Audit 320142

2023-001 - Internal Control over Financial Reporting – Lack of Segregation of Duties – Significant Deficiency Condition & Criteria: The small size of the Authority’s office staff does not allow for adequate segregation of duties. Standard practice regarding the design of a good system of internal controls relies at least in part on a system of checks and balances accomplished by having different employees performing various functions within the accounting cycle. These checks and balances are not possible when the same person performs all of an interrelated series of tasks. Although the Authority does have some compensating controls in place, there are still a number of situations where one person is responsible for all aspects of a transaction. Effect: The condition could result in errors being made in the accounting records and going undetected due to the lack of “cross-checking” and could result in the undetected misappropriation of Authority assets. Cause: The size of the Authority, and its budget, make it impractical for the Authority to hire the additional personnel needed to provide for optimum segregation of duties. Recommendation: The oversight that is provided by the close involvement of the Authority Manager and the Board of Directors is considered a compensating control. We urge the Board to continue to have the Authority Manager and the Board closely involved in all financial aspects. Views of Responsible Officials and Planned Corrective Actions: The Authority understands the potential effects of the condition described above but agrees that it would not be cost beneficial to hire additional personnel in order to provide for more adequate segregation of duties. As a compensating control, the Board intends to continue its close involvement in, and oversight over, the financial transaction process.

2023-002: U.S. Department of Environment Protection – Assistance Listing # 66.468 Capitalization Grants for Drinking Water State Revolving Fund (Drinking Water State Revolving Fund Cluster) Lack of Required Written Policies & Procedures – Compliance Condition & Criteria: The Authority does not currently have all the written policies and procedures in place as required by the Uniform Guidance as it relates to financial management and determining allowability of costs for the federal program (Title 2 U.S. Code of Federal Regulations (CFR) 200.302 & 200.305). In addition CFR sections 200.318, 200.319, and 200.320 require there to be written policies and procedures regarding procurement and conflicts of interest. Effect: Although not likely, the oversight agency could disallow all costs associated with this program. Cause: The Authority has not had any significant federal grant funding in many years. The current federal project is the first time that the Authority has been subject to the requirements of the Uniform Guidance. The Authority does have a set of informal policies and procedures that are followed as it relates to financial management, allowability of costs, procurement, and conflicts of interest, and have been very careful to carry out all federal program activities in accordance with established regulations; however, the Authority was not aware that the Uniform Guidance requires these policies and procedures be documented in writing.   Recommendation: We recommend that the Authority work towards getting those policies and procedures documented in writing so that they are in compliance with the requirements of the Uniform Guidance. Views of Responsible Officials and Planned Corrective Actions: The Authority understands the potential effects of the condition described above and is currently consulting with their attorney to draft written policies and procedures as they relate to federal programs that are required by the Uniform Guidance.

2023-001 - Internal Control over Financial Reporting – Lack of Segregation of Duties – Significant Deficiency Condition & Criteria: The small size of the Authority’s office staff does not allow for adequate segregation of duties. Standard practice regarding the design of a good system of internal controls relies at least in part on a system of checks and balances accomplished by having different employees performing various functions within the accounting cycle. These checks and balances are not possible when the same person performs all of an interrelated series of tasks. Although the Authority does have some compensating controls in place, there are still a number of situations where one person is responsible for all aspects of a transaction. Effect: The condition could result in errors being made in the accounting records and going undetected due to the lack of “cross-checking” and could result in the undetected misappropriation of Authority assets. Cause: The size of the Authority, and its budget, make it impractical for the Authority to hire the additional personnel needed to provide for optimum segregation of duties. Recommendation: The oversight that is provided by the close involvement of the Authority Manager and the Board of Directors is considered a compensating control. We urge the Board to continue to have the Authority Manager and the Board closely involved in all financial aspects. Views of Responsible Officials and Planned Corrective Actions: The Authority understands the potential effects of the condition described above but agrees that it would not be cost beneficial to hire additional personnel in order to provide for more adequate segregation of duties. As a compensating control, the Board intends to continue its close involvement in, and oversight over, the financial transaction process.

2023-002: U.S. Department of Environment Protection – Assistance Listing # 66.468 Capitalization Grants for Drinking Water State Revolving Fund (Drinking Water State Revolving Fund Cluster) Lack of Required Written Policies & Procedures – Compliance Condition & Criteria: The Authority does not currently have all the written policies and procedures in place as required by the Uniform Guidance as it relates to financial management and determining allowability of costs for the federal program (Title 2 U.S. Code of Federal Regulations (CFR) 200.302 & 200.305). In addition CFR sections 200.318, 200.319, and 200.320 require there to be written policies and procedures regarding procurement and conflicts of interest. Effect: Although not likely, the oversight agency could disallow all costs associated with this program. Cause: The Authority has not had any significant federal grant funding in many years. The current federal project is the first time that the Authority has been subject to the requirements of the Uniform Guidance. The Authority does have a set of informal policies and procedures that are followed as it relates to financial management, allowability of costs, procurement, and conflicts of interest, and have been very careful to carry out all federal program activities in accordance with established regulations; however, the Authority was not aware that the Uniform Guidance requires these policies and procedures be documented in writing.   Recommendation: We recommend that the Authority work towards getting those policies and procedures documented in writing so that they are in compliance with the requirements of the Uniform Guidance. Views of Responsible Officials and Planned Corrective Actions: The Authority understands the potential effects of the condition described above and is currently consulting with their attorney to draft written policies and procedures as they relate to federal programs that are required by the Uniform Guidance.