Desk Review of Los Angeles County, California's Use of Coronavirus Relief Fund Proceeds (OIG-CA-23-027)

Summary

A Department of the Treasury Office of Inspector General memorandum dated July 7, 2023, OIG-CA-23-027, signed /s/ by Deborah L. Harker, Assistant Inspector General for Audit, to Acting Chief Recovery Officer Jessica Milano, transmitting a desk review of Los Angeles County, California's use of Coronavirus Relief Fund proceeds. The memorandum states that Castro & Company, LLC performed the desk review and identified total questioned costs of $249,052,031.69, and determined LA County's risk of unallowable use of funds to be high. It states that Treasury OIG is questioning unsupported expenditures of $249,052,031.69. Castro recommends that Treasury OIG pursue missing documentation and determine if a focused audit is feasible over certain payment types.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

OFFICE OF
INSPECTOR GENERAL
DEPARTM ENT OF THE TREASURY
WASHINGTON, D.C.  20220

July 7, 2023

MEMORANDUM FOR JESSICA MILANO, ACTING CHIEF RECOVERY OFFICER,
DEPARTMENT OF THE TREASURY

FROM:

Deborah L. Harker /s/
Assistant Inspector General for Audit

SUBJECT:
Desk Review of Los Angeles County, California’s Use of
Coronavirus Relief Fund Proceeds (OIG-CA-23-027)

Please find the attached desk review memorandum1 on Los Angeles County,
California’s (LA County) use of Coronavirus Relief Fund (CRF) proceeds. The CRF
is authorized under Title VI of the Social Security Act, as amended by Title V,
Division A of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
Under a contract monitored by our office, Castro & Company, LLC (Castro), a
certified independent public accounting firm, performed the desk review. Castro
performed the desk review in accordance with the Council of the Inspectors
General on Integrity and Efficiency Quality Standards for Federal Offices of
Inspector General standards of independence, due professional care, and quality
assurance.

In its desk review, Castro personnel found that LA County was compliant with the
quarterly Financial Progress Reports (FPR) submission timeline as required under
Department of the Treasury’s (Treasury) guidance for cycles 12 through 53. In
addition, Castro personnel reviewed documentation for a selection of 26
transactions reported in the quarterly reports through cycle 54. Castro’s review of
LA County’s documentation supporting its uses of CRF proceeds found that the
expenditures for the Direct Payments greater than or equal to $50,000 and
Aggregate Payments to Individuals5 payment types complied with the CARES Act
and Treasury’s Guidance.

1 The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) assigned the Department of
the Treasury Office of Inspector General with responsibility for compliance monitoring and
oversight of the receipt, disbursement, and use of Coronavirus Relief Fund (CRF) payments. The
purpose of the desk review is to perform monitoring procedures of the prime recipient’s receipt,
disbursement, and use of CRF proceeds as reported in the grants portal on a quarterly basis.
2 Calendar quarter ending June 30, 2020.
3 Calendar quarter ending June 30, 2021.
4 Calendar quarter ending June 30, 2021.
5 Obligations and expenditures for payments made to individuals, regardless of amount, are
required to be reported in the aggregate in the grants portal to prevent inappropriate disclosure of
personally identifiable information.

Castro found that CRF proceeds for the Aggregate Reporting less than $50,0006
payment type complied with the CARES Act, but did not comply with Treasury’s
Guidance. Additionally, Castro found that the expenditures related to the
Contracts greater than or equal to $50,000 payment type did not comply with the
CARES Act and Treasury’s Guidance.

Based on the totality of the work performed, Castro identified total questioned
costs of $249,052,031.69 and determined LA County’s risk of unallowable use of
funds to be high. Based on Castro’s desk review, Treasury Office of Inspector
General (OIG) is questioning unsupported expenditures of $249,052,031.69. See
the attachment to this transmittal for the definition of a questioned cost.

Castro recommends Treasury OIG pursue obtaining missing documentation from
LA County management and ensure reporting corrections are made. Further,
based on LA County’s responsiveness to Treasury OIG’s requests and its ability to
provide documentation, Castro recommends Treasury OIG determine if a focused
audit is feasible over LA County’s Contracts greater than or equal to $50,000 and
Aggregate Reporting less than $50,000 payment types.

