Full text
OFFICE OF
INSPECTOR GENERAL
DEPARTM ENT OF THE TREASURY
WASHINGTON, D.C. 20220
July 20, 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 San Bernardino County, California’s Use
of Coronavirus Relief Fund Proceeds (OIG-CA-23-030)
Please find the attached desk review memorandum1 on San Bernardino County,
California’s (San Bernardino) 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 San Bernardino complied with the
quarterly Financial Progress Reports (FPR) reporting timeline as required under
the Department of the Treasury’s (Treasury) guidance for Cycles 12 through 83. In
addition, Castro personnel reviewed documentation for a selection of 33
transactions reported in the quarterly reports through cycle 84. Castro personnel
found that San Bernardino’s CRF expenditures for Contracts greater than or equal
to $50,000, Transfers greater than or equal to $50,000,5 Aggregate
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 March 31, 2022.
4 Calendar quarter ending March 31, 2022.
5 A transfer to another government entity is a disbursement or payment to a government entity
that is legally distinct from the prime recipient.
Page 2
Reporting for transactions less than $50,000,6 and Aggregate Payments to
Individuals7 complied with the CARES Act and Treasury’s Guidance.
Castro determined that San Bernardino’s expenditures related to Grants greater
than or equal to $50,000 and Direct Payments greater than or equal to $50,000 did
not comply with the CARES Act and Treasury guidance. Castro questioned
ineligible expenditures of $64,487.53 and unsupported expenditures of
$280,185.94 related to Grants greater than or equal to $50,000, and ineligible
expenditures of $3,806,938.49 related to Direct Payments greater than or equal to
$50,000. In total, Castro identified questioned costs of $4,151,611.96 and
determined San Bernardino’s risk of unallowable use of funds is moderate.
Castro recommends that Treasury Office of Inspector General (OIG) obtain
missing documentation from San Bernardino management and request that
reporting corrections be made. Further, based on San Bernardino’s
responsiveness to Treasury OIG’s requests and its ability to provide sufficient
documentation, Castro recommends Treasury OIG determine the feasibility of
performing a focused audit for Grants greater than or equal to $50,000 and Direct
Payments greater than or equal to $50,000.
Castro and Treasury OIG met with San Bernardino personnel to discuss the
questioned costs. San Bernardino provided Treasury OIG with their planned
corrective actions in response to the findings in this desk review.
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 San Bernardino’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 Council of the Inspectors General on Integrity and Efficiency’s
Quality Standards for Federal Offices of Inspectors General.
We appreciate the courtesies and cooperation provided to Castro and our staff
during the desk review.
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).
7 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.
Page 3
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.
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
Christopher Sun, Director of Data and Reporting, Department of the
Treasury
Leonard Hernandez, Chief Executive Officer, San Bernardino,
California
Joon Cho, Administrative Analyst, San Bernardino County
Administrative Office
Wayne Ference, Partner, Castro & Company, LLC
Page 4
Attachment
Schedule of Monetary Benefits
According to the Code of Federal Regulations,8 a questioned cost is a cost that is
questioned due to 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).9 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 5 USC Section 405(b) of the Inspector General Act of 1978.
Recommendations
Questioned
Costs
Recommendation No. 1
$64,487.53
Recommendation No. 2
$280,185.94
Recommendation No. 3
$3,806,938.49
The questioned cost represents amounts provided by Treasury under the
Coronavirus Relief Fund. As discussed in the attached desk review, $4,151,611.96
are San Bernardino’s expenditures reported in the grant-reporting portal that are
deemed ineligible and that lacked supporting documentation.
8 2 CFR § 200.84 – Questioned Cost.
9 JAMES is Treasury’s audit recommendation tracking system.
Desk Review of San Bernardino County
1
1635 King Street
Alexandria, VA 22314
Phone: 703.229.4440
Fax: 703.859.7603
www.castroco.com
July 20, 2023
OIG-CA-23-030
MEMORANDUM FOR DEBORAH L. HARKER,
ASSISTANT INSPECTOR GENERAL FOR AUDIT
FROM:
Wayne Ference
Partner, Castro & Company, LLC
SUBJECT:
Desk Review of San Bernardino County, California
On June 14, 2022, we initiated a desk review of San Bernardino County’s (herein
referred to as “San Bernardino”) 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 San Bernardino’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 March 31, 2022 as reported in Cycles 13 through
84 in the GrantSolutions portal.
