LAUREL COUNTY FISCAL COURTLocal Government

The Laurel County Fiscal Court Failed To Implement Internal Controls To Ensure Costs Submitted For Reimbursement Were For Eligible Expenses Federal Program: 21.019 ? COVID-19 - Coronavirus Relief Fund Award Number and Year: C327 2020 and C2-156 2020 Name of Federal Agency: U.S. Department of Treasury Pass-Through Agency: Commonwealth of Kentucky, Department for Local Government ? Office of Grants Compliance Requirements: Activities Allowed or Unallowed; Allowable Costs; Period of Performance Type of Finding: Significant Deficiency; Noncompliance Amount of Questioned Costs: $41,665 COVID Related - Yes The Laurel County Fiscal Court submitted payroll expenses that did not qualify for reimbursement from the Coronavirus Relief Fund (CRF) administered by the Commonwealth of Kentucky?s Department for Local Government (DLG). Reimbursement requests submitted to DLG included accrued vacation leave pay outs totaling $41,665. The fiscal court did not have controls in place to ensure expenditures submitted for reimbursement from the CRF were allowable and incurred during the period of availability. The deputy county judge/executive stated she was unaware that some of the payroll expenditures submitted for reimbursement were not allowable. As a result, the Laurel County Fiscal Court submitted payroll expenses that did not qualify for reimbursement from the CRF administered by DLG. This resulted in $41,665 of questioned costs. In addition, the fiscal court could be required to repay the questioned costs back to the granting agency. The Coronavirus Aid, Relief, and Economic Security Act (?CARES Act?) established the Coronavirus Relief Fund (the ?Fund?) and appropriated $150 billion for payments by Treasury to States, tribal governments, and certain local governments. The CARES Act provides that payments from the Fund may only be used to cover costs that? 1. are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID-19); 2. were not accounted for in the budget most recently approved as of March 27, 2020 (the date of enactment of the CARES Act) for the State or government; and 3. were incurred during the period that begins on March 1, 2020 and ends on December 31, 2021. Initial guidance released on April 22, 2020, provided that the cost of an expenditure is incurred when the recipient has expended funds to cover the cost. Upon further consideration and informed by an understanding of State, local, and tribal government practices, Treasury is clarifying that for a cost to be considered to have been incurred, performance or delivery must occur during the covered period, but payment of funds need not be made during that time (though it is generally expected that this will take place within 90 days of a cost being incurred). Additionally, 2 CFR ? 200.303 requires a non-federal entity to ?[e]stablish 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.? Total known questioned costs are $41,665. Questioned costs were computed by comparing requests for reimbursement to payroll earnings reports to determine the total amount of paid out vacation time included on the requests. Not a repeat finding. We recommend the fiscal court strengthen internal controls over federal awards to ensure expenditures submitted for reimbursement are allowable and incurred during the period of availability. We also recommend that the fiscal court contact the Department for Local Government to determine if questioned costs should be repaid or if they can resubmit requests with eligible expenditures.