Town of Refugio

2022-004 Grant Funds Disbursement Major Program U.S. Department of Housing and Urban Development Pass-through: Texas General Land Office and Texas Department of Agriculture Community Development Block Grants AL: 14.228 Criteria Federal grant payment requirements as per 24 CFR 570.489(c) states that the State's requests for payment, and the Federal Government's payments upon such requests, must comply with 31 CFR part 205. The State must use procedures to minimize the time elapsing between the transfer of grant funds and disbursement of funds by the State to units of general local government. States must also have procedures in place, and units of general local government must use these procedures to minimize the time elapsing between the transfer of funds by the State and disbursement for CDBG activities. As the grant is administered through the Texas General Land Office (GLO), the GLO defines the ?time elapsed? to be a period not to exceed 3 business days from the date of receipt/deposit of funds. The Town is expected to disburse grant funds within this specific timeframe as stated by the GLO. If the Town is unable to disburse grant funds within the specified timeframe, the Town is to document the specific reasons for such a delay. This has been identified as a significant deficiency in the Town?s internal control over compliance. Statement of Condition In the course of performing the audits of the CDBG-DR and CDBG-MIT grants, it was determined that an instance in the CDBG-DR grant and an instance in the CDBG-MIT grant in which grant funds had been disbursed after the required 3 business day timeframe. Statement of Cause The Town is inefficiently monitoring the bank account in which grant funds are deposited and ensuring that grant funds are then disbursed within the 3-business day requirement as stated by the GLO. Statement of Effect or Potential Effect This significant deficiency in the Town?s internal control over compliance results in a compliance issue associated with the time elapsed requirements of the CDBG-DR and CDBG-MIT grants. Questioned Costs No questioned costs were identified in association with this finding. Perspective Information This finding is considered an isolated instance as the instance in the CDBG-DR grant and the instance in the CDBG-MIT grant occurred in the same time period and the fact that all other CDBG-DR and CDBG-MIT grant funds were disbursed within the 3-business day requirement. Identification of Repeat Findings This is not a repeat finding. Recommendation To remedy the control deficiency related to grant funds being disbursed within the 3-business day compliance requirement, the Town would need to monitor bank account activity on a timely basis.

2021-005 Lack of Controls Over Financial Reporting Criteria The Town is expected to prepare and take responsibility for the schedule of expenditures of federal awards. The Town should have a control structure in place to ensure this Schedule is prepared accurately, completely, and in compliance with regulatory requirements. Statement of Condition The Town has requested that Goldman, Hunt & Notz, L.L.P. (GHN) draft the schedule of expenditures of federal awards. This was done because, due to its limited resources, the Town's internal personnel did not possess all of the skills and competencies necessary to prepare the schedule of expenditures of federal awards in accordance with the highly technical requirements for compliance. While GHN has been requested to prepare the schedule of expenditures of federal awards, GHN cannot be considered to be part of the Town's internal controls - specifically, GHN cannot be a part of the financial reporting internal control that address the preparation of an accurate schedule of expenditures of federal awards. This is considered to be a material weakness in the Town's system of internal control. Statement of Cause The Town's lack of controls over financial reporting is primarily driven by the Town's limited resources. The Town's internal personnel did not possess all of the skills and competencies necessary to prepare the schedule of expenditures of federal awards in accordance with the highly technical requirements for compliance. Statement of Effect or Potential Effect This material weakness in the Town's internal control could result in a compliance issue associated with the preparation of the schedule of expenditures of federal awards. Questioned Costs No questioned costs were identified in association with this finding. Perspective Information As this finding is associated with the general structure and nature of the Town, it is considered to be a systemic issue. Recommendation To remedy the control deficiency related to the preparation of the schedule of expenditures of federal awards, the Town would need to ensure that sufficient personnel are in place and that they have the appropriate knowledge and tools (i.e., current accounting literature, current disclosure checklist, etc.) to be an effective element of the internal control process over financial reporting. It is understood that this may not be feasible because of the Town's size and limited resources. Management may make a conscious decision to accept the risk in this control deficiency because of cost or other considerations.