As part of our desk review, we performed the following:
1) Reviewed San Bernardino’s quarterly Financial Progress Reports (FPRs)
submitted in the GrantSolutions portal through March 31, 2022;
2) reviewed the U.S. Department of the Treasury’s (Treasury) Coronavirus
Relief Fund Guidance as published in the Federal Register on
January 15, 2021;5
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 March 31, 2022.
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
Desk Review of San Bernardino County
2
3) reviewed Treasury Office of Inspector General (OIG)’s Coronavirus Relief
Fund Frequently Asked Questions Related to Reporting and
Recordkeeping;6
4) reviewed Treasury OIG’s monitoring checklists7 of San Bernardino’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 San Bernardino’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 San Bernardino’s uses of CRF
proceeds;
7) interviewed key personnel responsible for preparing and certifying San
Bernardino’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, Grants, Transfers,9 Direct
Payments, Aggregate Reporting,10 and Aggregate Payments to Individuals11
data identified through GrantSolutions reporting; and
9) evaluated documentation and records used to support San Bernardino’s
quarterly FPRs.
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.
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 18 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 A transfer to another government entity is a disbursement or payment to a government entity
that is legally distinct from the prime recipient.
10 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).
11 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 San Bernardino County
3
We reviewed San Bernardino’s quarterly FPR submissions through
March 31, 2022, and determined that San Bernardino submitted all its reports on a
timely basis.
Based on our review of San Bernardino’s documentation supporting the uses of
its CRF proceeds as reported in the GrantSolutions portal, we found that uses of
CRF proceeds for Contracts greater than or equal to $50,000, Transfers greater
than or equal to $50,000, Aggregate Reporting less than $50,000, and Aggregate
Payments to Individuals complied with the CARES Act and Treasury’s Guidance.
However, we determined that the expenditures related to Grants greater than or
equal to $50,000 and Direct Payments greater than or equal to $50,000 did not
comply with the CARES Act and Treasury’s Guidance.
We identified questioned costs of $4,151,611.96 and determined San Bernardino’s
risk of unallowable use of funds is moderate. Castro recommends that Treasury
OIG obtain missing documentation from San Bernardino management and
request that reporting corrections be made. Further, based on San Bernardino’s
responsiveness to Treasury OIG’s requests and its ability to provide sufficient
documentation, we recommend Treasury OIG determine the feasibility of
performing a focused audit for Grants greater than or equal to $50,000 and Direct
Payments greater than or equal to $50,000.
Non-Statistical Transaction Selection Methodology
Treasury issued a CRF payment to San Bernardino of $380,408,020.90. As of
Cycle 8,12 San Bernardino’s cumulative obligations and expenditures were
$380,408,020.90 and $370,096,733.73, respectively. San Bernardino’s cumulative
obligations and expenditures by payment type, as reported in GrantSolutions
through Cycle 8,1312 are summarized below:
Payment Type
Cumulative
Obligations
Cumulative
Expenditures
Contracts >= $50,000
$ 68,062,690.13
$ 66,833,016.15
Grants >= $50,000
$ 32,614,647.59
$ 26,458,950.05
Loans >= $50,000
$
$
Transfers >= $50,000
$ 40,707,711.42
$ 38,167,190.37
Direct Payments >= $50,000
$ 13,947,981.29
$ 13,947,981.29
Aggregate Reporting < $50,000
$ 77,538,740.75
$ 77,153,346.15
Aggregate Payments to Individuals
(in any amount)
$ 147,536,249.72
$ 147,536,249.72
Totals
$ 380,408,020.90
$ 370,096,733.73
12 Calendar quarter ending March 31, 2022.
13 Calendar quarter ending March 31, 2022.
Desk Review of San Bernardino County
4
Castro made a non-statistical selection of Contracts greater than or equal to
$50,000, Grants greater than or equal to $50,000, Transfers 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 anomalies14 identified by the
Treasury OIG CRF monitoring team, and review of San Bernardino’s FPR
submissions. Castro noted San Bernardino did not obligate or expend CRF
proceeds to Loans greater than or equal to $50,000; therefore, we did not make a
selection of transactions from that category.