Treasury OIG and Castro met with LA County management to discuss the
questioned costs. LA County management told us that they made updates to the
grants portal in subsequent cycle submissions, which they believe have
addressed all the findings contained in this report.

In connection with the contract, we reviewed Castro’s desk review memorandum
and related documentation and inquired of its representatives. Our review, as
differentiated from an audit performed in accordance with generally accepted
government auditing standards, was not intended to enable us to express an
opinion on LA County’s use of the CRF proceeds. Castro is responsible for the
attached desk review memorandum and the conclusions expressed therein. Our
review found no instances in which Castro did not comply in all material respects,
with the Quality standards for Federal Offices of Inspector General.

We appreciate the courtesies and cooperation provided to Castro and our staff
during the desk review. If you have any questions or require further information,
please contact me at (202) 486-1420, or a member of your staff may contact Lisa
DeAngelis, Deputy Assistant Inspector General for Audit, at (202) 487-8371.

6 Recipients are required to report CRF transactions greater than or equal to $50,000 in detail in the
grants portal. Transactions less than $50,000 can be reported as an aggregate lump-sum amount
by type (contracts, grants, loans, direct payments, and transfers to other government entities).

cc:

Michelle. A. Dickerman, Deputy Assistant General Counsel, Department of
the Treasury

Victoria Collin, Chief Compliance & Finance Officer, Office of Recovery
Programs, Department of the Treasury

Fesia Davenport, Chief Executive Officer, Los Angeles County, California

Wayne Ference, Partner, Castro & Company, LLC

Attachment

Schedule of Questioned Cost

According to the Code of Federal Regulations,7 a questioned cost is a cost that is
questioned because of a finding:

(a) which resulted from a violation or possible violation of a statute,
regulation, or the terms and conditions of a Federal award, including for
funds used to match Federal funds;

(b) where the costs, at the time of the review, are not supported by
adequate documentation; or

(c) where the costs incurred appear unreasonable and do not reflect the
actions a prudent person would take in the circumstances.

Questioned costs are to be recorded in the Department of the Treasury’s
(Treasury) Joint Audit Management Enterprise System (JAMES).8 The amount will
also be included in the Office of Inspector General (OIG) Semiannual Report to
Congress. It is Treasury management's responsibility to report to Congress on the
status of the agreed to recommendations with monetary benefits in accordance
with USC 5 Section 405(b) of the Inspector General Act of 1978.

Recommendation                                                Questioned Costs

Recommendation 1

$249,052,031.69

The questioned cost represents amounts provided by Treasury under the
Coronavirus Relief Fund. As discussed in the attached desk review,
$249,052,031.69 is Los Angeles County’s total expenditures reported in the grants
reporting portal that lacked supporting documentation.

7 2 CFR § 200.84 – Questioned Cost
8 JAMES is Treasury’s audit recommendation tracking system.

Desk Review of Los Angeles County, California

1

1635 King Street
Alexandria, VA 22314
Phone: 703.229.4440
Fax: 703.859.7603
www.castroco.com
July 7, 2023

OIG-CA-23-23-027

MEMORANDUM FOR DEBORAH L. HARKER,
ASSISTANT INSPECTOR GENERAL FOR AUDIT

FROM:
Wayne Ference

Partner, Castro & Company, LLC

SUBJECT:
Desk Review of Los Angeles County, California

On September 22, 2021, we initiated a desk review of Los Angeles County’s (LA
County) use of the Coronavirus Relief Fund (CRF) authorized under Title VI of the
Social Security Act, as amended by Title V Division A of the Coronavirus Aid,
Relief, and Economic Security Act (CARES Act).1 The objective of our desk review
was to evaluate LA County’s documentation supporting its uses of CRF proceeds
as reported in the GrantSolutions2 portal and to assess the risk of unallowable use
of funds. The scope of our desk review was limited to obligation and expenditure
data for the period of March 1, 2020 through June 30, 2021 as reported in Cycles
13 through 54 in the GrantSolutions portal.
As part of our desk review, we performed the following:
1) reviewed LA County’s quarterly Financial Progress Reports (FPRs)
submitted in the GrantSolutions portal through June 30, 2021;
2) reviewed the Department of the Treasury’s (Treasury) Coronavirus Relief
Fund Guidance as published in the Federal Register on January 15, 2021;5
3) reviewed Treasury Office of Inspector General (OIG)’s Coronavirus Relief
Fund Frequently Asked Questions Related to Reporting and
Recordkeeping;6

