports on time with accurate information diminishesthe federal government?s ability to ensure accountability and transparency offederal spending.Below is a summary of the missing reports we identified.See Schedule of Findings and Questioned Costs for chart/table.RecommendationWe recommend the City strengthen its internal controls over federal reportingrequirements to ensure its Financial Summary Report, Cash on Hand QuarterlyReports and FFATA reports are accurate.City?s ResponseHSD hired a consultant service (TDA) in response to prior SAO feedback, whichwill strengthen our internal controls over federal reporting requirements to ensureour Cash on Hand Quarterly Reports and FFATA reports are accurate andsubmitted timely moving forward. HSD will continue to clarify roles andresponsibilities for reporting and central reporting and archiving of confirmationreports to increase internal control of this function.TDA consulting will add capacity to HSD?s Federal Grants Management Unit toclear its 2022 FFATA reporting backlog while HSD addresses current staffingshortages. In addition to clearing the reporting backlog, HSD?s contractor isassisting with the development of policies and procedures to better facilitate theconducting of data quality reviews to address accuracy issues identified with Cashon Hand Quarterly Reports (PR29 and PR29-CV) to better report information suchas cash on hand, program income and revolving fund funding levels.As part of its scope of work, TDA has developed a workplan focusing on theestablishment of a staffing plan recommendation, the associated role assignmentsfor the future staffing structure and documenting reporting procedures to assurereporting compliance moving forward. Auditor?s RemarksWe thank the City for its response and consideration in this matter and the steps itis taking to address this issue. We will review the status of the City?s correctiveaction during our next audit.Applicable Laws and RegulationsTitle 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform AdministrativeRequirements, Cost Principles, and Audit Requirements for Federal Awards(Uniform Guidance), section 516, Audit findings, establishes reportingrequirements for audit findings.Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describesthe requirements for auditees to maintain internal controls over federal programsand comply with federal program requirements.The American Institute of Certified Public Accountants defines significantdeficiencies and material weaknesses in its Codification of Statements on AuditingStandards, section 935, Compliance Audits, paragraph 11.Title 2 CFR Part 200, Uniform Guidance, section 328, Financial reporting,establishes requirements for recipients? financial information.Title 2 CFR Part 170, Reporting Subaward and Executive CompensationInformation, establishes the Federal Funding Accountability and Transparency Act(FFATA) requirements of reporting the subaward information through the FFATASubaward Reporting System (FSRS).

