City of LanderLocal Government

SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTSMATERIAL WEAKNESSFinding 2022-004: Identification of Federal AwardsProgram Information: All federal programs.Repeat Finding from Prior Year: YesCondition: The City lacks an adequate internal control system for identifying federal awards and their corresponding compliance requirements. This finding has been recurring for several years.Criteria: The City should implement an internal control system that ensures accurate identification of federal awards and establishes mechanisms to monitor compliance requirements as per 2 CFR 200, Appendix XI, Uniform Grant Guidance and Cost Principles.Context: Despite receiving various federal funds throughout the year, the City was unable to distinguish certain federal expenditures from state expenditures as of June 30, 2022. Additionally the tracking mechanism for the City showed revenue from grants included outside of the general fund in the past. Additionally determining where the federal expenditures are being spent in relation to the applicable projects has been difficult for the City.Cause: The City's financial reporting internal controls do not include a process for identifying and differentiating federally funded grants and loans from state-funded ones. Although the City's grant files generally contain proper documentation, there seems to be a disconnect in financial reporting regarding federal awards.Effect: The initial Schedule of Federal Awards provided did not include a substantial portion of the federal awards expended in the current year. As a result, the City became subject to single audit requirements. The audit and reconciliation of federal expenditures conducted by the audit firm prevented a significant misstatement in the City's Schedule of Federal Expenditure Awards.Potential loss of future funding, or repayment of awards, is possible for not identifying these federal awards and complying with compliance requirements as outlined in 2 CFR 200, Appendix XI, Uniform Grant Guidance.This fundamental issue in the City?s internal control over financial reporting requires the City to be considered ?high risk? under the criteria presented in 2 CFR 200, Appendix XI, Uniform Grant Guidance, which requires a larger % of coverage to be audited with increases the overall cost year after year to the City.Questioned Costs: Not applicableSampling method: Not applicableRecommendation: The City must establish a robust internal control system for federal awards, ensuring the identification of all federal awards and their associated expenditures. This includes obtaining beforehand knowledge of pass-through funds that involve federal dollars. Additionally, it is crucial to implement formal monitoring and documentation procedures for each compliance requirement outlined in 2 CFR 200, Appendix XI, Uniform Grant Guidance and Cost Principles.

Program Information: All federal programs. Repeat Finding from Prior Year: No Condition: The City does not have a system of internal control that allows for the proper identification of federal awards, and the related compliance requirements contained in each of those awards. The City has received this finding multiple times over the last several years. Criteria: The City should have a system of internal control that allows for the federal awards to be properly identified, as well as a system in place to monitor the related compliance requirements as part of 2 CFR 200, Appendix XI, Uniform Grant Guidance and Cost Principles. Context: The City received various federal funds throughout the year and was unable to properly identify amounts spent as of June 30, 2021 as federal or state expenditures. Cause: The City does not have a process in their system of internal controls over financial reporting to identify and differentiate federally funded and state funded grants and loans. There appears to be a disconnect in the City's financial reporting over federal awards because the City's grant files in most cases contain the proper documentation. Effect: The City was unaware that it had spent over $750,000 in federal awards making it subject to single audit requirements. The City's Schedule of Federal Expenditure Awards would have been materially misstated had the audit not been conducted and federal expenditures reconciled by the auditors. Additionally, the City is likely not monitoring certain loan programs for the related federal compliance requirements as noted in of 2 CFR 200, Appendix XI, Uniform Grant Guidance and Cost Principles as they were unaware that the funding was from a federal source. Potential loss of future funding, or repayment of awards, is possible for not identifying these federal awards and complying with compliance requirements as outlined in 2 CFR 200, Appendix XI, Uniform Grant Guidance. Questioned Costs: Not applicable Sampling method: Not applicable Recommendation: The City must establish a system of internal control over federal awards that identifies all federal awards and their related expenditures. Each of the compliance requirements as outlined in 2 CFR 200, Appendix XI, Uniform Grant Guidance and Cost Principles need to be formally monitored and documented.

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