1 P.L. 116-136 (March 27, 2020)
2 GrantSolutions, a grant and program management Federal shared service provider under the
U.S. Department of Health and Human Services, developed a customized and user-friendly
reporting solution to capture the use of CRF payments from recipients.
3 Calendar quarter ending June 30, 2020.
4 Calendar quarter ending June 30, 2021.
5 Coronavirus Relief Fund Guidance as published in the Federal Register (January 15, 2021)
https://home.treasury.gov/system/files/136/CRF-Guidance-Federal-Register_2021-00827.pdf
6 Department of the Treasury Office of Inspector General Coronavirus Relief Fund Frequently Asked
Questions Related to Reporting and Recordkeeping OIG-20-028R; March 2, 2021

Desk Review of Los Angeles County, California
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4) reviewed Treasury OIG’s monitoring checklists7 of LA County’s quarterly
FPR submissions for reporting deficiencies;
5) reviewed other audit reports issued, such as Single Audit reports, and
those issued by the Government Accountability Office and other applicable
Federal agency OIGs for internal control or other deficiencies that may
pose risk or impact LA County’s uses of CRF proceeds;
6) reviewed Treasury OIG Office of Investigations (OI), the Council of the
Inspectors General on Integrity and Efficiency Pandemic Response
Accountability Committee (PRAC),8 and Treasury OIG Office of Counsel
input on issues that may pose risk or impact LA County’s uses of CRF
proceeds;
7) interviewed key personnel responsible for preparing and certifying LA
County’s GrantSolutions portal quarterly FPR submissions, as well as
officials responsible for obligating and expending CRF proceeds;
8) made a non-statistical selection of Contracts, Direct Payments, Aggregate
Reporting,9 and Aggregate Payments to Individuals10 data identified
through GrantSolutions reporting; and
9) evaluated documentation and records used to support LA County’s
quarterly FPRs.

7 The checklists are used by Treasury OIG personnel to monitor the progress of prime recipient
reporting in the GrantSolutions portal. GrantSolutions quarterly submission reviews are designed
to identify material omissions and significant errors, and where necessary, include procedures for
notifying prime recipients of misreported data for timely correction. Treasury OIG follows the CRF
Prime Recipient Quarterly GrantSolutions Submissions Monitoring and Review Procedures Guide,
OIG-CA-20-029R to monitor the prime recipients quarterly.
8 Section 15010 of P.L. 116-136 established the Pandemic Response Accountability Committee
within the Council of the Inspectors General on Integrity and Efficiency to promote transparency
and conduct and support oversight of covered funds (see Footnote 17 for a definition of covered
funds) and the coronavirus response to (1) prevent and detect fraud, waste, abuse, and
mismanagement; and (2) mitigate major risks that cut across program and agency boundaries.
9 Recipients are required to report CRF transactions greater than or equal to $50,000 in detail in the
GrantSolutions portal. Transactions less than $50,000 can be reported as an aggregate lump-sum
amount by type (contracts, grants, loans, direct payments, and transfers to other government
entities).
10 Obligations and expenditures for payments made to individuals, regardless of amount, are
required to be reported in the aggregate in the GrantSolutions portal to prevent inappropriate
disclosure of personally identifiable information.

Desk Review of Los Angeles County, California
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Based on our review of LA County’s documentation supporting its uses of CRF
proceeds as reported in the GrantSolutions portal, we found that uses of CRF
proceeds for Direct Payments greater than or equal to $50,000 and Aggregate
Payments to Individuals complied with the CARES Act and Treasury’s Guidance.
However, we found that uses of CRF proceeds for Aggregate Reporting less than
$50,000 complied with the CARES Act but did not comply with Treasury’s
Guidance. Additionally, we found that Contracts greater than or equal to $50,000
did not comply with the CARES Act and Treasury’s Guidance.

