City of Chicopee, MassachusettsLocal Government

Finding 2022-001 Significant Deficiency in Internal Control Over Compliance ? U.S. Department of Treasury ? Coronavirus Relief Fund City Municipal Assistance ? (CFDA No. 21.019) ? Reporting Passed Through Commonwealth of Massachusetts Executive Office of Administration and Finance Criteria: The U. S. Department of Treasury Office of Inspector General requires recipients of the CARES Act Coronavirus Relief Fund dollars to file periodic reports that describe the uses of these funds. The Massachusetts Executive Office of Administration and Finance requires that sub-recipient municipal governments (cities, towns, and regional school districts) submit quarterly reports on expenditures of the Coronavirus Relief Fund to the State administering agency. The reports should reflect the amounts expended on the municipal general ledger accounting records. Condition: The City of Chicopee, Massachusetts, filed the required quarterly reports. However, the reports were not reconciled to the City?s general ledger. The Final Submission Report showed $1,450,148.36 more reported on the report than was posted to the general ledger CARES account. Cause: The City does not have procedures in place to reconcile reporting filed with the State administering agency to the activity in the City?s general ledger. The costs reported that were not charged to the CARES Act account are likely expenses that were charged to City departmental budgets and later determined to be eligible under the program but were not reclassified to the CARES Act account on the City?s general ledger. Effect: The City could misstate or include unallowed costs in its financial reporting of grant funds. Questioned Costs: None reported. Recommendation: The City personnel should reconcile the reports to the City?s general ledger. When expenses are reclassified from other accounts to the Coronavirus Relief Funds, a journal entry adjustment should be made to the general ledger and proper supporting documentation should be retained to have a proper audit trail. Views of Responsible Officials and Planned Corrective Action: See corrective action plan following on page 17.

Finding 2019-001 Significant Deficiency in Internal Control Over Compliance ? Community Development Block -Grants/Entitlement Grants (CFDA No. 14.218) ? Subrecipient Monitoring Criteria: Per 24 CFR the subrecipient grant agreements shall include the program income requirements set forth in 570.504c. The regulations at 570.504c states that the written agreement between the recipient and the subrecipient, as required by 570.503, shall specify whether program income received is to be returned to the recipient or retained by the subrecipient. Where the program income is to be retained by the subrecipient, the agreement shall specify the activities that will be undertaken with the program income and that all provisions of the written agreement shall apply to the specified activities. When the subrecipient retains program income, transfers of grant funds by the recipient to the subrecipient shall be adjusted according to the principles described in paragraphs (b)(2)(i) and (ii) of this section. Any program income on hand when the agreement expires, or received after the agreement?s expiration, shall be paid to the recipient as required by 570.503(b)(8). Condition: Subrecipient grant agreements were missing key language regarding disposition of program income received by a subrecipient. Cause: There were inadequate internal controls and administrative oversight of Community Development Block Grant activities and funding. Effect: Absent proper internal controls the City is unable to appropriately manage the Community Development Block Grant finding. Questioned Costs: None identified. Perspective Information: This condition was noted in a monitoring review by the U. S. Department of Housing and Urban Development. Recommendation: The City should update the Community Development Block Grant subrecipient agreements to accurately reflect the regulatory criteria. Views of Responsible Officials and Planned Corrective Action: Although the City does not fund any activities that create program income, the City has revised its agreements to include regulations related to retention/return of program income.

Finding 2019-002 Significant Deficiency in Internal Control Over Compliance ? Community Development Block -Grants/Entitlement Grants (CFDA No. 14.218) ? Subrecipient Monitoring Criteria: Per 24 CFR 570.502(a) subrecipients that utilize Community Development Block Grant funds for salaries and wages must maintain records that document time charged to Community Development Block Grant funded work for that work to be allocable. 24CFR 570.502(a) references and follows requirements detailed in 2CFR Part 200.405, which states that a cost can be allocated to a Federal award if it (1) is incurred specifically for the Federal award; (2) benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in subpart 200.405. Condition: The City funds at least one subrecipient that has employees who work on both Community Development Block Grant eligible and Community Development Block Grant non-eligible activities. The City is not consistently monitoring time distribution records. Cause: The City is not implementing its subrecipient monitoring standards consistently. Effect: Failure to adequately monitor subrecipient administrative expenses creates the opportunity for Community Development Block Grant funds to be expended on ineligible uses. Questioned Costs: None identified. Perspective Information: This condition was noted in a monitoring review by the U. S. Department of Housing and Urban Development. Recommendation: The City should draft a written plan to ensure that the City is monitoring time distribution records for all Community Development Block Grant subrecipients. The City should document selected time distribution monitoring. Views of Responsible Officials and Planned Corrective Action: The City?s Community Development Department has revised its Public Service monitoring protocol to review time distribution records. In addition, the City will only pay personnel cost when supported by acceptable time allocation documentation.

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