The number of transactions (29) we selected to test were based on
San Bernardino’s total CRF award amount and our overall risk assessment of
San Bernardino. To allocate the number of transactions (29) by payment type
(Contracts greater than or equal to $50,000, Grants greater than or equal to
$50,000, Transfers 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 payment type dollar amounts as a
percentage of total cumulative obligations for Cycle 8.15 Additionally, Treasury
OIG identified four anomaly transactions in the form of potential duplicate
payments which had not already been included within our transaction selection.
As a result, our transaction selection was increased to 33 selections.
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 San Bernardino for
$380,408,020.90.
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);
(2) were not accounted for in the budget most recently approved as of
March 27, 2020; and
14 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 San Bernardino.
15 Calendar quarter ending March 31, 2022.
Desk Review of San Bernardino County
5
(3) were incurred between March 1, 2020 and December 31, 2021.16
Section 15011 of the CARES Act, requires each covered recipient17 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 funds18,19
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
Financial Progress Reports
We reviewed San Bernardino’s quarterly FPR submissions through
March 31, 2022, and determined that San Bernardino submitted all its reports on a
timely basis. As such, we determined San Bernardino to be compliant with the
Reporting Timeline as required under Treasury OIG Guidance OIG CA-20-021,
Coronavirus Relief Fund Reporting and Record Retention Requirements.
16 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.
17 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.
18 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.
19 Section 15011 of P.L. 116-136 defines large covered funds as covered funds that amount to more
than $150,000.
Desk Review of San Bernardino County
6
Summary of Testing Results
Other than Grants greater than or equal to $50,000 and Direct Payments greater
than or equal to $50,000, transactions selected for detailed review were supported
by documentation and were allowable expenditures in accordance with the
CARES Act and Treasury’s guidance. We also found that Contracts greater than or
equal to $50,000, Transfers greater than or equal to $50,000, Aggregate Reporting
less than $50,000, and Aggregate Payments to Individuals 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. 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
and the cumulative expenditure amount tested. Additionally, this table includes a
summary of Castro’s testing results over expenditure transaction balances. Within
the table below, we have included a summary of unsupported and ineligible
expenditures identified as questioned costs. These expenditures do not comply
with the CARES Act and Treasury’s Guidance. Additionally, in the far-right
column, we have identified the expenditures that Castro tested without exceptions
noted. See 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 San Bernardino County
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Summary of Expenditure Testing and Recommended Results – As of Cycle 820
Payment Type
Cumulative
Expenditure
Population
Amount
Cumulative
Expenditure
Tested Amount
Unsupported
Exception
Ineligible
Exception
Castro
Reviewed Value
Without
Exception
(per Support)
Contracts >=
$50,000
$ 66,833,016.15 $ 11,794,423.43
$ -
$ -
$ 11,794,423.43
Grants >= $50,000
$ 26,458,950.05 $ 4,249,019.14 $ 280,185.94
$ 64,487.53
$ 3,904,345.67
Loans >= $50,000
$ -
$ -
$ -
$ -
$ -
Transfers >=
$50,000
$ 38,167,190.37 $ 7,619,918.79 $ - $ -
$ 7,619,918.79
Direct Payments
>= $50,000
$ 13,947,981.29 $ 5,880,034.08 $ - $ 3,806,938.49 $ 2,073,095.59
Aggregate
Reporting <
$50,000
$ 77,153,346.15
$ 105,787.86 $ - $ -
$ 105,787.86
Aggregate
Payments to
Individuals (in any
amount)
$ 147,536,249.72 $ 71,944,822.22 $ - $ -
$ 71,944,822.22
Totals
$ 370,096,733.73 $ 101,594,005.52 $ 280,185.94
$3,871,426.02
$ 97,442,393.56
Grants Greater Than or Equal to $50,000
We determined that San Bernardino’s Grants greater than or equal to $50,000 do
not comply with the CARES Act and Treasury’s Guidance. We questioned
expenditures of $64,487.53 for Grants greater than or equal to $50,000 because
the related expenditures were ineligible. Additionally, we questioned expenditures
of $280,185.94 for Grants greater than or equal to $50,000 due to the lack of
supporting documentation. As part of our procedures, we selected five
transactions to test. From these selected transactions, we made 20 sub-
selections21 to obtain coverage at the detailed transaction level. During our review,
we identified the following exceptions.