Categories

Subrecipient Monitoring

Other Findings in this Audit

  • 418478 2022-003
    Significant Deficiency
  • 418479 2022-001
    - Repeat
  • 418480 2022-001
    - Repeat
  • 418481 2022-001
    - Repeat
  • 418482 2022-001
    - Repeat
  • 418483 2022-001
    - Repeat
  • 418484 2022-001
    - Repeat
  • 418485 2022-003
    Significant Deficiency
  • 418486 2022-001
    - Repeat
  • 418487 2022-001
    - Repeat
  • 418488 2022-001
    - Repeat
  • 418489 2022-001
    - Repeat
  • 418490 2022-001
    - Repeat
  • 418491 2022-001
    - Repeat
  • 418492 2022-001
    - Repeat
  • 418493 2022-002
    Material Weakness Repeat
  • 418494 2022-002
    Material Weakness Repeat
  • 418495 2022-002
    Material Weakness Repeat
  • 418496 2022-002
    Material Weakness Repeat
  • 418497 2022-002
    Material Weakness Repeat
  • 418498 2022-002
    Material Weakness Repeat
  • 418499 2022-002
    Material Weakness Repeat
  • 418500 2022-002
    Material Weakness Repeat
  • 418501 2022-002
    Material Weakness Repeat
  • 418502 2022-002
    Material Weakness Repeat
  • 418503 2022-002
    Material Weakness Repeat
  • 418504 2022-002
    Material Weakness Repeat
  • 418505 2022-002
    Material Weakness Repeat
  • 994920 2022-003
    Significant Deficiency
  • 994921 2022-001
    - Repeat
  • 994922 2022-001
    - Repeat
  • 994923 2022-001
    - Repeat
  • 994924 2022-001
    - Repeat
  • 994925 2022-001
    - Repeat
  • 994926 2022-001
    - Repeat
  • 994927 2022-003
    Significant Deficiency
  • 994928 2022-001
    - Repeat
  • 994929 2022-001
    - Repeat
  • 994930 2022-001
    - Repeat
  • 994931 2022-001
    - Repeat
  • 994932 2022-001
    - Repeat
  • 994933 2022-001
    - Repeat
  • 994934 2022-001
    - Repeat
  • 994935 2022-002
    Material Weakness Repeat
  • 994936 2022-002
    Material Weakness Repeat
  • 994937 2022-002
    Material Weakness Repeat
  • 994939 2022-002
    Material Weakness Repeat
  • 994940 2022-002
    Material Weakness Repeat
  • 994941 2022-002
    Material Weakness Repeat
  • 994942 2022-002
    Material Weakness Repeat
  • 994943 2022-002
    Material Weakness Repeat
  • 994944 2022-002
    Material Weakness Repeat
  • 994945 2022-002
    Material Weakness Repeat
  • 994946 2022-002
    Material Weakness Repeat
  • 994947 2022-002
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
66.458 Clean Water State Revolving Fund $8.07M
21.023 Covid 19 - Emergency Rental Assistance Program $3.73M
97.047 Bric: Building Resilient Infrastructure and Communities $2.10M
97.039 Hazard Mitigation Grant $1.37M
20.200 Highway Research and Development Program $1.32M
59.075 Covid 19 - Shuttered Venue Operators Grant Program $1.19M
10.558 Child and Adult Care Food Program $898,758
16.543 Missing Children's Assistance $707,467
14.231 Covid 19 - Emergency Solutions Grant Program $662,249
16.560 National Institute of Justice Research, Evaluation, and Development Project Grants $631,992
14.881 Moving to Work Demonstration Program $533,333
97.091 Homeland Security Biowatch Program $488,576
93.778 Medical Assistance Program $443,689
16.922 Equitable Sharing Program $420,424
10.559 Summer Food Service Program for Children $316,968
97.106 Securing the Cities Program $315,181
21.016 Equitable Sharing $295,231
16.838 Comprehensive Opioid, Stimulant, and Other Substances Use Program $263,540
84.047 Trio Upward Bound $229,868
14.239 Home Investment Partnerships Program $219,966
93.631 Developmental Disabilities Projects of National Significance $205,758
93.568 Low-Income Home Energy Assistance $188,098
93.569 Community Services Block Grant $181,812
16.582 Crime Victim Assistance/discretionary Grants $181,138
11.438 Pacific Coast Salmon Recovery Pacific Salmon Treaty Program $176,014
93.045 Special Programs for the Aging, Title Iii, Part C, Nutrition Services $170,962
14.218 Covid 19 - Community Development Block Grants/entitlement Grants $150,404
93.052 National Family Caregiver Support, Title Iii, Part E $143,382
97.042 Emergency Management Performance Grants $141,320
93.052 Covid 19 - National Family Caregiver Support, Title Iii, Part E $134,250
16.738 Edward Byrne Memorial Justice Assistance Grant Program $132,582
93.053 Nutrition Services Incentive Program $127,624
97.067 Homeland Security Grant Program $113,826
20.616 National Priority Safety Programs $110,138
14.241 Covid 19 - Housing Opportunities for Persons with Aids $106,646
93.048 Special Programs for the Aging, Title Iv, and Title Ii, Discretionary Projects $87,676
21.027 Covid 19 - Coronavirus State and Local Fiscal Recovery Funds $86,921
16.034 Covid 19 - Coronavirus Emergency Supplemental Funding Program $82,725
16.590 Grants to Encourage Arrest Policies and Enforcement of Protection Orders Program $81,124
93.044 Covid 19 - Special Programs for the Aging, Title Iii, Part B, Grants for Supportive Services and Senior Centers $63,693
14.267 Continuum of Care Program $61,816
16.320 Services for Trafficking Victims $59,634
20.507 Covid 19 - Federal Transit Formula Grants $59,618
97.044 Assistance to Firefighters Grant $51,428
97.056 Port Security Grant Program $49,644
93.043 Special Programs for the Aging, Title Iii, Part D, Disease Prevention and Health Promotion Services $49,378
20.703 Interagency Hazardous Materials Public Sector Training and Planning Grants $42,184
97.036 Disaster Grants - Public Assistance (presidentially Declared Disasters) $35,461
93.969 Pphf Geriatric Education Centers $31,693
20.507 Federal Transit Formula Grants $29,297
97.036 Covid 19 - Disaster Grants - Public Assistance (presidentially Declared Disasters) $23,392
16.575 Crime Victim Assistance $20,759
20.500 Federal Transit Capital Investment Grants $20,034
45.310 Grants to States $9,085
14.218 Community Development Block Grants/entitlement Grants $8,219
45.024 Promotion of the Arts Grants to Organizations and Individuals $7,100
10.576 Senior Farmers Market Nutrition Program $6,627
16.710 Public Safety Partnership and Community Policing Grants $6,392
20.600 State and Community Highway Safety $5,695
14.241 Housing Opportunities for Persons with Aids $4,294
15.916 Outdoor Recreation Acquisition, Development and Planning $2,840
20.205 Highway Planning and Construction $1,921
93.044 Special Programs for the Aging, Title Iii, Part B, Grants for Supportive Services and Senior Centers $1,596
20.525 State of Good Repair Grants Program $1,280
93.041 Special Programs for the Aging, Title Vii, Chapter 3, Programs for Prevention of Elder Abuse, Neglect, and Exploitation $666