City of KyleLocal Government

Federal Award Finding and Questioned Costs Reference No. Finding #2020-001 Allowable cost CFDA #20.219 Coronavirus Relief Fund Federal award year: 2020 Department of Treasury Passed through the Texas Division of Emergency Management Type of Finding: Significant Deficiency and Noncompliance Criteria or specific requirement: The City is a recipient of funds under section 601(a) of the Social Security Act, as added by section 5001 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act established the Coronavirus Relief Fund (the Fund). As a recipient of the Fund, the City agreed to the Coronavirus Relief Fund Terms and Conditions issued by the Texas Division of Emergency Management (TDEM). Under the Terms and Conditions of the grant funds provided to the City, the City may only use grant funds to cover expenditures that are necessary expenditures incurred during the period that begins on March 1, 2020, and ends on December 30, 2020. If the City determines that payments made were based on an estimate and later determined to not be actual and allowable allocable costs, the grantee shall return to TDEM the amount identified as an overpayment. Additionally, per 2 CFR 200.303, the City must establish and maintain effective internal controls over federal awards that provides reasonable assurance that they are managing federal awards in compliance with federal statutes, regulation and the provisions of contract or grant agreement that could have a material effect on each of its federal programs. Condition found: The City has a centralized accounting process for the processing of all transactions. The centralized accounting includes the processing of payroll and benefit expenses for public safety and similar employees whose service are substantially dedicated to mitigating or responding to the COVID-19 public health emergency. Based on a sample of 40 transactions of which 35 were payroll-related costs, the City submitted reimbursement requests which included an estimated fringe benefit rate of 4.35% for workers? compensation. The estimated rate was applied to the total eligible payroll cost. The estimated rate was determined by the City based on the total expected annual workers? compensation premium of $382,071. Based on the City-provided support, the actual workers? compensation premium paid is $143,903 for the period ended September 30, 2020. The total public safety reimbursement costs to which the rate of 4.35% was applied is $900,500 or $39,171. The questioned cost is not determinable. Statement of cause: The City used an estimated rate for the reimbursement of workers? compensation premium and did not correct the rate based on actual workers? compensation expenses and allowable allocable costs. Statement of effect: Based on the City-provided support, the actual workers? compensation premium paid is $143,903 for the period ended September 30, 2020. The premium paid results in an estimated workers? compensation rate of 4.35% for the category of employees selected within the sample. Question costs: Questioned cost associated with the workers compensation estimate could not be determined. Repeat audit findings: The audit finding is not a repeat of a finding in the immediately prior audit. Recommendations: Budget estimates alone do not qualify as support for charges to federal awards, but may be used for interim purposes provided that the City has a system of internal controls which includes a process to review after-the-fact interim charges and the City makes all needed adjustments to the final amount charged to the federal award. The City should implement a process that allows for management to periodically identify and adjust budget estimates. Views of responsible officials of the auditee: Management agrees with finding. Management?s response is attached.