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The United States Department of Justice awarded the City a COPS Hiring Program grant in 2009. The City may use the funds over three years to pay the salary of entry level officers or re-assigned officers working on specific community safety programs created under the terms of the grant. In 2012 the City spent $233,461 to pay for the
third year of salaries and benefits for new officers hired, although not assigned, to these specific programs.
Description of Condition
In our prior audit, we reported internal control weaknesses related to allowable activities, and non-compliance with cost principles, cash management and reporting requirements. Similar internal control weaknesses and noncompliance were noted in the current audit as described below.
Allowable Costs/ Cost Principles
The City did not use grant funds to pay the salary of entry-level officers or re-assigned officers working on specific community safety programs. One officer whose time was charged to the grant was ineligible because he was hired prior to the grant award. The City was reimbursed for ineligible salary costs of $67,694.
Employees whose entire salaries and benefits are charged to a federal grant must certify in writing at least twice a year that they spent all their time working on the program’s activities. The City did not maintain adequate time and effort documentation for one of the two officers charged to the grant for five pay periods. The City was reimbursed $27,078 in salary costs for these five pay periods.
Staff that administered the federal grant made clerical accounting errors that resulted in unallowable costs charged to the grant and did not obtain appropriate time and effort documentation. This City did not include a review of grant reimbursement requests to ensure accuracy and completeness.
Cash Management/Reporting
The City must report program and financial information to the Department of Justice quarterly. Federal regulations stipulate that cash advances should pay only for immediate funding needs. If the City requests federal funds prior to paying the expense, it must track any interest earned and remit it to the federal agency.
The Police Department used the approved grant budget for billing purposes, rather than actual expenditures charged to the grant. In April 2012, the City requested reimbursement that exceeded actual expenditures, resulting in a cash advance of $911. The City did not earn interest in excess of $100 on this money, therefore, the City did not need to remit the interest to the Department of Justice.
The City did not have internal controls to ensure only accurate and complete information was reported. During the first half of the year, one person prepared the reports and no one reviewed them before they were submitted. A review of the reports was performed for October, November and December of 2012; however, that review was not effective in detecting errors.
Cause of Condition
The staff member put in charge of grant management and reporting was not knowledgeable of the actual activity of the grant. The City did not appoint a knowledgeable person to monitor or review the reports being submitted.
The City chose to submit reimbursement requests based on the grant award because it thought it would spend more than the award each quarter.
Effect of Condition and Questioned Costs
Allowable Costs/Cost Principles
Without internal controls over, and sufficient understanding of, all allowable costs and cost principles, the City puts itself at risk of having to reimburse the grantor for any unallowable or unsupported costs. We verified the City had other eligible employees who worked on the grant; therefore, we will not question costs.
Cash management/Reporting
As a result of submitting claims for reimbursement based on annual funding approved, divided by four quarters, the City received a cash advance of $911 in the first quarter. Excess cash was on hand from April 2012 through June 2012 until another reimbursement claim was submitted in July 2012. The Finance Department was unaware the Police Department received funds in advance. The City did not earn interest in excess of $100 on this money; therefore, the City does not need to remit interest to the Department of Justice.
Recommendation
We recommend the City appoint staff knowledgeable of the federal requirements to perform oversight of grant management and compliance, including the preparation and review of required reports. Oversight should include ensuring only allowable staff is charged to federal grants, time and effort certifications are obtained from all employees whose time is charged to federal grants, and actual costs charged to the grant support claims submitted for reimbursement.
We also recommend the City ensure staff are provided regular training to ensure they are familiar with the current federal grant management and compliance requirements.
City’s Response
In summary, the City correctly used funds from the 2009 COPS Hiring Program grant during 2012 to pay for only those salaries and benefits of eligible officers in accordance with grant requirements, and the SAO agreed in this finding that this grant had no questioned costs. Though the City complied substantially with grant requirements, the City agrees that it did not obtain certifications from all eligible employees for all periods, and that the April 2012 grant draw was $911 too high. As described in this finding, the $911 excess draw was corrected in the following quarter.
The City asserts that it appointed a staff member in charge who was knowledgeable of the actual activity of the grant. However, the City acknowledges that further training in federal grant requirements and documentation would assist in ensuring compliance and, therefore, intends to provide staff with that training. The City also acknowledges that it did not appoint a staff member to review the preparer’s work until later in the year, and that the scope of the reviewer’s work was limited to the accounting components of the grant, and not the eligibility and certification components. This will be corrected.
Auditor’s Remarks
We appreciate the City’s commitment to resolving the issues noted. We will follow up on its status during the next audit.
September 30, 2013
Everett Government