CITY OF MONTROSELocal Government

Finding 2020-001: Criteria: All governments are required to prepare financial statements in accordance with generally accepted accounting principals (GAAP). This is a responsibility of the government's management. The preparation of financial statements in accordance with GAAP requires internal controls over both (1) recording, processing, and summarizing accounting data (i.e., maintaining internal books and records), and (2) reporting government wide and fund financial statements, including the related footnotes (i.e., external financial reporting.) Condition: As is the case with many smaller and medium sized entities, the City has historically relied on its independent auditors to assist in identifying certain adjustments that are necessary for the financial statements to be in conformance with GAAP as part of its external financial reporting process. Adjustments were necessary in order to present certain accounts in accordance with GAAP. The material adjustments that were proposed by the auditor and corrected by management were as follows: (1) proper recording of pension related activity at the government wide level; (2) proper recording of capital assets in governmental activities Cause: The City did not identify certain adjustments that were necessary for the financial statements to be presented in accordance with GAAP. Effect or Potential Effect: As a result of this condition, the City?s financial information was initially misstated by amounts that were deemed to be quantitatively material to most opinion units. Correcting entries were subsequently posted by management to the City's records and the appropriate balances are presented in the audited financial statements. Recommendation: For the adjustments, we recommend an individual review year-end balances in the general ledger and agree or reconcile to supporting documentation and schedules and record adjustments as needed, to ensure everything is recorded properly and completely. Responsible Official?s Response: The Coronavirus caused significant difficulties for the City. As a result of the pandemic the 2019 audit was delayed and took a significant amount of the City's limited resources. Final 2019 numbers weren't available in a timely manner. As a result of these challenges, the City was not able to timely reconcile capital assets or pension activity during the year ended December 31, 2020. Both of these issues will be addressed early in the 2021 audit and all entries will be finished prior to the trial balance request from our new auditors.

Finding 2020-002: Information on the Federal Program: CFDA 20.019?Coronavirus Relief Fund, United States Department of Treasury. Pass-Through Entity: Colorado Department of Local Affairs. Compliance Requirements: Allowable Cost Type of Finding: Significant Deficiency. Criteria: Cost allowed for reimbursement under the Coronavirus Relief Fund must be qualify under section 601(d) of the Social Security Act outlined in Treasury?s guidance. Condition: For the year ended December 31, 2020, we identified a reimbursement using Coronavirus Relief Funding that was inadvertently included in the reimbursement request form twice. Cause: The inclusion of the same expenditure twice in the reimbursement request form indicates a lack of monitoring and appropriate review of expenditures for reimbursement prior to submission. Effect or Potential Effect: The resulting cost was corrected by Management under the guidance provided by the Department of Treasury's OIG FAQ #86 upon discovery, however there could be other similar errors that occurred given the control deficiency discussed above. Recommendation: The City program staff and management should ensure that costs incurred under grants are reviewed prior to submission for duplicates, and errors/omissions. Responsible Official's Response and Corrective Action Planned: Management of City of Montrose concurs with the audit finding. Unfortunately, the quick turn around of spending these dollars and having multiple departments involved caused a receipt to be included from two different sources causing us to report it twice. In the future, tasking one person to thoroughly review the request for reimbursement will prevent this from happening. Planned Implementation Date of Corrective Action: September 30, 2021. Person Responsible for Corrective Action: Director of Finance.

Finding 2020-003: Information on the Federal Program: CFDA 20.019?Coronavirus Relief Fund, United States Department of Treasury. Pass-Through Entity: Colorado Department of Local Affairs. Compliance Requirements: Allowable Cost Type of Finding: Known Questioned Cost Exceeding $25,000 . Criteria: Cost allowed for reimbursement under the Coronavirus Relief Fund must be qualify under section 601(d) of the Social Security Act outlined in Treasury?s guidance. Condition: For the year ended December 31, 2020, we identified one reimbursement using Coronavirus Relief Funding that did not meet the criteria referenced above. Cause: At the time of the reimbursement, there was limited guidance on specifics as to how the funds could be used. While the City had a reasonable basis for their belief that the expense would qualify, it ultimately did not comply with the Effect or Potential Effect: As a result, the City has an expenditure that is not allowable under the grant for the year ended December 31, 2020, by the amount of questioned costs below. Questioned Costs: $30,000. Recommendation: The City program staff and management should ensure that costs incurred under grants are reviewed prior to submission for allowability under the most up to date federal guidance. Responsible Official's Response and Corrective Action Planned: Management of City of Montrose concurs with the audit finding. At the time the City Council voted on this item, it was understood that expanding day care facilities was an appropriate use of Coronavirus relief funding. This expense was paid directly to the contractor who did the work to create a day care for one of our local gyms. Since the gym was closed due to the pandemic, they proposed to help with the number of day care providers in Montrose by remodeling to allow a place for pre-school aged children. The funding was intended to provide relief for working parents impacted by school closures, which we believed to be in compliance with guidance issued at the time the disbursement was approved. Planned Implementation Date of Corrective Action: September 30, 2021. Person Responsible for Corrective Action: Director of Finance.