City of Agawam, MassachusettsLocal Government

COVID-19 – Coronavirus State and Local Fiscal Recovery Funds ALN#21.027 2024-002: Reporting to the Federal Government Compliance Requirement: Reporting Type of Finding: Compliance and Significant Deficiency in Internal Control Over Compliance Criteria or Specific Requirement: Federal grant requirements under the American Rescue Plan Act (“ARPA”) and the U.S. Department of Treasury’s Compliance and Reporting Guidance mandate that all eligible current period expenditures be accurately and completely reported in the Project and Expenditure (“P&E”) reports for federal grants. Complete and timely reporting is essential for compliance, transparency, and continued grant eligibility. Condition: During the review of the City’s ARPA federal grant fund, it was found that not all current period expenditures were included in the P&E report submitted for the reporting period April 1, 2023, through March 31, 2024. Specifically, $618,832 in eligible costs that had been incurred April 1, 2023, through June 30, 2023 were omitted from the required federal reporting of the Current Period Expenditures. The $618,832 was included on the ARPA submission on the “Total Expenditures” and ”Total Cumulative Expenditures” lines of the P&E Report but was inadvertently omitted on the “Current Period Expenditures” line due to the Procurement officer who filed the report used the Town’s fiscal year which begins in July inadvertently instead of the Federal fiscal year which begins in April. Context: The City receives ARPA federal funding to support eligible projects and expenditures related to the COVID-19 response and recovery. The U.S. Treasury requires regular reporting of project expenditures through the P&E Reporting process. For the City, the requirement is to file the P&E report annually. Accurate and comprehensive reporting ensures that grant activity is properly disclosed and meets federal compliance standards. Cause: The omission occurred because the City’s grant accounting and reporting process did not capture and reconcile all eligible expenditures incurred during the reporting period before submitting the P&E report. The City lacked an established system to ensure proper segregation of duties in the report filing process. Specifically, the same individual was responsible for both preparing and submitting the report, without an independent review or oversight by another staff member. This absence of checks and balances increases the risk of errors or omissions and does not align with best practices for internal controls. Effect: As a result of the incomplete reporting, the City’s P&E submission understated current period ARPA expenditures. This can have an impact on the City’s compliance standing with federal grant requirements and potentially jeopardize future grant funding. Questioned Costs: None reported. Recommendation: The City should implement internal control procedures to ensure compliance with all grant requirements including establishing a standardized reconciliation process that reconciles the P&E report submission with the grant fund ledger to ensure all eligible expenditures are included. The City should also implement a secondary review of the P&E report prior to submission. Views of Responsible Officials: See Corrective Action Plan.