Based on the totality of the work performed, we identified total questioned costs
of $249,052,031.69, and determined LA County’s risk of unallowable use of funds
to be high. As such, Castro recommends Treasury OIG pursue obtaining
documentation from LA County management and ensure reporting corrections
are made. Further, based on LA County’s responsiveness to Treasury OIG’s
requests and its ability to provide documentation, we recommend Treasury OIG
determine if a focused audit is feasible over LA County’s Contracts greater than or
equal to $50,000 and Aggregate Reporting less than $50,000.

Non-Statistical Transaction Selection Methodology
Treasury issued a CRF payment to LA County of $1,057,341,431.90. As of Cycle 5,11
LA County’s cumulative obligations and expenditures were both $906,772,082.89.
LA County’s cumulative obligations and expenditures by payment type as
reported in GrantSolutions through Cycle 511 are summarized below:

Payment Type
Cumulative
Obligations
Cumulative
Expenditures
Contracts >= $50,000
$ 512,836,297.77
$ 512,836,297.77
Grants >= $50,000
$                      -     $                       -
Loans >= $50,000
$                      -     $                       -
Transfers >= $50,000
$                      -     $                       -
Direct Payments >= $50,000
$        450,000.00
$        450,000.00
Aggregate Reporting < $50,000
$ 139,279,623.15
$ 139,279,623.15
Aggregate Payments to Individuals (in any
amount)
$ 254,206,161.97
$ 254,206,161.97
Totals
$ 906,772,082.89
$ 906,772,082.89

11 Calendar quarter ending June 30, 2021.

Desk Review of Los Angeles County, California
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Castro made a non-statistical selection of Contracts greater than or equal to
$50,000, Direct Payments greater than or equal to $50,000, Aggregate Reporting
less than $50,000, and Aggregate Payments to Individuals. Selections were made
using auditor judgment based on information and risks identified in reviewing
audit reports, the GrantSolutions portal reporting anomalies12 identified by the
Treasury OIG CRF monitoring team, and review of LA County’s FPR submissions.
Castro noted LA County did not obligate or expend CRF proceeds to Grants
greater than or equal to $50,000, Loans greater than or equal to $50,000, or
Transfers13 greater than or equal to $50,000, therefore, we did not make a
selection of transactions from these categories.

The number of transactions (24) we selected to test were based on LA County’s
total CRF award amount and our overall risk assessment of LA County. To allocate
the number of transactions (24) by obligation type (Contracts greater than or
equal to $50,000, Direct Payments greater than or equal to $50,000, Aggregate
Reporting less than $50,000, and Aggregate Payments to Individuals), we
compared the obligation type dollar amounts as a percentage of cumulative
obligations for Cycle 5.14 Treasury OIG identified seven anomalies, five of which
were included in our original transaction selections; therefore, we did not select
any additional transactions from the anomalies identified by Treasury OIG.
Additionally, Treasury OIG identified two potential duplicate payments that were
part of the seven anomalies. We included these two potential duplicate payments
from the Contracts greater than or equal to $50,000 payment type in our selection,
increasing the total transactions tested to 26.

Background

The CARES Act appropriated $150 billion to establish the CRF. Under the CRF,
Treasury made payments for specified uses to States and certain local
governments; the District of Columbia and U.S. Territories, including the
Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, American
Samoa, and the Commonwealth of the Northern Mariana Islands; and Tribal
governments. Treasury issued a CRF payment to LA County for $1,057,341,431.90.
The CARES Act stipulates that a recipient may only use the funds to cover costs
that—
(1) are necessary expenditures incurred due to the public health emergency
with respect to the coronavirus disease 2019 (COVID-19);

12 Treasury OIG has a pre-defined list of risk indicators that are triggered based on data submitted
by recipients in the FPR submissions that meet certain criteria. Castro reviewed these results
provided by Treasury OIG for LA County.
13 A transfer to another government entity is a disbursement or payment to a government entity
that is legally distinct from the prime recipient.
14 Calendar quarter ending June 30, 2021.

