Coronavirus Relief Funding

$100 dollar bill with Benjamin Franklin wearing a medical mask.

Objective

Objective: To assess the city’s compliance with the Coronavirus Aid, Relief, and Economic Security Act’s eligibility and documentation requirements for pandemic-related expenses in 2020, specifically those paid for through the federal Coronavirus Relief Fund.

Background

In 2020, the COVID-19 pandemic significantly impacted government finances at every level — including within the City and County of Denver.

Because the pandemic brought economic activity to a near standstill, Denver saw a drastic decline in tax revenues while also facing millions of dollars in increased costs related to the pandemic response. Specifically, the city reported that its sales, use, and lodgers tax revenue decreased by about $192.3 million in 2020 compared to 2019. Additionally, the city’s reported expenses in 2020 increased by about $165.9 million over 2019 primarily because of expenses related to pandemic response.

In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security — or CARES — Act, which created the Coronavirus Relief Fund. This fund provided $150 billion in direct government assistance: $139 billion for state governments based on their populations; $8 billion for tribal governments; and $3 billion for U.S. territories, including the District of Columbia and Puerto Rico.2

The City and County of Denver received $126.9 million of that aid on April 21, 2020. Table 1 on the audit report summarizes the amount of coronavirus relief funds that Colorado and certain counties — including Denver — received.

For the purposes of this audit, we refer to the money Denver received through the Coronavirus Relief Fund as “coronavirus relief funds.”

Why this matters

Federal aid from the CARES Act and other sources helped Denver pay for a wide array of unexpected costs related to its pandemic response efforts at the same time the city saw drastic declines in its sales, use, and lodgers tax revenue. Ensuring the city uses its relief funds appropriately will maximize their benefit to Denver residents and businesses.

Findings

The Department of Finance Sufficiently Managed the City’s Process for Spending Federal Aid from the Coronavirus Relief Fund, but It Could Offer Better Guidance to Agencies on How to Document Individual Transactions

The Finance Department formed a federal funding committee and implemented a phased spending plan to use the coronavirus relief funds. The city also submitted federal reporting periodically as required. However, we found:

Some transactions were not documented appropriately in accordance with city fiscal rules.
Some transactions lacked supporting information showing how the expense was related to the pandemic.

The Department of Finance Failed to Properly Track and Review Interest for Coronavirus Relief Funds

Federal guidance and Denver’s own Fiscal Accountability Rules require the city to track interest earned, but the Department of Finance failed to track interest on the city’s coronavirus relief funds for several months.
Bank reconciliations also were not done as required for several months.

Recommendations

1.1 Provide Detailed Guidance on Supporting Documentation – To ensure compliance with U.S. Treasury guidance and the city’s Fiscal Accountability Rule 2.5, the Department of Finance should give more detailed guidance to agencies about what is acceptable supporting documentation in Workday to substantiate pandemic-related transactions. Examples showing what is and is not acceptable should be included in this guidance to better illustrate what appropriate documentation looks like — including itemized receipts or invoices.

Agency Response: Agree, Implementation Date – August 31, 2021

2.1 Cross-Train and Rotate Employee Job Functions – The Department of Finance should ensure agency heads and department managers in the Department of Finance develop and follow a plan to periodically have their staff members rotate jobs to ensure employees are cross-trained to perform each other’s functions in case of illness, vacation, or termination. This is required by city Fiscal Accountability Rule 2.4.

Agency Response: Agree, Implementation Date – September 30, 2021

2.2 Monitor and Ensure Bank Reconciliations Are Performed Monthly – The Department of Finance should implement an additional procedure that ensures all bank reconciliations are completed monthly. This should include a monitoring requirement where a supervisor verifies and signs off that all bank reconciliations are completed each month.

Agency Response: Agree, Implementation Date – September 30, 2021

2.3 Implement Procedures to Post Interest – The Department of Finance should implement procedures that ensure the posting of interest complies with Fiscal Accountability Rule 6.2. These procedures should include a list of all funds that have an interest posting requirement to ensure all of those funds have interest posted accurately and in a timely manner each month.

Agency Response: Agree, Implementation Date – September 30, 2021

2.4 Monitor Interest on Grants – The Department of Finance should implement procedures requiring grant managers to monitor postings of interest to their grants to ensure those funds have had interest posted accurately and in a timely manner each month.

Agency Response: Agree, Implementation Date – September 30, 2021

Auditor's Letter

July 15, 2021

The objective of our audit of the City and County of Denver’s coronavirus relief funding was to assess the city’s financial controls related to the initial federal aid Denver received for its pandemic response efforts. This audit specifically focused on the $126.9 million the city received from the federal Coronavirus Relief Fund — which Congress created through the Coronavirus Aid, Relief, and Economic Security, or CARES, Act. I am pleased to present the results of this audit.

The audit found that, in 2020, the Department of Finance sufficiently managed the city’s progress in spending federal coronavirus relief funds on pandemic-related expenses, but the city should also better document individual transactions. Additionally, we found problems related to how the city accounted for the interest it earned on the relief dollars.

By implementing recommendations for stronger policies, procedures, and processes for documenting transactions and tracking interest earned, the city will be better equipped to manage current and future government aid the city receives for its pandemic relief.

This performance audit is authorized pursuant to the City and County of Denver Charter, Article V, Part 2, Section 1, “General Powers and Duties of Auditor.” 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.

We extend our appreciation to the city personnel who assisted and cooperated with us during the audit. For any questions, please feel free to contact me at 720-913-5000.

Denver Auditor,

Timothy O'Brien, CPA