Estill County Fiscal Court

The Estill County Fiscal Court Did Not Provide The Same Level Of Health Insurance Coverage ToAll County EmployeesFederal Program: CFDA #97.040 ? Chemical Stockpile Emergency Preparedness ProgramAward Number and Year: Multiple Years ? CSEPP GrantsName of Federal Agency and Pass-Through Agency: U.S. Department of Homeland SecurityPass Through Agency: Kentucky Department of Military AffairsCompliance Requirements: Allowable Costs/Cost PrinciplesType of Finding: Compliance and Internal ControlAmount of Questioned Costs: $13,179Effect on Audit Opinion: Not applicable ? disclaimer of opinionThree county employees, whose compensation and benefits are reimbursed by the federal Chemical StockpileEmergency Preparedness Program (CSEPP), received health insurance coverage that was not made available toall other county employees. County employees are provided individual health insurance coverage. If theemployee chooses to elect additional coverage for a spouse, children, or family coverage they may do so but areresponsible for the cost of the health insurance premium that exceeds the individual coverage premium. Forfiscal year 2019, the cost of an individual health insurance premium was $500. Three employees elected to addcoverage for dependents, which was an additional $399 per month per employee. This additional cost was notpaid by the employees via payroll deduction. The county paid this cost and then sought reimbursement fromCSEPP. CSEPP allows reimbursement for eligible wages, salaries, and employee benefits.The fiscal court did not have adequate internal controls in place to ensure health insurance benefits were appliedequally among all classes of employees and that proper wage deductions were applied to employees thatrequested coverage in excess of standard county employee coverage. Management?s understanding was thatCSEPP would not reimburse expenses that are unallowable. However, management failed to understand thatthose benefits could have been allowable had the employee benefits been applied to all county employeesequally.The fiscal court has applied employee benefits in an inequitable manner and received federal reimbursement forunallowable expenses, resulting in federal questioned costs of $13,179 for fiscal year 2019. Additionally, countyfunds are being spent for the personal benefit of select employees that could have been expended on other itemsto benefit the entire county.In order for an expense to be allowable under federal grant guidelines, the expense must be in compliance withall federal, state, and local laws, regulations, policies, and procedures. Since the local procedure for healthinsurance benefits provides single/individual coverage, the amount in excess of that is not an allowable expenseof the program.OAG 94-15 states, ?[t]he basic statute providing for governmentally funded health coverage (KRS 79.080) forpublic employees does not provide for one level of coverage for officers, and another level for employees.Accordingly, we believe such differing coverage would not be lawful as not authorized by statute.? Federal guidance outlined in 2 CFR 200.431 states, in part, ?(a) Fringe benefits are allowances and servicesprovided by employers to their employees as compensation in addition to regular salaries and wages. Fringebenefits include, but are not limited to, the costs of leave (vacation, family related, sick or military), employeeinsurance, pensions, and unemployment benefit plans. Except as provided elsewhere in these principles, the costsof fringe benefits are allowable provided that the benefits are reasonable and are required bylaw, non-Federalentity-employee agreement, or an established policy of the non-Federal entity?. (c) The cost of fringe benefitsin the form of employer contributions or expenses for social security; employee life, health, unemployment, andworker's compensation insurance (except as indicated in ?200.447 Insurance and indemnification); pension plancosts (see paragraph (i) of this section); and other similar benefits are allowable, provided such benefits aregranted under established written policies. Such benefits, must be allocated to Federal awards and all otheractivities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) ofemployees whose salaries and wages are chargeable to such Federal awards and other activities, and charged asdirect or indirect costs in accordance with the non-Federal entity's accounting practices.?We recommend management ensure that employee benefits are applied equally among all employees and thatproper amounts are withheld from employees? wages for elective/optional employee benefits. Further, werecommend management contact CSEPP officials to determine how to resolve the questioned costs for fiscalyear 2019.

The Estill County Fiscal Court Does Not Have Adequate Internal Controls Over Federal ProgramsFederal Program: CFDA #97.040 ? Chemical Stockpile Emergency Preparedness ProgramAward Number and Year: Multiple Years ? CSEPP GrantsName of Federal Agency and Pass-Through Agency: U.S. Department of Homeland SecurityPass Through Agency: Kentucky Department of Military AffairsCompliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, CashManagement, Equipment and Real Property Management, Procurement and Suspension and Debarment,ReportingType of Finding: Compliance and Internal ControlAmount of Questioned Costs: NoneEffect on Audit Opinion: Disclaimer of OpinionEstill County expended $997,132 for the Chemical Stockpile Emergency Preparedness Program (CSEPP) duringfiscal year ending June 30, 2019. Due to issues found during the audit of the financial statement of the EstillCounty Fiscal Court, we cannot rely on the design and implementation of the internal controls over compliancewith the types of requirements that could have a direct and material effect on CSEPP. Our testing revealed onequestioned cost as described in finding 2019-012 and we note that the internal control structure and managementoverride of controls as discussed in finding 2019-001 increases the risk associated with federal awards sincethese transactions are processed in the same internal control environment as other county expenditures wherenumerous problems have been noted.The issues found during the audit of the financial statement were caused by a lack of internal controls or byoverride of controls by the management of the Estill County Fiscal Court. As a result, there is an increased riskthat the Estill County Fiscal Court is not in compliance with the requirements that have a direct and materialeffect on CSEPP. In order to comply with Uniform Guidance requirements regarding federal grants, the entitymust establish adequate internal controls to ensure compliance with each major program?s applicable compliancerequirements.We recommend the fiscal court ensure that internal controls exist over federal awards and design and implementinternal controls that will ensure material compliance with applicable requirements for all federal awards.