Unsupported Cumulative Grant Expenditures
Castro made five sub-selections related to COVID-19 medical care. For four of the
five sub-selections reviewed, Castro was unable to obtain sufficient supporting
documentation to support $280,185.94 of the $461,694.73 in reported expenditures
and therefore considered these amounts unsupported.
San Bernardino management concurred with this finding, indicating that they
followed up with the hospital sub-recipient and confirmed that there were several
20 Calendar quarter ending March 31, 2022.
21 Due to the voluminous nature of transactions at the original transaction selection level, we
obtained and utilized a general ledger detail listing to obtain a sub-selection of transactions
needed to test obligations and expenditures at the detailed transaction level.
Desk Review of San Bernardino County
8
unsupported worker’s compensation cases at the time that the hospital submitted
their request for CRF reimbursement. As part of its corrective action plan, San
Bernardino County management noted that it had received and would review the
hospital’s list of total COVID-19 worker’s compensation closed cases during the
CRF covered period. San Bernardino management claimed that the amount
related to closed cases was higher than the amount claimed against the CRF.
Management told us that they would also perform additional review procedures,
such as an on-site visit, to ensure that the hospital’s expenditure amounts claimed
were accurate.
Eligibility of Cumulative Expenditures
Castro made five sub-selections related to network project expenditures. For three
of the five sub-selections reviewed, Castro noted that San Bernardino claimed
sub-recipient incurred expenditures that were prepaid for a 3- and 4-year
timeframe that extended beyond the covered period of eligible CRF use of
September 30, 2022. For one out of the three sub-selections reviewed, line items
with the description “24/7 System Support Bundle” covered a 4-year period and
the line items relating to the remaining two sub-selections covered a 3-year
period. Castro performed calculations to determine the portion of these prepaid
expenditures that were eligible due to falling within the eligible time period and
the portion that was ineligible due to falling outside of the covered period. Castro
determined that $64,487.53 of the $579,545.95 in reported expenditures was
ineligible.
San Bernardino concurred with this finding. San Bernardino management
attributed this error to the San Bernardino City Unified School District’s practice of
purchasing multi-year prepaid coverage to have information technology security
solutions in place. San Bernardino management attempted to locate the District’s
written policy regarding this type of prepaid purchase, but was unsuccessful in
obtaining the relevant policy. San Bernardino management noted that through its
ongoing monitoring activities, the County would perform additional review
procedures, such as an on-site visit, to verify whether any written policy or other
equivalent documentation existed to support this type of purchase practice as part
of the entity’s ordinary course of business. San Bernardino management told us
that any prepaid item that could not be supported with its appropriate written
policy or procedures would be identified and replaced by other CRF eligible costs
that were incurred and expended by the sub-recipient or County during the CRF
covered period.
Castro noted that the period of performance date was extended to September 30,
2022 by the issuance of the publication "Coronavirus Relief Fund Revision to
Desk Review of San Bernardino County
9
Guidance Regarding When a Cost is Considered Incurred," dated December 14,
2021,22 which states:
“…Treasury is now revising the guidance to provide that a cost associated
with a necessary expenditure incurred due to the public health emergency
shall be considered to have been incurred by December 31, 2021, if the
recipient has incurred an obligation with respect to such cost by
December 31, 2021…Treasury’s reporting framework currently permits
recipients to record their expenditures through September 30, 2022.”
