The Office of the City Controller released its report on compliance for federal grant programs and review of internal controls over compliance for fiscal year 2017. The report, which must be completed annually, was transmitted to the Kenney Administration for the submission to the federal audit clearing house, as required. The report details its findings – four instances of non-compliance for the City’s major federal programs, including one material weakness and three significant deficiencies on internal control – and the administration’s responses to the findings.
“The review of compliance with federal grant programs serves as a critical check on internal control over grant administration and management,” said City Controller Rebecca Rhynhart. “My office’s findings about the City’s grant compliance show that there are areas that need improvements to ensure the City remains in good standing with its grant requirements.”
Inappropriate grant administration can result in a failure to meet grant requirements, which in turn can lead to some or all of the grant resources needing to be returned to the grantor, according to the Government Finance Officers Association (GFOA).
- Material Weakness & Noncompliance over Subrecipient Monitoring – The Managing Director’s Office could not demonstrate that the Philadelphia 2016 Host Committee, a subrecipient of the City’s Edward Byrne Memorial Competitive Grant Program from the U.S. Department of Justice that was used for the Democratic National Convention, had completed the required single audit. Without the audit, the spending cannot be shown to be in compliance with laws, regulations, and the provisions of the subaward. As a result, the Controller’s Office questions as unallowable the grant funds, $8.6 million, that went to the 2016 Philadelphia Host Committee;
- Significant Deficiency & Noncompliance over Reporting – The Managing Director’s Office completed and approved and the Grants Accounting and Administration Unit (GAAU) of the Finance Unit processed and approved all transactions for the Edward Byrne Memorial Competitive Grant Program in the City’s Financial Accounting and Management Information System (FAMIS) under the incorrect Catalog of Federal Domestic Assistance (CFDA) number. Neither the Managing Director’s Office or the GAAU detected the error, resulting in the grant being wrong in the initial SEFA report. After Controller’s Office auditors brought the incorrect CFDA issue to the attention of the GAAU, the number was corrected in the final SEFA. The City accepted the Controller’s Office findings, but stated that they believe they have sufficient controls in place;
- Significant Deficiency & Noncompliance over Reporting – The Philadelphia Fire Department submitted inaccurate semi-annual Federal Financial Reports (SF-425s) for federal awards received under the Staffing for Adequate Fire and Emergency Response program. Our review of two SF-425s in FY17 reported amounts for “cash disbursements” and “federal share of expenditures” incorrectly. As a result, any lines on the SF-425s that were calculated using those amounts were incorrect. Failure to properly report the accurate information on SF-425 reports leads to noncompliance with reporting requirements. Additionally, federal grantors may not have complete and accurate information to make final decisions on future federal awards. The forms were released back to PFD for correction and The PFD accepted the finding and began to implement a corrective action plan to ensure these errors do not happen in the future; and
- Significant Deficiency & Noncompliance over Reporting – The GAAU within the Finance Department did not accurately disclose the total payments to subrecipients in the preliminary SEFA. The Office of the Controller’s review of records indicated that subrecipient expenditures for major programs, including the Edward Byrne Memorial Competitive Grant Program, Community Development Block Grant/Entitlement Grants, Community Services Block Grants, Block Grants for Prevention and Treatment of Substance Abuse, and Emergency Solutions Grant Program, were either understated, overstated or not reported at all. The net value of these misstatements total $14.7 million. The GAAU agreed with our findings and corrected the amounts reported for subrecipient expenditures.
Other issues with the administration of the Edward Byrne Memorial Competitive Grant Program were highlighted in an Office of the Inspector General, U.S. Department of Justice report released last year.