1. Audit of COVID-19 Response: Disaster Reimbursements ABSTRACT
The City has generally established effective
controls over expenses to ensure reimbursements
are maximized. Formalization of the
reimbursement submission process and additional
guidance on reimbursable expenses would
increase efficiency.
r
Internal Audit Department
AUDIT OF COVID-19
RESPONSE
Disaster Reimbursements
crry
OF
DENTON
The City of Denton Internal Audit Report July 2020
Audit of COVID-19 Response: Disaster Reimbursements
Table of Contents
Auditat a Glance .................................................................................................................................3
Introduction.........................................................................................................................................4
ManagementResponsibility.....................................................................................................................4
Audit Objectives, Scope, and Methodology..............................................................................................4
Findings&Analysis..............................................................................................................................5
Disaster Expense Tracking is Effective; Additional Guidance May Increase Efficiency ............................5
Reimbursable Expenses are Generally Well Supported............................................................................8
Reimbursement Submission Process is Well Designed but Should be Formalized ................................10
Appendix A: Management Response Summary..................................................................................12
Appendix B: Reimbursement Packet Submission Process................................................................... 13
N
v
The City of Denton Internal Audit Report July 2020
Audit of COVID-19 Response: Disaster Reimbursements
Audit at a Glance
Why we did this Audit: What we Found:
Since the beginning of the City's In general, the City has established effective controls
emergency declaration, about $2.5 over reimbursable disaster expenses; however,
million has been spent in response to increased documentation could further reduce the
the COVID-19 pandemic. A significant risk that reimbursements are rejected. The following
portion of this amount may be discusses our findings for each major area reviewed:
eligible for reimbursement.This audit
was included as part of the COVID-19 Expense Tracking. The COVID-19 expense tracking
Response Audit Series which was process effectively ensures that all potentially
included on the City's amended fiscal reimbursable expenses are reported to the Finance
year 2019-20 Audit Plan as approved Department. The reimbursement packet preparation
by the City Council. process could be further streamlined if Finance
released general guidance on what expenses and
What we Recommend: work are considered COVID-19 related.
Recommendation 1 Expense Documentation. Generally, all expenses had
Finance should release general adequate supporting documentation.That being said,
guidance for employees on what some minor inconsistency could increase the chance
categories of work and expenses are that some of the City's reimbursement submissions
considered COVID-19 related. are rejected. Ensuring that these inconsistencies are
corrected will reduce this risk. Finance has generally
Recommendation 2 designed a process to ensure that these
Procurement should ensure inconsistencies are corrected; however, it had not yet
Requisition Forms are complete and been used during the audit period.
accurately correspond to the
purchase order and any associated Reimbursement Submission Process. The City has
contract for all COVID-19 related created a Cost Recovery Team which is primarily
purchases. responsible for identifying and applying for disaster
reimbursement opportunities. The Cost Recovery
Recommendation 3 Team has also identified a well-designed process for
Ensure all COVID-19 related preparing and submitting reimbursement packets to
timecards are complete and signed. relevant grantors; however, there is no formalized
policy manual or standard operating procedure to
Recommendation 4 guide staff. Formalizing this process would facilitate
Finance should formalize the process consistency, help retain institutional knowledge, and
for preparing, reviewing, and provide a guide during future emergency situations.
submitting disaster reimbursement
packets to grantors.
(ITY
01 m
DENTON
The City of Denton Internal Audit Report July 2020
Audit of COVID-19 Response: Disaster Reimbursements
Introduction
The City Auditor is responsible for providing: (a) an independent appraisal' of City operations to
ensure policies and procedures are in place and complied with, inclusive of purchasing and
contracting; (b) information that is accurate and reliable; (c) assurance that assets are properly
recorded and safeguarded; (d)assurance that risks are identified and minimized;and (e) assurance
that resources are used economically and efficiently and that the City's objectives are being
achieved.
The Internal Audit Department has completed a performance audit of the COVID-19 disaster
reimbursements processes. We conducted this performance audit in accordance with generally
accepted government auditing standards. Those standards require that we plan and perform the
audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit objectives.
Management Responsibility
City management is responsible for ensuring that resources are managed properly and used in
compliance with laws and regulations; programs are achieving their objectives; and services are
being provided efficiently, effectively, and economically.
Audit Objectives, Scope, and Methodology
This report is intended to provide assurance that the City has established adequate controls over
disaster-related expenses to maximize COVID-19 related reimbursements.
