Audit 320523

Criteria: The Borough is required by the Uniform Guidance to have written policies addressing procurement procedures specific to federal award expenditures and written policies specific to conflicts of interest. Condition: The Borough does not have any written policies addressing procurement procedures specific to federal award expenditures or written policies specific to conflicts of interest. Cause: The absence of these written policies appears to be due to oversight and a lack of awareness of the specific requirements under the Uniform Guidance. The municipality has relied on informal procedures and verbal guidelines for procurement and conflict of interest issues. Effect: Without formal written policies, there is a higher risk of non-compliance with federal procurement standards. This lack of documentation can lead to inconsistent procurement practices, potential favoritism, and conflicts of interest, which may result in unallowable costs, inefficiencies, and jeopardize the integrity of the procurement process. Recommendation: We recommend that the Borough develop and implement comprehensive written procurement policies and conflict of interest policies that comply with the Uniform Guidance. These policies should include: Procurement Policies: Clear procedures for procurement planning, solicitation, evaluation, and award. Methods of procurement to be used, including micro-purchases, small purchases, sealed bids, competitive proposals, and non-competitive proposals. Procedures to ensure compliance with the applicable federal requirements for procurement. Conflict of Interest Policies: Definitions and examples of conflicts of interest. Procedures for disclosing potential conflicts of interest. Actions to be taken when conflicts of interest are identified, including recusal from decisionmaking processes. Additionally, we recommend that staff involved in procurement be trained on these new policies to ensure proper implementation and adherence. Implementing these policies will help ensure compliance with federal requirements, promote transparency, and safeguard the integrity of the procurement process. Views of Responsible Official and Planned Corrective Action: See corrective action plan included in this report package.

Criteria: The small size of the Borough’s office staff limits the extent of separation of duties. The basic premise in an ideal accounting office is that no one employee should have access to both physical assets and the related accounting records or to all phases of a transaction. Some examples of lack of segregation of duties at the Borough are as follows: An individual can process checks, initiate ACH payments, make journal entries, and have access to the Borough's bank accounts. An individual can accept cash receipts, enter transactions in the accounting system, initiate deposits, make deposits at the bank, and reconcile bank statements. Condition: The Borough has a limited number of staff responsible for or access to various stages of the accounting processes. Cause: The Borough does not have the number of employees necessary in the business office to properly segregate all duties. Recommendation: Ideally, the Borough would hire the number of staff necessary to segregate all duties. However, we realize segregation of duties is not practical, if not impossible. Because of this internal control situation, the responsibility of the Business Manager is greatly increased because the Board must rely on his knowledge of the everyday operations to discover any material changes in the Borough’s financial position. Effect: A lack in separation of duties makes the Borough more susceptible to misappropriation of Borough Assets. Views of Responsible Official and Planned Corrective Action: See corrective action plan included in this report package.

Criteria: The Borough is required by the Uniform Guidance to have written policies addressing procurement procedures specific to federal award expenditures and written policies specific to conflicts of interest. Condition: The Borough does not have any written policies addressing procurement procedures specific to federal award expenditures or written policies specific to conflicts of interest. Cause: The absence of these written policies appears to be due to oversight and a lack of awareness of the specific requirements under the Uniform Guidance. The municipality has relied on informal procedures and verbal guidelines for procurement and conflict of interest issues. Effect: Without formal written policies, there is a higher risk of non-compliance with federal procurement standards. This lack of documentation can lead to inconsistent procurement practices, potential favoritism, and conflicts of interest, which may result in unallowable costs, inefficiencies, and jeopardize the integrity of the procurement process. Recommendation: We recommend that the Borough develop and implement comprehensive written procurement policies and conflict of interest policies that comply with the Uniform Guidance. These policies should include: Procurement Policies: Clear procedures for procurement planning, solicitation, evaluation, and award. Methods of procurement to be used, including micro-purchases, small purchases, sealed bids, competitive proposals, and non-competitive proposals. Procedures to ensure compliance with the applicable federal requirements for procurement. Conflict of Interest Policies: Definitions and examples of conflicts of interest. Procedures for disclosing potential conflicts of interest. Actions to be taken when conflicts of interest are identified, including recusal from decisionmaking processes. Additionally, we recommend that staff involved in procurement be trained on these new policies to ensure proper implementation and adherence. Implementing these policies will help ensure compliance with federal requirements, promote transparency, and safeguard the integrity of the procurement process. Views of Responsible Official and Planned Corrective Action: See corrective action plan included in this report package.

Criteria: The small size of the Borough’s office staff limits the extent of separation of duties. The basic premise in an ideal accounting office is that no one employee should have access to both physical assets and the related accounting records or to all phases of a transaction. Some examples of lack of segregation of duties at the Borough are as follows: An individual can process checks, initiate ACH payments, make journal entries, and have access to the Borough's bank accounts. An individual can accept cash receipts, enter transactions in the accounting system, initiate deposits, make deposits at the bank, and reconcile bank statements. Condition: The Borough has a limited number of staff responsible for or access to various stages of the accounting processes. Cause: The Borough does not have the number of employees necessary in the business office to properly segregate all duties. Recommendation: Ideally, the Borough would hire the number of staff necessary to segregate all duties. However, we realize segregation of duties is not practical, if not impossible. Because of this internal control situation, the responsibility of the Business Manager is greatly increased because the Board must rely on his knowledge of the everyday operations to discover any material changes in the Borough’s financial position. Effect: A lack in separation of duties makes the Borough more susceptible to misappropriation of Borough Assets. Views of Responsible Official and Planned Corrective Action: See corrective action plan included in this report package.