Desk Review of Los Angeles County, California
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(2) were not accounted for in the budget most recently approved as of
March 27, 2020; and
(3) were incurred between March 1, 2020 and December 31, 2021.15

Section 15011 of the CARES Act, requires each covered recipient16 to submit to
Treasury and the PRAC, no later than 10 days after the end of each calendar
quarter, a report that contains (1) the total amount of large covered funds17,18
received from Treasury; (2) the amount of large covered funds received that were
expended or obligated for each project or activity; (3) a detailed list of all projects
or activities for which large covered funds were expended or obligated; and (4)
detailed information on any level of sub-contracts or sub-grants awarded by the
covered recipient or its sub-recipients.

The CARES Act assigned Treasury OIG the responsibility for compliance
monitoring and oversight of the receipt, disbursement, and use of CRF proceeds.
Treasury OIG also has authority to recoup funds in the event that it is determined
a recipient failed to comply with requirements of subsection 601(d) of the Social
Security Act, as amended, (42 U.S.C. 801(d)).

Desk Review Results

We reviewed LA County’s quarterly FPRs through June 30, 2021 and determined
that LA County submitted all its reports on a timely basis.

Summary of Testing Results

Certain transactions selected for detailed review were not supported by
documentation and we were unable to determine if expenditures were allowable
in accordance with the CARES Act and Treasury’s guidance. Specifically, we were
unable to determine if $249,052,031.69 in Contracts greater than or equal to

15 P.L. 116-260 (December 27, 2020). The period of performance end date of the CRF was extended
through December 31, 2021 by the Consolidated Appropriations Act, 2021. The period of
performance end date for tribal entities was further extended to December 31, 2022 by the State,
Local, Tribal, and Territorial Fiscal Recovery, Infrastructure, and Disaster Relief Flexibility Act,
Division LL of the Consolidated Appropriations Act, 2023, P.L. 117-328, December 29, 2022, 136
Stat. 4459.
16 Section 15011 of P.L. 116-136 defines a covered recipient as any entity that receives large
covered funds and includes any State, the District of Columbia, and any territory or possession of
the United States.
17 Section 15010 of P.L. 116-136 defines covered funds as any funds, including loans, that are made
available in any form to any non-Federal entity, not including an individual, under Public Laws 116-
123, 127, and 136, as well as any other law which primarily makes appropriations for Coronavirus
response and related activities.
18 Section 15011 of P.L. 116-136 defines large covered funds as covered funds that amount to more
than $150,000.

Desk Review of Los Angeles County, California
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$50,000 tested were necessary expenditures due to the COVID-19 public health
emergency, were not accounted for in the budget most recently approved as of
March 27, 2020, and were incurred during the covered period. We found that uses
of CRF proceeds for Direct Payments greater than or equal to $50,000 and
Aggregate Payments to Individuals complied with the CARES Act and Treasury’s
Guidance.

Additionally, we found that uses of CRF proceeds for Aggregate Reporting less
than $50,000 complied with the CARES Act but did not comply with Treasury’s
Guidance because some transactions tested were not recorded in the correct
payment type in the GrantSolutions portal. We are not questioning these
misclassified costs as they were allowable and supported, but we have made
Treasury OIG personnel aware of the reporting misclassification.

The transactions selected for testing were not selected statistically, and therefore
results cannot be extrapolated to the total universe of transactions.

The following table includes the total cumulative expenditure population amount
as of June 30, 2021 and the cumulative expenditure amount tested. Additionally,
this table includes a summary of Castro’s testing results over cumulative
expenditure transaction balances. Within the “Exception Noted: IPA [Independent
Public Accountant] Recommended for Treasury OIG Follow-up” section of this
table, we have included a summary of unsupported and/or ineligible balances
identified as questioned costs as a result of our desk review. These expenditures
do not comply with the CARES Act and Treasury’s Guidance. Additionally, in the
far-right column, we have identified the cumulative expenditures that Castro
tested without exceptions noted. See the Desk Review Results section below this
table for a detailed discussion of questioned costs and other issues identified
throughout the course of our desk review.