Audit fieldwork was conducted during May of 2020. The scope of review varied depending on the
procedure being performed. The following list summarizes major procedures performed during
this time:
• Reviewed documentation to develop criteria including industry standards, best practices,
policies, and procedures,-
Developed process narratives to identify current control activities that was certified by two
Assistant Finance Directors,the Budget Manager, and the Payroll Coordinator; and
• Reviewed supporting documentation for COVID-19 related purchase orders, procurement card
transactions, and payroll expenses.
i The City of Denton Internal Auditor's Office is considered structurally independent as defined by generally accepted government auditing
standard 3.56.
The City of Denton Internal Audit Report July 2020
Audit of COVID-19 Response: Disaster Reimbursements
Findings & Analysis
On March 13th,2020,the City of Denton (City) issued a declaration of local disaster for public health
emergency to minimize the potential impact of COVID-19. As of May 201h, 2020, the City has
expended almost $2.5 million in response to the COVID-19 pandemic (see Table 1).
Table 1: COVID-19 Costs (March 131h— May 201h, 2020)
Expense Category Total
Personnel Costs $1,906,000
Assistance Costs $342,000
Materials and Supplies $201,000
Total: $2,450,000
A significant portion of this amount may be eligible for reimbursement from Federal, State, and
local agencies. This audit evaluated disaster reimbursement procedures based on the Federal
Emergency Management Agency's (FEMA) requirements as they are generally the most stringent;
however, it should be noted that the City may also seek reimbursement from other sources. The
Finance Department has identified the following significant sources of reimbursement for the City:
➢ Coronavirus Aid, Relief, and Economic Security (CARES) Act though Denton County; and
➢ FEMA's Public Assistance Programs.
Disaster Expense Tracking is Effective; Additional Guidance May Increase Efficiency
FEMA's Disaster Financial Management Guide recommends that jurisdictions do the following:
➢ Activate and use disaster accounting general ledger lines;
➢ Log and track time and expenses; and
➢ Document all expenditures related to response and disaster impacts.
Based on our discussions with Finance staff, reimbursable expenses are generally incurred in one
of three ways: purchase orders (POs), procurement card (p-card) transactions, and payroll
expenses.
What We Found
• The Finance Department has established an accounting subledger to track expenses related to
COVID-19. Guidance was distributed to City employees on how to code operating and payroll
expenses to this subledger in the City's accounting system.
o The Finance Department has not released guidance on what types of commodities or
services are considered disaster related.This is due in part to the changing and unclear
guidance provided by FEMA and other grantors.
Ln
v
nA
2 The referenced guide was published in April 2020.
The City of Denton Internal Audit Report July 2020
Audit of COVID-19 Response: Disaster Reimbursements
• Staff are conservatively coding operating expenses to the COVID-19 subledger.
o Based on a sample review of thirty purchase orders and fifty p-card transactions not
coded to the COVID subledger, we found only one p-card transaction that potentially
should have been coded to the COVID subledger.All others appeared to be non-COVID
related.
o Of the twenty-two purchase orders3 coded to the COVID-19 subledger, three did not
have adequate documentation describing how the purchase was related to the
disaster response. These purchase orders were related to the purchase of a prisoner
transport van and the regular purchase of paper products (i.e. toilet paper, paper
towels, etc.)
Table 2: Purchase Order Coding Summary
Category No.of POs Value Ordered
Adequate Description 19 $354,498.19
Prisoner Van 2 $46,964.00
Paper Products 1 $20,868.60
All: 22 $422,330.79
o Of the 184 p-card transactions4 coded to the COVID-19 subledger, twenty-eight
transactions did not have adequate documentation describing how the purchase was
related to the disaster response.
Table 3: P-Card Coding Summary
Category No.of Transactions Value
Adequate Description 156 $58,240.90
Telecommuting Equipment 14 $18,559.81
Food—Inadequate Description 6 $2,267.25
Other 8 $1,038.10
All: 184 $80,106.06
■ Fourteen of these transactions were for telecommuting equipment. While
purchasing telecommuting equipment is not inappropriate and is generally an
indirect result of the Pandemic, it may be difficult to prove that these
expenditures are related to the disaster response — especially if
telecommuting continues after the disaster declaration is ended.
• Staff generally appears to be effective at reporting disaster-related work hours; however,some
descriptions of the work performed could be more detailed.
o Of the 629.75 COVID-coded hours' reviewed, 177.75 hours did not have adequate
documentation to describe how the work completed was related to the disaster response.
