oversight

20-06. Audit of Grant TN-17913 Awarded to Erwin Utilities, Erwin, Tennessee

Published by the Appalachian Regional Commission, Office of Inspector General on 2020-04-23.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

APPALACHIAN REGIONAL COMMISSION
  OFFICE OF INSPECTOR GENERAL
      AUDIT OF GRANT AWARD
             Erwin Utilities
           Erwin, Tennessee




      Final Report Number: 20-06
       Grant Number: TN-17913

            December 2019




             Prepared by:

      Leon Snead & Company, P.C.
                                                   TABLE OF CONTENTS



                                                                                                                                          Page


Background ......................................................................................................................................1

Objective, Scope, and Methodology ................................................................................................1

Summary of Audit Results ...............................................................................................................2
Background

Leon Snead & Company, P.C. completed an audit of grant number TN-17913 awarded by the
Appalachian Regional Commission (ARC) to Erwin Utilities, Erwin, Tennessee (the Utility). The
audit was conducted at the request of the ARC Office of Inspector General to assist the office in
its oversight of ARC grant funds.

ARC initially awarded $650,000 to the Utility and required a matching contribution of $718,875.
The period of performance was May 1, 2016 through April 30, 2019. The grant was subsequently
amended, increasing the ARC award amount by $475,000 and the matching contribution by
$7,965. The ending date was extended to November 1, 2019. The project has been fully completed
and closed out by ARC. Final accepted costs at closeout were $1,125,000 of ARC funds and
$740,758 of matching contributions for a final total project cost of $1,865,758.

The grant, Rocky Fork Water Line Extension, was awarded to extend a water line to serve Rocky
Fork State Park and approximately 70 households near the park. The project will: (1) install
14,300 linear feet of ductile iron pipe from Erwin Utilities' existing water line along Old Asheville
Highway southwest to Rocky Fork Road; (2) install 1,300 linear feet of ductile iron pipe along
Gills Road; (3) make road repairs related to waterline construction activities; and (4) install fire
hydrants. The project will also prepare the site for future construction of the associated water
distribution system.

ARC funds were made available through the Tennessee Department of Economic & Community
Development (TDECD). As the fiscal agent for Erwin utilities, TDECD administrated the grant
in accordance with a Memorandum of Understanding between TDECD and ARC.

Objectives, Scope, and Methodology

The audit objectives were to determine whether: (1) program funds were managed in accordance
with the ARC and Federal grant requirements; (2) grant funds were expended as provided for in
the approved grant budget; (3) internal grant guidelines, including program (internal) controls,
were adequate and operating effectively; (4) accounting and reporting requirements were
implemented in accordance with generally accepted accounting principles (or other applicable
accounting and reporting requirements); and (5) the matching requirements and (6) the established
performance measures were met.

ARC funding of $1,125,000 had been expended and total matching contributions were $740,758.
We reviewed $896,773 of the ARC expenditures and $486,712 of the matching contributions to
determine whether they were properly supported and allowable.

We reviewed documentation provided by the Utility and interviewed personnel to obtain an overall
understanding of the grant activities, the accounting system, and general operating procedures and
controls. We reviewed written policies and administrative procedures to determine if they
complied with federal requirements and were adequate to administer the grant. We reviewed
financial and project performance reports to determine if they were submitted in accordance
with requirements. We evaluated grant results discussed in the project performance reports to
determine if the planned performance goals and objectives were met.



Leon Snead & Company, P.C.                       1
The on-site fieldwork was performed at the Utility's office in Erwin, Tennessee during the
period of December 2 through December 6, 2019. The audit results were discussed with Utility
officials at the conclusion of the on-site visit.

The primary criteria used in performing the audit were 2 CFR 200, the ARC Code, the grant
agreement, and the MOU between ARC and TDECD. The audit was performed in accordance
with the Generally Accepted Government Auditing Standards.

Summary of Audit Results

The Utility’s administrative policies, procedures, and related internal controls were adequate to
manage the funds provided under the ARC grant. The ARC expenditures of $896,773 and
the match of $486,712 tested were properly supported and allowable. The Utility's matching
contribution met the required matching requirement. Financial and project performance reports
were submitted to ARC timely and accurately.

We determined that the Utility had an adequate process in place for obtaining and recording data
related to the construction of the water line. The project was fully completed. We compared the
planned performance outputs and outcomes with the actual performance outputs and outcomes,
which were verified through the grantee's Geographical Information System (GIS). GIS was used
by the grantee to track and record the results of the project. These results were confirmed by the
General Manager of the Utility. As shown below, the grantee met or exceeded three of the five
performance measures.

                                           Planned       Actual         Planned        Actual
         Performance Measure
                                           Outputs       Outputs       Outcomes       Outcomes
  Linear Feet of Water Pipe Installed       15,600       17,399             0             0
  Households Served                           70           57               0             0
  Businesses Served                            1            1               0             0
  Households Improved                          0            0              70            57
  Businesses Improved                          0            0               1             1




Leon Snead & Company, P.C.                      2