City of Carbondale

Significant Deficiency Finding number 2025 – 001 Federal Program 21.027 American Rescue Plan Act (ARPA) Criteria Noncompliance finding of IMRF contributions being incorrectly allocated to the grant funds and included in the annual report to the federal agency. Condition and Context The City incorrectly allocated IMRF contributions as a portion of salaries and benefits. This amount was reported on the annual report to the Department of Treasury Cause The City failed to remove the IMRF contributions amounts from total salaries and benefits when reporting that information to the third-party consultant who assists with submitting the annual report. Effect The total allocated to the ARPA funds for the fiscal year was overstated on the initial version of the schedule of expenditures of federal awards. The total salaries and benefits as allocated to the fiscal year on the annual report to the Department of Treasury was overstated. Questioned Costs 21.027 American Rescue Plan Act (ARPA) - $14,921 IMRF contributions are a percentage of eligible salaries as determined by Illinois State Statute and were incorrectly included in the total salaries and benefits for employees performing administrative duties for the federal program.Recommendation We recommended management contact their third-party consultant who assists with the annual report to the Department of Treasury for guidance on self-reporting the unallowable total. The City was advised to remove the questioned allocation from the schedule of expenditures of federal awards and record the amount as deferred revenue on the financial statements. The annual report to the Department of Treasury can not be amended or adjusted after submission, which was due prior to fiscal year ending April 30, 2025. A correction will need to be made on the next annual report, due prior to the end of the next fiscal year. Views of the responsible officials and planned corrective actions Management agreed with the recommendation from the third-party consultant. An entry was made to the financial statements to remove the dollar amount from recognized revenue, and record as deferred revenue, and costs removed from the schedule of expenditures of federal awards. The total amount of questioned costs is immaterial to the program and to the financial statements, however, management decided the entry was in the best interest of the City and should be recognized in a future year. Official Responsible for Ensuring the Corrective Action Plan is Implemented Jeff Davis, City Treasurer/Director of Finance; Stan Reno, City Manager. Planned Completion Date for the Corrective Action Plan Recommendations are considered at the issuance of the report, November 24, 2025.

Criteria Eight journal entries were made during the audit process from information obtained as audit evidence. A ninth entry was made to agree actuarial reports to various funds, which the audit routinely assists with during the audit process. Condition and Context Eight journal entries were made during the audit process to correct various sections and agree to supporting documentation. Cause The City’s internal control process for review and approval of journal entries, reconciliations and other documentation did not adequately prevent or detect and correct misstatements to the financial statements. Effect It’s imperative that internal control processes, especially those of review and approval, are properly performed to provide accurate financial statement information to the users of the financial statements. As a result of the review and approval process not being performed properly, several transactions were recorded incorrectly or not at all. Recommendation We recommend that management continuously improve the review and approval process and determine if and where problems persist. Views of the responsible officials and planned corrective actions Management agrees that the review and approval process may need to be examined and refined to ensure financial information is properly recorded. Official Responsible for Ensuring the Corrective Action Plan is Implemented Jeff Davis, City Treasurer/Director of Finance; Stan Reno, Interim-City Manager. Planned Completion Date for the Corrective Action Plan Recommendations are considered at the issuance of the report, October 24, 2024.

Federal Program Impacts all programs presented on the Schedule of Expenditures of Federal Awards (SEFA). Criteria Lack of procedures to track and reconcile federal programs to the financial statements. Condition and Context The SEFA initially provided was incomplete and had not been reconciled to capital assets, general ledger data or other supporting documentation. Cause The City does not have adequate procedures to track federal awards in a centralized location. Effect The SEFA required multiple updates during the audit as a result of questions and testing in other areas. • The dollar amount of the final SEFA was more than $3.2 million greater than the dollar amount presented on the initial SEFA. • Programs that were necessary for testing as determined by the final SEFA were not included on the original SEFA. There were also two journal entries necessary to reconcile the SEFA and the general ledger. • Construction in progress and capital assets placed into service (completed projects) required an adjustment to correct expenses related to projects funded by federal grants. • Revenue and accounts receivable were also adjusted to record a federal grant reimbursement that had been placed into service during the fiscal year. Management indicated that while each individual department may have procedures to track their grants, capital assets and projects, there is not a centralized location or process to reconcile those records to the general ledger or other information as obtained from the Finance Department. As a result, the Finance Department was unaware of the progress of certain projects and could not adequately reconcile the financial statement information or the SEFA in preparation for the financial statement audit or single audit. Recommendation We recommend that management establish a centralized system for tracking all federal programs entered into by the City, that includes reconciling such information to the general ledger. We also recommend that reconciliations of federal programs be performed during month-end procedures, instead of performing those procedures while fieldwork is being conducted for the audit. Views of the responsible officials and planned corrective actions Management agrees that a centralized reconciliation control process should be in place, given the large amount of grants that the City has been awarded and will continue to apply for in the future. Management will work to develop those procedures and communicate with other departments. Official Responsible for Ensuring the Corrective Action Plan is Implemented Jeff Davis, City Treasurer/Director of Finance; Stan Reno, Interim-City Manager. Planned Completion Date for the Corrective Action Plan Recommendations are considered at the issuance of the report, October 24, 2024.