County of Alpena

2024-005- Internal Control over Grant Monitoring and Reporting Finding Type: Material Weakness in Internal Control and Material Noncompliance in accordance with Uniform Guidance. Federal Program and Agency: Airport Improvement Program – ALN #20.106; U.S. Department of Transportation – Federal Aviation Administration (FAA) Repeat Finding: No Criteria: Per 2 CFR § 200.303 and 2 CFR § 200.510(b), the recipient is required to establish and maintain effective internal control over federal awards and to ensure complete and accurate reporting of all federal expenditures on the Schedule of Expenditures of Federal Awards (SEFA). Adequate oversight and reconciliation processes must be in place to ensure all allowable expenditures are properly recorded and submitted for reimbursement. Condition: During the financial audit for fiscal year ending December 31, 2024, it was identified that approximately $2.7 million in expenditures related to a federally funded airport construction project were not communicated to the finance department in a timely manner. Consequently, the expenses were not reported in the correct accounting period and were excluded from the County’s grant monitoring process. These expenditures were incurred under ALN #20.106 and were not submitted for reimbursement timely. Questioned Costs: None. While invoices were not submitted timely, the costs incurred appear allowable, supported, and related to the approved project scope. The County has since submitted the majority of expenditures for reimbursement. Context: The prior period adjustment was identified during 2024 audit testing. Due to the lack of communication and oversight by the former Airport Manager and Grant Manager, these amounts were not reported in the proper period or submitted for reimbursement timely. The issue was not limited to a single transaction. A prior period adjustment was recognized in the 2024 financial statements to properly reflect these federal expenditures. Cause: The County did not have adequate internal controls in place to ensure timely receipt and tracking of grant-related invoices. The project oversight was insufficient, and the individuals responsible for managing the grant and construction activities failed to communicate expenditures to the finance department timely. Effect: The County materially understated federal expenditures in prior reporting period(s) and did not submit timely reimbursement request for eligible costs. This resulted in a material adjustment to the County’s financial statements and required correction in the current audit period. Recommendations: The County should implement formal internal control procedures to ensure all involved personnel are held accountable for timely communication of incurred costs. All federal grant activities should be monitored on a regular basis by the County and related departments to ensure expenditures are properly recorded and reported. View of Responsible Officials: The County concurs with the finding. The omission of the expenditures was the result of a lack of communication between the former Airport Manager, Grant Manager and finance department. Since discovery, the County has taken steps to ensure improved coordination and documentation of all grant-related expenditures. Project oversight and internal controls will be strengthened through regular reconciliation between project managers and the finance department to ensure timely reporting, submission for reimbursement, and inclusion on the SEFA. The County is in the process of submitting the allowable expenditures for reimbursement and updating internal procedures to prevent future occurrences.

2020-005 ? Economic Adjustment Assistance ? Revolving Loan Funds ? Lack of Grant Administration and Oversight (Repeat Finding 2019-003) CFDA 11.307; Grant No. 06-19-0264; Grant Period: Year ended December 31, 2020; Federal Agency U.S. Department of Commerce Finding Type: Significant Deficiency in Internal Control over Financial Reporting and Noncompliance Criteria: In accordance with Uniform Guidance, the auditee is responsible for identifying all federal awards received and expended, as well as the federal programs under which they were received and have sub awarded. The County is responsible to ensure that those funds passed through or contracted to an entity are used in accordance with Federal statues, regulations, and the terms and conditions of the Federal award. Condition: The County continues to exercise a lack of proper oversight and execution as the lead entity with final responsibility for grant administration for a contract with the U.S. Department of Commerce Economic Development Administration. This lack of oversight may lead to the contracted agency not meeting all the required Federal statues, regulations, and terms and conditions of the Federal award. Questioned Costs: None. Identification of how questioned costs were computed is non-applicable. Context: Upon discovery of the responsibility for the grant administration, for grant funds received and passed-through several years ago, and with no recurring grant funds being received and no corresponding expenditures, the County established a new fund to record the activity and began its investigation of the pass-through entity?s adequacy of its records. Cause: The current County of Alpena, Michigan officials were not aware of their grant administration responsibilities, which resulted in an unintentional oversight of compliance. Effect: County of Alpena, Michigan was not compliant with its grant administrative requirements. Recommendation: We recommend that the County educate themselves on the grant requirements to fulfill grant administration for the contract with the U.S. Department of Commerce Economic Development Administration. View of Responsible Officials: The current County of Alpena officials were not aware of these grant requirements until an inquiry made by the U.S. Department of Commerce Economic Development Administration made them aware of their responsibilities to be the lead entity with final responsibility for grant administration. In addition, we agree with the auditors' recommendation. Procedures are being reviewed and will be implemented to enhance compliance and oversight of the grant agreement.

2019-003 ? Economic Adjustment Assistance ? Revolving Loan Funds ? Lack of Grant Administration and Oversight:

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