San Bernardino did not comply with Treasury OIG Guidance OIG-CA-20-02123
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; and San Bernardino management was unable to support
transactions reported within the GrantSolutions portal. Additionally, we
determined San Bernardino did not comply with these requirements because its
prepaid expenses extended beyond the allowable covered period.
Additionally, we determined San Bernardino did not comply with Subsection 601
(d) of the Social Security Act, as amended, (42 U.S.C. 801 (d)), and Federal
Register Notice Volume 86, Number 10,24 Coronavirus Relief Fund for States,
Tribal Governments, and Certain Eligible Local Governments, Treasury’s
Guidance, FAQ #31, because San Bernardino management did not have evidence
to support that these prepayments were made as part of its sub-recipient’s normal
process and because its prepaid expenses extended beyond the allowable
covered period.
Direct Payments Greater Than or Equal to $50,000
We determined that San Bernardino’s Direct Payments greater than or equal to
$50,000 did not comply with the CARES Act and Treasury’s Guidance. We
questioned expenditures of $3,806,938.49 for Direct Payments greater than or
equal to $50,000 because the expenditures were ineligible. We identified
misclassification exceptions related to Direct Payments greater than or equal to
$50,000 that should have been reported as Contracts greater than or equal to
$50,000 for $13,947,981.29 for both cumulative expenditures and obligations. We
selected one original transaction for testing. From this transaction, we made five
22 https://home.treasury.gov/system/files/136/CRF-Guidance_Revision-Regarding-Cost-Incurred.pdf
23 https://home.treasury.gov/system/files/136/IG-Coronavirus-Relief-Fund-Recipient-Reporting-
Record-Keeping-Requirements.pdf
24 https://home.treasury.gov/system/files/136/CRF-Guidance-Federal-Register_2021-00827.pdf
Desk Review of San Bernardino County
10
sub-selections to obtain coverage at the transaction level. We identified the
following exceptions.
For the original transaction selected, we noted that the GrantSolutions balance
was supported by general ledger detail of 348 individual transactions made to San
Bernardino County Fire Protection District (County Fire) as the sub-recipient. Upon
review of the underlying detail for our sub-selections, we noted that each of these
transactions had different transaction descriptions, budget units, funded
programs, and transaction dates. Upon inquiry, we determined that County Fire
was part of San Bernardino County’s government for CRF reporting purposes. As
such, this transaction represented a payment from San Bernardino to itself. It was
misclassified as a Direct Payment greater than or equal to $50,000. It should have
been reported as Contracts greater than or equal to $50,000, Aggregate Reporting
less than $50,000, or County Fire payroll in Aggregate Payments to Individuals. As
a result, Direct Payments greater than or equal to $50,000 was overstated by
$13,947,981.29. Although we do not consider misclassifications to be questioned
costs, we do not consider these misclassified transaction balances to comply with
Treasury’s Guidance as they should have been reported under a different
payment type.
Due to the high volume of expenditures contained within the original selection,
Castro was not able to quantify the corrections required to be made by San
Bernardino. However, Castro made a sub-selection of five transactions to obtain
coverage over the original cumulative expenditure transaction selection amounts
and determined required corrections over those balances. See results below.
Eligibility of Cumulative Expenditures
For two out of the five sub-selections reviewed, we take exception with
cumulative obligation and expenditure amounts of $3,806,938.49 claimed for
Direct Payments greater than or equal to $50,000 because the related
expenditures were ineligible. San Bernardino claimed depreciation expenses of
vehicles utilized to respond to the COVID-19 pandemic. Although we reviewed
vehicle activity logs and determined these vehicles were used for eligible
purposes that related to the COVID-19 pandemic, Castro determined that these
expenditures were not eligible due to an excessive valuation that overstated CRF
costs claimed.