Desk Review of Los Angeles County, California
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Summary of Expenditure Testing and Recommended Results – As of Cycle 519
Payment Type
Cumulative
Expenditure
Population
Amount
Cumulative
Expenditure
Tested Amount
Unsupported
Exception
Ineligible
Exception
Castro Reviewed
Value Without
Exception
(per Support)
Contracts >=
$50,000
$    512,836,297.77
$  291,176,829.96
$    249,052,031.69
$                    -
$    42,124,798.28
Grants >=
$50,000
$
$                         -
$                            -   $                    -
$                          -
Loans >=
$50,000
$
$                         -
$                            -   $                    -
$                          -
Transfers >=
$50,000
$
$                         -
$                            -   $                    -
$                          -
Direct
Payments >=
$50,000
$450,000.00
$         300,000.00
$                            -   $                    -
$         300,000.00
Aggregate
Reporting <
$50,000
$139,279,623.15
$    30,792,985.87
$                            -   $                    -
$    30,792,985.87
Aggregate
Payments to
Individuals (in
any amount)
$254,206,161.97
$    72,574,749.19
$                            -   $                    -
$    72,574,749.19
Totals
$906,772,082.89
$  394,844,565.02
$   249,052,031.69
$                     -
$  145,792,533.34

Contracts Greater Than or Equal to $50,000
We determined LA County’s Contracts greater than or equal to $50,000 were not
in compliance with the CARES Act and Treasury’s Guidance. As a result of our
testing, we are questioning expenditure amounts of $249,052,031.69 because of a
lack of supporting documentation. Additionally, as a result of our testing, we
noted that LA County’s contracts included grant agreements that we determined
should have been reported as Grants greater than or equal to $50,000; however,
due to a lack of supporting documentation, we were unable to determine the
exact amount of the required correcting entries. As part of our procedures, we
selected 11 contract transactions for testing. For 5 of 11 transactions, we noted the
following pertaining to the cumulative expenditure amounts:

1. We identified $183,963,831.10 in expenditures that we questioned as
unsupported. We obtained grant agreements between LA County and
its sub-recipients which we utilized to test LA County’s cumulative
obligations for these balances without exception. We obtained and
reviewed expenditure supporting documentation, to include letters
from sub-recipients summarizing requested installment payments to be
made by LA County to the grant sub-recipients and general ledger
details. However, LA County did not provide detailed invoices to

19 Calendar quarter ending June 30, 2021.

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support the cumulative expenditure amounts incurred by sub-recipients
as part of the grant program. Without detailed invoices to support the
cumulative expenditure amounts incurred by sub-recipients, we were
unable to perform a full assessment to verify eligibility of grantees and
the date expenditures were incurred using CRF funding.

2. We identified an additional $65,088,200.59 in expenditures that we
questioned as unsupported. We obtained grant agreements between LA
County and its sub-recipients which we utilized to test the LA County’s
cumulative obligations for these balances without exception. However,
LA County personnel reported estimated expenditures within
GrantSolutions by reporting the full advance payment amount of
$255,805,013.96 made to a sub-recipient instead of tracking and
reporting the sub-recipient’s actual incurred expenses of
$190,716,813.37. This resulted in a known overstatement to
GrantSolutions expenditures as of Cycle 5.20

LA County personnel told us that they planned to complete a reconciliation of
these sub-recipient costs and to adjust GrantSolutions values in future cycles to
reflect the final expenditures incurred. LA County personnel told us that they
made updates to GrantSolutions in subsequent cycle submissions which they
believe have addressed all the findings contained in this report; however, our
review did not consider updates LA County made after the end of Cycle 5.21

Treasury OIG Guidance OIG-CA-20-021,22 Recipient Portal Access, states: “For
future quarterly reporting, each prime recipient will have GrantSolutions portal
access for three (3) individuals: two (2) designees (preparers) to input quarterly
data and one (1) official authorized to certify that the data is true, accurate, and
complete.” LA County did not comply because the official authorized to certify
that the data was true, accurate, and complete did not ensure that its submission
met all the Treasury OIG Guidance requirements.

Subsection 601 (d) of the Social Security Act, as amended, (42 U.S.C. 801 (d))
requires prime recipients to ensure eligible use of funds and Treasury OIG
Guidance OIG-CA-20-021, CRF Reporting and Record Retention Requirements,
states: “Recipients of Coronavirus Relief Fund payments shall maintain and make
available to the Treasury OIG upon request all documents and financial records
sufficient to establish compliance.” LA County did not comply because it did not
maintain and provide sufficient records to evidence transactions reported in
GrantSolutions.

