City of ScottsboroLocal Government

Criteria: Uniform Guidance ("UG") Section 200.313(d) states that "Procedures for managing equipment, including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (2) a physical inventory of the property must be taken and the results reconciled with the property records at least once every two years." Condition: The City did not perform the physical inventory required by UG Section 200.313(d). Cause: The City did not schedule or plan for a physical inventory. Effect or Potential Effect: The City did not comply with the requirement of UG Section 200.313(d) to take a physical inventory of equipment purchased with Federal awards at least once every two years. Context: We inquired whether the physical inventory of equipment required by UG Section 200.313 had been performed within the last two years and was told no such physical inventory had been performed. Repeat finding? No Recommendation: We recommend the City develop and implement policies and procedures to ensure compliance with UG Section 200.313, including a physical inventory of equipment purchased with Federal awards at least every two years. Views of Responsible Officials: Management agrees with the finding.

Information on the Federal Program: Federal Agency: U.S. Department of Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number 21.027 Compliance Requirement: Subrecipient Monitoring Type of Finding: Material Weakness in Internal Controls over Compliance, Modified Opinion Criteria: Title 2 U.S. Code of Federal Regulations (CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Section 200.332, Requirements for pass-through entities, states "All pass-through entities must: (a) ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward; (b) evaluate each subrecipient's risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring; (c) consider imposing specific subaward conditions upon a subrecipient if appropriate as described in Section 200.208 (Specific conditions); (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved; (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in Section 200.501. 2 CFR 200.303 states in part: "The non-Federal enity 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." Condition: The City received a total State and Local Fiscal Recovery Funds (SLFRF) allocation of $3,431,839. In its March, 2022, Project and Expenditures Report, the City elected to use the standard allowance for identifying revenue loss and reported its Revenue Loss Due to Covid-19 Public Health Emergency as $3,431,839. During fiscal year ended September 30, 2023, the City made payments from its SLFRF federal award, totaling $1,600,000, to another local government entity for materials used by the other government for a water line project. The payments were supported by an invoice from the other government, to which were attached copies of invoices submitted to the other government by its vendors. The City reported in its March, 2023, Project and Expenditures Report that the payments were made under the Infrastructure: Drinking water: Transmission & distribution Project Expenditure Category and Subcategory. The City also reported the transactions as a subaward, including identification of the subrecipient, and reported each of the payments to the subrecipient in the Expenditures section, in that Project and Expenditures Report. The City was unable to provide: a copy of the subaward agreement that clearly identified the subaward to the subrecipient as a subaward and that included the information required by Section 200.332(a); supporting documentation that the City evaluated the subrecipient's risk of noncompliance as required by Section 200.332(b); supporting documentation that the City monitored the activities of the subrecipient as required by Section 200.332 (d); and/or supporting documentation that the City verified that the subrecipient was audited as required by Subpart F. Cause: The City did not have adequate internal controls to ensure compliance with the Subrecipient Monitoring compliance requirement. The City's past federal awards experience did not involve or include subawards. Effect or Potential Effect: Noncompliance by the subrecipient may occur due to the subrecipient not being aware of the federal program's requirements and due to the City not sufficiently monitoring the subrecipient. Recommendation: We recommend that management of the City design and implement a comprehensive system of internal controls over federal award compliance, including development of policies and procedures to ensure compliance with the Subrecipient Monitoring compliance requirement. Views of Responsible Officials and Planned Corrective Actions: See Corrective Action Plan

Criteria: Uniform Guidance ("UG") Section 200.313(d) states that "Procedures for managing equipment, including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (2) a physical inventory of the property must be taken and the results reconciled with the property records at least once every two years." Condition: The City did not perform the physical inventory required by UG Section 200.313(d). Cause: The City did not schedule or plan for a physical inventory. Effect or Potential Effect: The City did not comply with the requirement of UG Section 200.313(d) to take a physical inventory of equipment purchased with Federal awards at least once every two years. Context: We inquired whether the physical inventory of equipment required by UG Section 200.313 had been performed within the last two years and was told no such physical inventory had been performed. Repeat finding? Yes Recommendation: We recommend the City develop and implement policies and procedures to ensure compliance with UG Section 200.313, including a physical inventory of equipment purchased with Federal awards at least every two years. Views of Responsible Officials and Planned Corrective Actions: See management's Corrective Action Plan.

Criteria: Section 5-53 of the Airport Improvement Program Handbook, Order 5100.38D requires sponsors to submit certain financial reprots to summarize grant expenditures and the status of project funds. The financial reporting forms required are the Standard Form 425, Federal Financial Report and Standard Form 271, Outlay Report and Request for Reimbursement for Construction Programs. Condition: The required financial reporting forms were submitted as required. However, some of the forms submitted included errors, including: indication that the information was reported on the cash basis of accounting when such information was actually reported on the accrual basis; a final SF-425 Federal Financial Report was submitted that included expenditures of federal awards that occurred after the date the final SF-425 was submitted. Cause: The City's review of the reports, which were prepared by the project engineer, did not include adequate comparison of the information reported with the City's financial information. Effect or Potential Effect: The information reported on the required forms was inaccurate. Context: We examined all reports submitted for the AIP grants under which funds were expended during the period of our audit. All the forms indicated they had been prepared using the cash basis of accounting. However, our tests indicated the amounts reported on the forms were accrual basis amounts. While all the costs reported on the forms had been incurred during the period covered by the reports, not all of the costs had been paid within the period. Repeat finding? Yes Recommendation: We recommend that the City review each required financial report prior to submission, including a comparison of the amounts reported with the City's accounting records. Views of Responsible Officials and Planned Corrective Actions: See management's Corrective Action Plan.

Criteria: 29 CFR sections 5.5 and 5.6 requires that non-federal entities include in their construction contracts subject to the Wage Rate Requirements a provision that the contractor or subcontractor comply with those requirements and the DOL regulations. This includes a requirement for the contractor or subcontractor to submit to the non-federal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls). 29 CFR Section 5.5 (3) (B) states ?Each payroll submitted shall be accompanied by a ?Statement of Compliance,? signed by the contractor or subcontractor or his or her agent who pays or supervises the payment of the persons employed under the contract and shall certify the following:?? Condition: We noted that none of statements of compliance accompanying the weekly payrolls submitted by one contractor were signed by the contractor. Cause: There was insufficient monitoring of internal controls over Wage Rate Requirements compliance. Those internal controls failed to prevent or detect and correct the noncompliance with these requirements. Effect or Potential Effect: The entity failed to comply with the Wage Rate Requirements, described under "Criteria", above. Context: We inspected copies of all certified payrolls submitted by each of three contractors each week during which contract work was performed, noting that those from one of the contractors lacked a signed statement of compliance. Repeat finding? Not a repeat finding. Recommendation: We recommend that the City design and implement improved controls for monitoring its contract, third-party engineering firm's grant management activities to ensure the City is complying with all applicable compliance requirements. Views of Responsible Officials and Planned Corrective Actions: See management's Corrective Action Plan.

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