■ Some work descriptions were very general such as "COVIDI9 response, �p
budget, staffing, VSP." While this work was likely related to the disaster o
3 Reviewed all purchase orders issued between March 13 and May 13 that were coded to the COVID-19 subledger.
4 Reviewed p-card transactions coded to the COVID-19 subledger that occurred between March 13 through May 7.
5 Reviewed ten randomly selected timecards submitted per pay periods ending on 3/20/20,4/3/20,4/17/20,and 5/1/20.
The City of Denton Internal Audit Report July 2020
Audit of COVID-19 Response: Disaster Reimbursements
response, it does not detail what work was completed and may be rejected by
potential grantors.
■ Similarly, some work descriptions appeared to be related to telecommuting
such as "set up home system" or "taking remote calls; entering tickets;
assisting employees." While telecommuting has drastically increased due to
the Pandemic, it may be difficult to prove that this is disaster response work—
especially if telecommuting continues after the disaster declaration is ended.
Table 4: Payroll Coding Summary
Category Hours
Adequate Description 452.00
General Description 99.00
Increased Telecommuting Response 59.00
Other 19.75
All: 629.75
• The Finance Department plans to eventually move reimbursed expenses into a specific ledger
where reimbursement revenue will be recognized. Non-reimbursed expenses will remain in
the COVID-19 subledger. This accounting system should allow the City to effectively track its
COVID-19 related costs.
Why It Matters
The Finance Department has effectively established and communicated a tracking system for
disaster-related costs, which will facilitate the reimbursement packet submission process. In
addition, creating separate funds to account for reimbursement revenues will ensure that
accounting practices are appropriate and in line with government accounting standards.
That being said, providing general guidance on what type of expenses and work are related to the
disaster response mayfacilitate the reimbursement packet preparation process. In particular, clear
direction on telecommuting expenses, the distinction between disaster-related work and normal
operations,and the level of description needed fortimecards may help weed out non-reimbursable
expenses before submission to the Finance Department. This would increase the efficiency of the
process as there will be fewer expenses to sort through.
Recommendation:
1. Release general guidance for employees on what categories of work and expenses are
considered COVID-19 related.
Finance Department Comments: The Finance Department concurs with this recommendation.
In March, at the start of the pandemic, the Finance Department emailed all City Departments
with instructions for tracking COVID related expenses. This communication was focused on
casting a wide net through the organization capturing all possible COVID related expenses.
However, prior to submitting for reimbursement the Finance Department will review all
expenses for accuracy and supporting documentation. Today, all COVID related expenses are
being tracked accounting to this initial communication. However, the Finance Department
agrees that updated communication and documentation should be sent to departments
ao
The City of Denton Internal Audit Report July 2020
Audit of COVID-19 Response: Disaster Reimbursements
regarding COVID expenses. In response to this recommendation the Finance Department will
send additional communication to departments in the coming weeks.
Reimbursable Expenses are Generally Well Supported
To receive reimbursement, the City must ensure it has detailed and thorough documentation of
all disaster-related expenses. All expenses must be adequately approved, but have different
supporting documentation requirements as summarized on the next page:
➢ Purchase Orders should have documentation to show compliance with purchasing
regulations;
➢ Procurement Card (P-Card) Transactions should have itemized and detailed receipts; and
➢ Payroll Expenses should have completed timecards.
What We Found
• All nineteen COVID-19 related purchase orders were procured in accordance with
procurement regulations.
o In addition, we found that the Purchasing Division has begun issuing Informal Request
for Proposals before purchasing scarce commodities such as masks, thermometers,
and cleaning products. Continued use of this process will provide further assurance
that the City is receiving the best value for these items.
o For ten of the purchase orders, the Requisition Form was incomplete or inaccurate
which made it difficult to tell if the procurement complied with procurement
regulations.All identified documentation issues were corrected during the audit.While
the Requisition Form is not an official procurement document, it provides details of
the procurement history that may decrease the possibility that the City's submitted
expenses are rejected for reimbursement.
• Generally, p-card transactions had adequate receipts attached in the City's Certify system.
o Eleven p-card transactions did not have an itemized receipt and four did not have an
adequately detailed receipt.
• Of the forty timecards reviewed,twenty-nine were fully complete.The remaining eleven were
typically missing the time in and out fields.
o Missing details may increase the chance that reimbursement submissions are rejected
so the Finance Department should ensure these details are completed when preparing
the reimbursement packet.That being said,all timecards contained critical details such
as a description of the work completed, and the number of hours devoted to this work.
