CITY OF DELPHI

FINDING 2021-003 Subject: Community Development Block Grants/State's program and Non-Entitlement Grants in Hawaii, COVID-19 ? Community Development Block Grants/ State's program and Non-Entitlement Grants in Hawaii - Cash Management Federal Agency: Department of Housing and Urban Development Federal Program: Community Development Block Grants/State's program and Non-Entitlement Grants in Hawaii, COVID-19 ? Community Development Block Grants/ State's program and Non-Entitlement Grants in Hawaii Assistance Listings Number: 14.228 Federal Award Numbers and Years (or Other Identifying Numbers): A192-21-WW-20-102, A192-21-CV-CV2-330 Pass-Through Entity: Indiana Office of Community and Rural Affairs Compliance Requirement: Cash Management Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the City to ensure compliance with requirements related to the grant agreement and the Cash Management compliance requirement. The City contracted with a grant administrator to help oversee the grant. The grant administrator submitted reimbursement requests on behalf of the City. Prior to submission, the City authorized the grant administrator to submit the request. On July 30, 2021, the City authorized the grant administrator to request $250,000 for grant A192-21-CV-CV2-330. The request was received and receipted into the City's ledger on August 10, 2021. The City then timely disbursed $170,000 of the grant within five days. However, the remaining $80,000 was disbursed 31 days and 203 days later in the amounts of $6,250 and $73,750, respectively. The City earned $108 in interest on the balance held from August 2021 until March 2022, which was returned to the U.S. Treasury on June 8, 2022. On October 7, 2021, the City authorized the grant administrator to request $529,862 for grant A192-21-WW-20-102. The request was received and receipted into the City's ledger on October 19, 2021. The City then timely disbursed $476,998 of the grant within five days. However, the remaining $52,864 was disbursed 13 days and 126 days later in the amounts of $30,230 and $22,634, respectively. The lack of effective internal controls and noncompliance was isolated to the A192-21-WW-20-102 and the A192-21-CV-CV2-330 grants. We consider the $132,864 disbursed late to be questioned costs. Criteria 2 CFR 200.303 states in part: "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). . . ." 2 CFR 200.305(b)(1) states in part: ". . . written procedures that minimize the time elapsing between the transfer of funds and disbursement by the non-Federal entity, . . . Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. . . ." Indiana CDBG Handbook, Section III, Financial Management and Reporting (p 100) states in part: ". . . Grantees must be alert to the receipt of federal funds and be prepared to issue payments to their contractors within five business days of the deposit. Under no circumstances should a Grantee retain more than $5,000 of federal money in their bank account for more than five business days. If for any reason the federal funds cannot be disbursed during the five-day period, the Grantee will be required to return all interest earned on the federal funds over $100 to OCRA by check made payable to the U.S. Treasury. Grantees are advised to keep federal funds in non-interest-bearing accounts. . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Cash Management compliance requirement. Effect The failure to design and implement an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Cash Management compliance requirement could have resulted in the loss of federal funds to the City. Questioned Costs Questioned costs of $132,864 were identified as noted in the Condition and Context. Recommendation We recommended that the City's management establish a system of internal control to ensure compliance with the grant agreement and the Cash Management compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2021-004 Subject: Community Development Block Grants/State's program and Non-Entitlement Grants in Hawaii - Reporting Federal Agency: Department of Housing and Urban Development Federal Program: Community Development Block Grants/State's program and Non-Entitlement Grants in Hawaii Assistance Listings Number: 14.228 Federal Award Number and Year (or Other Identifying Number): A192-21-WW-20-102 Pass-Through Entity: Indiana Office of Community and Rural Affairs Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not in place at the City to ensure compliance with requirements related to the grant agreement and the Reporting compliance requirement. The City contracted with a grant administrator to help oversee the grant. The grant administrator submitted the reports on behalf of the City without an effective oversight or review process. The Section 3 Compliance form for the period of January 1, 2021 to June 30, 2021, was approved by the City's Chief Elected Official (Mayor) on August 31, 2021; however, the report did not include contractor information related to work started on April 26, 2021, as evidenced by contractor invoices paid by the City with grant funds. The lack of effective internal controls was a systemic issue throughout the audit period; the noncompliance was isolated to the A192-21-WW-20-102 grant. Criteria 2 CFR 200.303 states in part: "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). . . ." 2 CFR 200.302(b)(2) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ?? 200.328 and 200.329. . . ." Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Reporting compliance requirement. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Reporting compliance requirement could have resulted in the loss of federal funds to the City. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the City's management establish a system of internal control to ensure compliance with the grant agreement and the Reporting compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

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