County Fire personnel included vehicle fuel and maintenance costs and annual
straight-line depreciation of the historical vehicle purchase price over the period
of its estimated useful life (e.g., 12, 15, and 20 years). County Fire personnel
identified various vehicles in its possession, and then calculated an hourly fee rate
per vehicle type by dividing the sum of the average total maintenance, fuel costs,
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and annual depreciation costs by the average of hours used for that vehicle type.
An estimate of hours needed to complete the COVID-19 related tasks was used.
However, San Bernardino personnel significantly inflated its calculated hourly
usage rate for claimed depreciation expenses by excessively underestimating the
denominator used to calculate the hourly rate. As an example of the effect of the
valuation error over a single vehicle, County Fire claimed total depreciation costs
of $1,432,287.36 for five months of activity for one vehicle originally procured at a
historical cost of $727,856.67 in 2006. The total claimed for this five-month period
was almost double the amount of the historical cost of the vehicle and exceeded
the annual depreciation cost of the vehicle of $48,523.78 by a factor of 29.5 times.
San Bernardino personnel told us that they viewed these depreciation costs as
eligible because it represented activity incurred for the vehicle to represent an
“expense” that was used for a substantially different use than originally planned.
Additionally, San Bernardino personnel told us that the equipment asset
allocation/depreciation expense claimed was for the activity of the vehicle, and
that this depreciation expense was not previously budgeted for in the County’s
budget. San Bernardino personnel told us that these equipment fee amounts were
calculated for the purposes of cost recovery, which were based on an accounting
depreciation of the average purchase cost over the vehicle lifecycle and average
equipment/vehicle maintenance and fuel costs. Further, San Bernardino
management told us that it was unable to procure new vehicles or rentals due to
the vehicle rental shortage that occurred during the pandemic.
San Bernardino staff were in the process of recalculating the fees and anticipated
that the claim amount would decrease when this recalculation process was
completed. In the event that the equipment amount claimed decreased, County
Fire personnel identified that there were other eligible expenditures such as
payroll costs for public health and safety employees whose services were
substantially dedicated to respond to the COVID-19 pandemic to replace the
unallowable portion of this expenditure. San Bernardino staff were in the process
of gathering this data for potential correction within a future reporting cycle.
Misclassification of Cumulative Expenditures
For three out of the five sub-selections reviewed, San Bernardino personnel
misclassified County Fire payroll expenditures as Direct Payments greater than or
equal to $50,000 instead of Aggregate Payments to Individuals. San Bernardino
personnel concurred that the payroll costs incurred by County Fire had been
misclassified due to an oversight, and told us that the corrective action plan was
to re-categorize the payroll costs as Aggregate Payments to Individuals in future
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GrantSolutions portal cycle submissions. Castro was unable to corroborate San
Bernardino’s statement during our desk review through Cycle 8.25
Conclusion
We reviewed San Bernardino’s quarterly FPR submissions through
March 31, 2022, and determined that San Bernardino submitted all its reports on a
timely basis. We found that uses of CRF proceeds for Contracts greater than or
equal to $50,000, Transfers greater than or equal to $50,000, Aggregate Reporting
less than $50,000, and Aggregate Payments to Individuals complied with the
CARES Act and Treasury’s Guidance.
However, we determined that the expenditures related to Grants greater than or
equal to $50,000 and Direct Payments greater than or equal to $50,000 did not
comply with the CARES Act and Treasury’s Guidance.
We identified questioned costs of $4,151,611.96 and determined San Bernardino’s
risk of unallowable use of funds is moderate. Castro recommends that Treasury
OIG obtain missing documentation from San Bernardino management and
request that reporting corrections be made. Further, based on San Bernardino’s
responsiveness to Treasury OIG’s requests and its ability to provide sufficient
documentation, we recommend Treasury OIG determine the feasibility of
performing a focused audit for Grants greater than or equal to $50,000 and Direct
Payments greater than or equal to $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.26 We appreciate the courtesies
and cooperation provided to our staff during the desk review.
Sincerely,
Wayne Ference
Partner, Castro & Company, LLC
25 Calendar quarter ending March 31, 2022.
26 https://www.ignet.gov/sites/default/files/files/Silver%20Book%20Revision%20-%208-20-12r.pdf