• Twenty-seven of the forty reviewed timecards were missing the necessary signatures. Given
that all employee time is eventually approved in the City's time keeping system by the
employee's supervisor, there is adequate approval of these expenses. Still, the Finance
Department should ensure that all timecards have adequate signatures before submitting for
reimbursement to avoid the risk of the submissions being rejected. OQ
v
a_
The City of Denton Internal Audit Report July 2020
Audit of COVID-19 Response: Disaster Reimbursements
Why It Matters
It is particularly important to have adequate supporting documentation for expenses when
submitting them for reimbursement. Without adequate documentation, the City risks submitted
expenses being rejected and thus may not be reimbursed. Generally, most COVID-19 related
expenses had adequate documentation to support reimbursement; however, the Finance and
Procurement Departments should ensure that some minor inconsistencies are resolved before
submission to the grantor.
It should be noted that all documentation reviewed as a part of this audit had not yet been vetted
by the Finance Department.According to Finance, identifying and correcting these inconsistencies
is part of their reimbursement packet submission process, which had not yet been completed
during the audit period.
Recommendation:
2. Ensure Requisition Forms are complete and accurately correspond to the purchase order and
any associated contract for all COVID-19 related purchases.
Procurement Department Comments: The Procurement Department concurs with this
recommendation. Before submitting the final documentation for reimbursement, Procurement
staff will work with the using department to ensure all documentation is clear and accurate.
Procurement staff have corrected the incomplete or inaccurate requisition forms. We have also
requested itemized receipts from the p-card holders who did not provide those initially. The
Procurement Department is sending a reminder communication to remind supervisors who
approve p-card transactions to check for itemized receipts before approving.
3. Ensure all COVID-19 related timecards are complete and signed.
Finance Department Comments: We agree.As part of the Finance department's review process
before submitting expenses to federal funding, we have procedures in place to document the
status of all time coded to COVID-19. It documents whether a timecard exist, what function was
worked, is the timecard signed, and is the time worked eligible. If any of the information is
missing, Finance will reach out to the department for completion before any submittal.
Additionally, as part of the department's submittal process, secondary reviews will take place
before submittal to ensure the backup is complete, accurate, and eligible.
Ol
a,
an
a
The City of Denton Internal Audit Report July 2020
Audit of COVID-19 Response: Disaster Reimbursements
Reimbursement Submission Process is Well Designed but Should be Formalized
In order to receive reimbursement,the City must submit disaster-related expenses to the grantor.
It is important during this process to ensure that staff verifies that expenses meet eligibility
requirements, that expenses are adequately supported, and that the grant applications are
formally approved before submission.This is illustrated in the figure below:
Figure 1: Reimbursement Packet Submission Process Summary
D- equacy Review and Submit Packet
Expense of Supporting Approve to the Grantor
Eligability Documentation Application
What We Found
• As part of the City's Emergency Operation Center activation,a Cost Recovery Team was created
consisting of staff from the Accounting, Budget, Payroll, and Purchasing Divisions of the City.
This Team is responsible for identifying and applying for reimbursement opportunities.
o The Cost Recovery Team had not submitted any reimbursement packets for general
government expenditures by June 1, 2020; however, a plan has been developed and
presented to the City Council that focuses on maximizing reimbursements.
• The Cost Recovery Team has developed a well-designed process for preparing and submitting
reimbursement packets (see Appendix B).
o Each day, Budget staff reviews COVID-19 coded expenses and generally determines if
the expenses meet reimbursement eligibility requirements and has adequate
supporting documentation. As mentioned previously, it is currently difficult for City
staff to determine what expenses are eligible for reimbursement due to the
unprecedented nature of the COVID-19 Pandemic.That being said,the Cost Recovery
Team has been monitoring guidance issued by the relevant grantors.
o Once the packet is prepared, it is reviewed by the Cost Recovery Team. It may be useful
to more clearly define who should review the packet and if they are reviewing for
allowability, adequate support, or both. Clearly identifying who is responsible for
reviewing minimizes confusion and increases accountability.
o Finally, the reimbursement packet must be approved by the Finance Director before
being submitted. It may be appropriate to require City Council approval before
submitting any disaster-related reimbursement packets; however, time constraints
may make this step unfeasible in an emergency.
• The City has established the "Disaster Finance Plan for FEMA Reimbursement." In general,this
Plan appears to be focused on weather-related events and provides guidance to employees on
what expenses and work are eligible for weather-related disaster reimbursements. It does not O
outline the reimbursement packet preparation or submission process. r--i
a,
tw
a
The City of Denton Internal Audit Report July 2020
Audit of COVID-19 Response: Disaster Reimbursements
Why It Matters
The Finance Department appears to have a well-designed plan for preparing and submitting
reimbursement packets to the identified grantors. Formalizing a plan or standard operating
procedures would facilitate consistency, help retain institutional knowledge, and provide a guide
during future emergency situations.
