CITY OF DES MOINESLocal Government

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS City of Des Moines January 1, 2020 through December 31, 2020 2020-002 The City charged the Coronavirus Relief Fund for payroll expenditures that lacked support. CFDA Number and Title: 21.019 ? COVID-19 ? Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Commerce Pass-through Award/Contract Number: 20-6541C-161 Known Questioned Cost Amount: $3,383 Description of Condition The purpose of the Coronavirus Relief Fund program is to provide payments to state, territorial, tribal and certain eligible local governments to cover necessary expenditures incurred because of the COVID-19 pandemic. The City used program funds to provide relief to businesses negatively affected by the pandemic, provide meals to veterans and seniors, and to cover additional costs the City incurred due to the pandemic, including payroll, supplies and equipment. During fiscal year 2020, the City spent $1,554,717 in program funds. Of this amount, the City spent $830,226 on payroll expenses. The U.S. Department of the Treasury?s guidance allows recipients to use funding to cover payroll expenditures for employees whose work is substantially dedicated to mitigating or responding to the pandemic. The full amount of payroll and benefits expenses of substantially dedicated employees may be covered using payments from the program. The City charged salary, wage and benefit payments for law enforcement and administrative employees to the program using an estimated hourly rate that was based on employee contract pay and expected hours to be worked . The City did not reconcile the estimated charges and actual payroll costs to ensure the costs it charged to the program were for actual work that employees performed. This issue was not reported as a finding in the prior audit. Cause of Condition The City received the new Coronavirus Relief Fund program funds while trying to react quickly to the COVID-19 pandemic. As such, the City did not sufficiently train employees responsible for managing the program on Treasury?s guidance for charging salary, wage and benefits to this specific program. Effect of Condition and Questioned Costs We used statistical sampling to select and test 22 payroll transactions charged to the program. We found three payroll overpayments of $3,383. From this, we estimated total payroll overpayments of $37,685. As a result, we are questioning $41,523 in costs charged to the grant. Recommendation We recommend the City ensure the salary, wage and benefit expenditures it charges to federal programs are supported by records that accurately reflect the work employees performed. City?s Response Thank you for the opportunity to respond to this finding for the 2020 audit of the City of Des Moines. The City appreciates the efforts of the State Auditor?s Office regarding the audit and the review of federal grant funding. The City takes full accountability for the condition documented in the audit finding and has taken steps to prevent the reoccurrence of this issue. We have also prioritized resolving the issue directly with the granting agency. The City of Des Moines currently uses an outside vendor (an old version of ADP) for processing payroll, which does not provide for tracking actual hours and related salary, wage and benefit information for those hours. This requires the City to use a manual process to calculate the amount of salary that uses the estimates of the hourly rate based on the employees contract pay and hours worked. The City used this process in billing the grant expenditures to the granting agency without performing a reconciliation to the actual amount paid to the employee. This did cause an overpayment of payroll to the grant. The City, at the time of requesting reimbursement, did incur additional eligible costs that could have been billed to the grant but did not because it exceeded the total amount of the award. The City will work with the granting agency to resolve these questioned costs. The City of Des Moines will provide training for all staff charging salary, wage and benefits to federal grant programs to ensure only actual salary, wage and benefits are claimed against the federal funding. In addition, the City of Des Moines is implementing a new financial management system, which includes new payroll and project accounting modules. This will allow the City to be proactive in creating a project for any grant, which will record "actual salary, wage and benefit? data. This data will be reconciled to actual payroll paid before sending to any federal granting agency. As recommended, the City intends to ensure salary, wage and benefit expenditures charged to federal programs are supported by records that accurately reflect the work performed in the program. Auditor?s Remarks We appreciate the City?s commitment to resolve this finding and thank the City for its cooperation and assistance during the audit. We will review the corrective action taken during our next regularly scheduled audit. Applicable Laws and Regulations 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 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 42 U.S. Code of Federal Regulations (CFR) Part 801, Coronavirus Relief Fund establishes allowable costs of the grant program.