2021-006 Lack of Segregation of Duties Criteria The Town is expected to maintain sufficient internal controls as to be able to prevent or detect material instances of non-compliance. The following finding represents a material weakness in the Town's internal control. Statement of Condition In the course of performing the financial statement audit it was determined that the Town has a lack of segregation of duties. This is considered to be a material weakness in the Town's system of internal control. As compliance with the requirements of FEMA Public Assistance Disaster Recovery (FEMA PA) Grant and the Community Disaster Loan requires effective controls and oversight around preparing and maintaining the Town's financial records, this control deficiency impacts the control structure around the FEMA PA grant and the Community Disaster Loan. It was found that the Town does not have sufficient staff that is appropriately cross-trained and experienced to ensure the necessary oversight procedures and separation of key duties. Statement of Cause The Town's lack of segregation of duties is primarily driven by the Town's limited resources. The Town has a limited staff that is insufficiently cross-trained to provide the necessary segregation of duties to ensure proper financial reporting and compliance with related grant requirements. Statement of Effect or Potential Effect This material weakness in the Town's internal control could result in a compliance issue associated with financial reporting to not be identified or corrected before the Town has fallen out of compliance with the requirements of the FEMA PA Grant. Questioned Costs No questioned costs were identified in association with this finding. Perspective Information As this finding is associated with the general structure and nature of the Town, it is considered to be a systemic issue. Identification of Repeat Findings 2020-006 Recommendation To remedy the control deficiency related to the segregation of duties, the Town would need to ensure that sufficient personnel are in place and that they have the appropriate knowledge and tools to be able to effectively separate key steps of high risk procedures, and provide sufficient oversight to assist with the identification of errors or possible fraud.

2021-007 Period of Performance Noncompliance Criteria The Town is expected to complete projects during a program-specified timeframe. If the Town is unable to complete the project by the end of the specified period of performance, the Town is to request a time extension. The following finding represents a significant deficiency in the Town's internal control over compliance. Statement of Condition In the course of performing the audit of the FEMA-PA grant, it was determined that when projects were not completed by either the end of the initial period of performance or by the latest approved time extension, additional time extensions had not been requested. This is considered to be a significant deficiency in the Town's system of internal control. Statement of Cause The Town is inefficiently monitoring the progress of each project. The Town has a limited staff that is insufficiently cross-trained to provide the necessary duties to ensure proper compliance with related grant requirements. Statement of Effect or Potential Effect This significant deficiency in the Town's internal control over compliance results in a compliance issue associated with the period of performance requirements of the FEMA-PA. Questioned Costs No questioned costs were identified in association with this finding. Perspective Information This finding is considered to be a systemic issue. Identification of Repeat Findings 2020-007 Recommendation To remedy the control deficiency related to the period of performance compliance requirement, the Town would need to request time extensions on a timely basis.