Recommendation:
4. Formalize the process for preparing, reviewing, and submitting disaster reimbursement
packets to grantors.
Finance Department Comments: The Finance Department concurs with this recommendation.
The City's Disaster Finance Plan was last updated in 2017 and doesn't address pandemics.
Additionally, the plan needs clarification on preparing and submitting reimbursement packets
to the Federal Emergency Management Association (FEMA). However, the existing plan is
considered our official reimbursement guidance document for the current disaster. The Finance
Department will update the plan in the fall of 2020 and make it available to all City
Departments.
r—I
rl
v
ao
The City of Denton Internal Audit Report July 2020
Audit of COVID-19 Response: Disaster Reimbursements
Appendix A: Management Response Summary
The following summarizes the recommendations issued throughout this report. The auditors found that
staff and the Department were receptive and willing to make improvements to controls where needed.
1 Release general guidance for employees on what categories Concur Expected
of work and expenses are considered COVID-19 related. Completion:
Finance Department Comments: The Finance Department concurs with this Responsibility:
recommendation. In March, at the start of the pandemic, the Finance Department
emailed all City Departments with instructions for tracking COVID related expenses.
This communication was focused on casting a wide net through the organization
capturing all possible COVID related expenses. However, prior to submitting for
reimbursement the Finance Department will review all expenses for accuracy and
supporting documentation.Today, all COVID related expenses are being tracked
accounting to this initial communication. However, the Finance Department agrees that
updated communication and documentation should be sent to departments regarding
COVID expenses. In response to this recommendation the Finance Department will
send additional communication to departments in the coming weeks.
Ensure Requisition Forms are complete and accurately Expected
2 correspond to the purchase order and any associated contract Concur Completion:
for all COVID-19 related purchases.
Procurement Department Comments: The Procurement Department concurs with the Responsibility:
recommendation. Before submitting the final documentation for reimbursement,
Procurement staff will work with the using department to ensure all documentation is
clear and accurate. Procurement staff have corrected the incomplete or inaccurate
requisition forms. We have also requested itemized receipts from the p-card holders
who did not provide those initially.The Procurement Department is sending a reminder
communication to remind supervisors who approve p-card transactions to check for
itemized receipts before approving.
3 Ensure all COVID-19 related timecards are complete and Concur Expected
signed. Completion:
Finance Department Comments: We agree.As part of the Finance department's review Responsibility:
process before submitting expenses to federal funding, we have procedures in place to
document the status of all time coded to COVID-19. It documents whether a timecard
exist,what function was worked, is the timecard signed, and is the time worked eligible.
If any of the information is missing, Finance will reach out to the department for
completion before any submittal. Additionally, as part of the department's submittal
process, secondary reviews will take place before submittal to ensure the backup is
complete, accurate, and eligible.
4 Formalize the process for preparing, reviewing, and Concur Expected
submitting disaster reimbursement packets to grantors. Completion:
Finance Department Comments: The Finance Department concurs with this Responsibility:
recommendation.The City's Disaster Finance Plan was last updated in 2017 and doesn't
address pandemics. Additionally,the plan needs clarification on preparing and
submitting reimbursement packets to the Federal Emergency Management Association N
(FEMA). However,the existing plan is considered our official reimbursement guidance
document for the current disaster.The Finance Department will update the plan in the
fall of 2020 and make it available to all City Departments.
The City of Denton Internal Audit Report July 2020
Audit of COVID-19 Response: Disaster Reimbursements
Appendix B: Reimbursement Packet Submission Process
The following flowchart was prepared based on discussions with staff from the City's Budget and Payroll
Divisions and is intended to help formalize the process for reimbursement packet submission.
City of Denton: Disaster Reimbursements
Reimbursement Packet Submission Process
Budget Manager& Budget Cost Recovery Finance
Sr. Financial Analyst Analysts Departments Team Director
1
I
COVID Expenses o
2 6
Identify
Reim bu rsab le Expense Excluded
Expenses
No
4
3 5
Adequate LD =4
&Request Adequate
Support? oded Support?
ntation
Yes Yes
8 7 12
ty
City-Wide ExpenseSummary FormForward Needed Documentation e Review Packet
No Reimbursement
Packet Review Packet
14 13
Submit Packet to the Ye Adequate
Grantor Support?
cM
a,
tw