City of Socorro, Texas

Criteria: Per the Texas Administrative Code (TAC) §3.2527, grantees must periodically submit reports regarding grant information, performance, and progress towards the grant goals and objectives. Also, per the Texas Administrative Code (TAC) §3.2507, a financial status report may be submitted as often as monthly but must be submitted at least quarterly. Required quarterly financial status reports (FSRs) are due 22 days after the end of each calendar quarter. Condition: During a programmatic desk review for the Homeland Security Grant Operation Stonegarden, award number 3007209, the federal awarding agency notified the City of late submission of required reports and recommended implementation of a policy detailing submission procedures for progress reports. The City failed to submit timely four out of four required performance reports, as well as the general assessment and quarterly FSRs. Cause: The City has a written policy in place (“Policy 67”) that meets the requirements recommended by the awarding agency; however, the City did not properly follow the established policy. The breakdown in compliance was to be due to a lack of effective internal monitoring to ensure adherence to established reporting procedures. Effect: The City failed to submit four out of four required performance reports, a general assessment report, and a quarterly FSR in a timely manner. Recommendation: We recommend that management strengthen monitoring controls over reporting deadlines by implementing formal procedures, including: • Maintaining a centralized reporting calendar for all grant requirements; • Assigning clear responsibility for report preparation, review, and submission; and • Implementing documented supervisory review prior to submission to ensure timely compliance with grant reporting requirements. Strengthening these controls will help ensure timely submission of required reports and reduce the risk of sanctions or funding interruptions. Management’s response: Management agrees with auditor’s recommendation. Refer to Corrective Action Plan.

Criteria: According to 2 CFR 200.303, non-federal entities should establish and maintain effective internal control over a Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: During our single audit procedures over reporting compliance requirements for ARPA grants, we noted that grant expenditures in the Annual SLFR Compliance Report P&E 2024 were overstated by $56,850. Cause: Due to adjustments made throughout the fiscal year to address journal entries with incorrect general ledger codes, fund codes, etc., accounting reports provided by the finance department to grants department were not updated as of the date of ARPA reports submission. The grants department accidentally reported duplicate transactions for projects No. RC02 and No. GSP05. Per review of allowable expenses testwork, auditors verified transactions noted as duplicated in the general ledger detail were only paid once, and these expenditures were allowed under the program. Effect: Lack of proper expenditure reconciliation led to the City overstating reported expenses by $56,850. Failure to properly reconcile federal grants could result in misstatements in the financial statements, and non-compliance with federal grant requirements. Questioned costs: None. Recommendation: We recommend that management develop and implement a reconciliation process for ARPA grant expenditures. Reconciliation should be performed on a regular basis and be properly documented. Any discrepancies identified should be investigated and promptly resolved. We also recommend the City adjust and correct duplicate expenses for project RC02 and GSP05 when submitting its next required Annual Report to the U.S. Department of Treasury. Management’s response: Management agrees with auditor recommendation. Refer to Corrective Action Plan.