2020-005 Lack of Controls Over Financial Reporting Criteria The Town is expected to prepare and take responsibility for the schedule of expenditures and federal awards. The Town should have a control structure in place to ensure this Schedule is prepared accurately, completely, and in compliance with regulatory requirements. Statement of Condition The Town has requested that Goldman, Hunt & Notz, L.L.P. (GHN) draft the schedule of expenditures and federal awards. This was done because, due to its limited resources, the Town?s internal personnel did not possess all of the skills and competencies necessary to prepare the schedule of expenditures and federal awards in accordance with the highly technical requirements for compliance. While GHN has been requested to prepare the schedule of expenditures and federal awards, GHN cannot be considered to be part of the Town?s internal controls ? specifically, GHN cannot be a part of the financial reporting internal control that address the preparation of an accurate schedule of expenditures and federal awards. This is considered to be a material weakness in the Town?s system of internal control. Statement of Cause The Town?s lack of controls over financial reporting is primarily driven by the Town?s limited resources. The Town?s internal personnel did not possess all of the skills and competencies necessary to prepare the schedule of expenditures and federal awards in accordance with the highly technical requirements for compliance. Statement of Effect or Potential Effect This material weakness in the Town?s internal control could result in a compliance issue associated with the preparation of the schedule of expenditures and federal awards. Questioned Costs No questioned costs were identified in association with this finding. Perspective Information As this finding is associated with the general structure and nature of the Town, it is considered to be a systemic issue. Identification of Repeat Findings This finding was not identified in prior years. Recommendation To remedy the control deficiency related to the preparation of the schedule of expenditures and federal awards, the Town would need to ensure that sufficient personnel are in place and that they have the appropriate knowledge and tools (i.e., current accounting literature, current disclosure checklist, etc.) to be an effective element of the internal control process over financial reporting. It is understood that this may not be feasible because of the Town?s size and limited resources. Management may make a conscious decision to accept the risk in this control deficiency because of cost or other considerations.

2020-006 Lack of Segregation of Duties Criteria The Town is expected to maintain sufficient internal controls as to be able to prevent or detect material instances of non-compliance. The following finding represents a material weakness in the Town?s internal control. Statement of Condition In the course of performing the financial statement audit it was determined that the Town has a lack of segregation of duties. This is considered to be a material weakness in the Town?s system of internal control. As compliance with the requirements of FEMA Public Assistance Disaster Recovery (FEMA PA) Grant and the COVID-19 Coronavirus assistance requires effective controls and oversight around preparing and maintaining the Town?s financial records, this control deficiency impacts the control structure around the FEMA PA grant and the COVID-19 Coronavirus assistance. It was found that the Town does not have sufficient staff that is appropriately cross-trained and experienced to ensure the necessary oversight procedures and separation of key duties. Statement of Cause The Town?s lack of segregation of duties is primarily driven by the Town?s limited resources. The Town has a limited staff that is insufficiently cross-trained to provide the necessary segregation of duties to ensure proper financial reporting and compliance with related grant requirements. Statement of Effect or Potential Effect This material weakness in the Town?s internal control could result in a compliance issue associated with financial reporting to not be identified or corrected before the Town has fallen out of compliance with the requirements of the FEMA PA Grant. Questioned Costs No questioned costs were identified in association with this finding. Perspective Information As this finding is associated with the general structure and nature of the Town, it is considered to be a systemic issue. Identification of Repeat Findings This finding was not identified in prior years. Recommendation To remedy the control deficiency related to the segregation of duties, the Town would need to ensure that sufficient personnel are in place and that they have the appropriate knowledge and tools to be able to effectively separate key steps of high risk procedures, and provide sufficient oversight to assist with the identification of errors or possible fraud.

2020-007 Period of Performance Noncompliance Criteria The Town is expected to complete projects during a program-specified timeframe. If the Town is unable to complete the project by the end of the specified period of performance, the Town is to request a time extension. The following finding represents a significant deficiency in the Town?s internal control over compliance. Statement of Condition In the course of performing the audit of the FEMA-PA grant, it was determined that when projects were not completed by either the end of the initial period of performance or by the latest approved time extension, additional time extensions had not been requested. This is considered to be a significant deficiency in the Town?s system of internal control. Statement of Cause The Town is inefficiently monitoring the progress of each project. The Town has a limited staff that is insufficiently cross-trained to provide the necessary duties to ensure proper compliance with related grant requirements. Statement of Effect or Potential Effect This significant deficiency in the Town?s internal control over compliance results in a compliance issue associated with the period of performance requirements of the FEMA-PA. Questioned Costs No questioned costs were identified in association with this finding. Perspective Information This finding is considered to be a systemic issue. Identification of Repeat Findings This finding was not identified in prior years. Recommendation To remedy the control deficiency related to the period of performance compliance requirement, the Town would need to request time extensions on a timely basis.