20 Calendar quarter ending June 30, 2021.
21 Calendar quarter ending June 30, 2021.
22 https://oig.treasury.gov/sites/oig/files/2021-01/OIG-CA-20-021.pdf

Desk Review of Los Angeles County, California
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LA County did not comply with Treasury OIG Guidance OIG-CA-20-028R,23
Department of the Treasury Office of Inspector General Coronavirus Relief Fund
Frequently Asked Questions Related to Reporting and Recordkeeping (Revised),
because it estimated expenditure amounts and reported the full advance payment
amount to its sub-recipients rather than tracking and reporting actual
expenditures incurred by its sub-recipients. In addition, certain transactions
reported as Contracts greater than or equal to $50,000 did not meet the definition
of a Contract.

Aggregate Reporting Less Than $50,000
We determined LA County’s Aggregate Reporting less than $50,000 complied with
the CARES Act, but determined that it did not comply with Treasury’s Guidance.
We selected three original transactions over which to perform testwork; then from
these transactions, we selected 23 sub-selections over which to obtain coverage at
the transaction level. We determined that all these transactions represented
eligible expenditures; however, we noted the following exceptions.

For 12 out of 23 sub-selections, we identified misclassification exceptions related
to Aggregate Reporting less than $50,000 expenditures that should have been
reported as Contracts greater than or equal to $50,000 for amounts totaling
$24,196,752.63 for both cumulative obligation and expenditure amounts.

LA County personnel told us that due to a variety of factors (e.g., internal
audits/reviews, modified strategies to maximize all available revenue sources,
departmental reconciliations, etc.), LA County’s departments had routinely
corrected and/or adjusted their CRF claims. LA County made a strategic decision
to initially report contracts in the Aggregate Reporting payment type; however, LA
County personnel told us that they planned to identify/reclassify all Contracts
greater than or equal to $50,000 in a future cycle once all corrections and
adjustments had been finalized.

Based on the issues noted above, we determined LA County to be noncompliant
with Treasury OIG Guidance OIG-CA-20-021 because the official authorized to
certify that the data was true, accurate, and complete did not ensure that its
submission met all the Treasury OIG Guidance requirements.

Additionally, we determined LA County to be non-compliant with Treasury OIG
Guidance OIG-CA-20-028R because certain expenditures did not meet the
definition of an Aggregate Reporting transaction less than $50,000.

23 https://oig.treasury.gov/sites/oig/files/2021-03/OIG-CA-20-028R.pdf

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Conclusion

Based on our review of LA County’s documentation supporting its uses of CRF
proceeds as reported in the GrantSolutions portal, we found that uses of CRF
proceeds for Direct Payments greater than or equal to $50,000 and Aggregate
Payments to Individuals complied with the CARES Act and Treasury’s Guidance.
However, we found that uses of CRF proceeds for Aggregate Reporting less than
$50,000 complied with the CARES Act, but did not comply with Treasury’s
Guidance. Additionally, we found that Contracts greater than or equal to $50,000
did not comply with the CARES Act and Treasury’s Guidance.

Based on the totality of the work performed, we identified total questioned costs
of $249,052,031.69 and determined LA County’s risk of unallowable use of funds
to be high. As such, Castro recommends Treasury OIG pursue obtaining
documentation from LA County management and ensure reporting corrections
are made. Further, based on LA County’s responsiveness to Treasury OIG’s
requests and its ability to provide documentation, we recommend Treasury OIG
determine if a focused audit is feasible over LA County’s Contracts greater than or
equal to $50,000 and Aggregate Reporting less than $50,000.

*****

All work completed with this letter complies with the Council of the Inspectors
General on Integrity and Efficiency’s Quality Standards for Federal Offices of
Inspectors General, which require that the work adheres to the professional
standards of independence, due professional care, and quality assurance to
ensure the accuracy of the information presented.24 We appreciate the courtesies
and cooperation provided to our staff during the desk review.

Sincerely,

Wayne Ference
Partner, Castro & Company, LLC

24 https://www.ignet.gov/sites/default/files/files/Silver%20Book%20Revision%20-%208-20-12r.pdf

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