Audit 340916

Significant Deficiency in Allowable Costs and Cost Principles Federal Award Identification Assistance Listing Program Title: Formula Grants for Rural Areas Assistance Listing Program Number: 20.509 Federal Award ID Number and Year: Various Federal Agency: U.S. Department of Transportation Pass-Through Entity: Nebraska Department of Transportation Criteria Standards for documentation of personnel expenses at 2 CFR 200.430(i)(1) require that charges to federal awards for salaries and wages be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly documented. The Organization must establish and maintain effective internal control over the Federal award that provides reasonable assurance that they are managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal Award (2 CFR 200.303). Condition The Organization lacked adequate documentation to support approved rates of pay. Repeat Finding Yes, 2023-005. Cause Procedures within the Organization were inadequate to ensure that personnel expenses were adequately documented. Effect or Potential Effect Increased potential for errors or misuse of funds. Questioned Costs No. Statistical Sample No. Context Auditor randomly selected 60 payroll transactions covering the entire fiscal year for testing and judgmentally selected one additional payroll transaction for testing. Of the 61 transactions that were tested, there were frequent errors regarding: - Personnel files lacking (approved) rates of pay. - Rates of pay documented in personnel files that did not match the actual rates of pay. Recommendation We recommend the Organization establish a system of internal control consisting of policies and procedures whereby personnel files contain appropriately reviewed and approved documentation to support employee rates of pay. Views of Responsible Officials See Corrective Action Plan, below.

Significant Deficiency in Internal Controls Over Equipment and Real Property Management; Noncompliance with Equipment and Real Property Management Federal Award Identification Assistance Listing Program Title: Formula Grants for Rural Areas Assistance Listing Program Number: 20.509 Federal Award ID Number and Year: Various Federal Agency: U.S. Department of Transportation Pass-Through Entity: Nebraska Department of Transportation Criteria Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property (2 CFR 200.313(d)(1)). A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years (2 CFR 200.313(d)(2)). Condition The Organization lacked certain required elements on its vehicle listing. The Organization failed to adequately document the performance of the required physical inventory. Repeat Finding Yes, 2023-006. Cause Procedures within the Organization were inadequate to ensure that required elements are regularly updated on its vehicle listing, and that the physical inventory count and reconciliation is documented. Effect or Potential Effect Federal interests in property are lost or inadequately tracked. Questioned Costs No. Statistical Sample No. Context Nebraska Department of Transportation provides its subrecipients with an online portal through which, among other things, a vehicle listing is kept. The auditor obtained this vehicle listing, noting that most of the elements required by 2 CFR 200.313(d)(1) were present, however, out of the seven federally-funded vehicles on the listing: - Two were missing the FAIN (VINs *8494 and *2891). - One had a total purchase price of $63,670, whereas source documentation suggested a total purchase price of $103,475 (VIN *2891). - One was missing a purchase price. Source documentation suggested a total purchase price of $36,231 (VIN *2472). - One had an acquisition date of 9/30/2019, whereas source documentation suggested an acquisition date of 2/25/2020 (VIN *2891). Management indicates that a physical inventory is performed nightly with all vehicles, however, no documentation exists to prove that this was performed during the audit period. Recommendation We recommend the Organization track all Federally-required elements along with its own internal data points (such as bus number and depreciation system number) in one consolidated listing. Further, we recommend that a policy be instituted whereby a physical inventory and related reconciliation is performed annually on June 30, with the results being documented, reviewed, and approved by appropriate personnel. Views of Responsible Officials See Corrective Action Plan, below.

Significant Deficiency in Allowable Costs and Cost Principles Federal Award Identification Assistance Listing Program Title: Formula Grants for Rural Areas Assistance Listing Program Number: 20.509 Federal Award ID Number and Year: Various Federal Agency: U.S. Department of Transportation Pass-Through Entity: Nebraska Department of Transportation Criteria Standards for documentation of personnel expenses at 2 CFR 200.430(i)(1) require that charges to federal awards for salaries and wages be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly documented. The Organization must establish and maintain effective internal control over the Federal award that provides reasonable assurance that they are managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal Award (2 CFR 200.303). Condition The Organization lacked adequate documentation to support approved rates of pay. Repeat Finding Yes, 2023-005. Cause Procedures within the Organization were inadequate to ensure that personnel expenses were adequately documented. Effect or Potential Effect Increased potential for errors or misuse of funds. Questioned Costs No. Statistical Sample No. Context Auditor randomly selected 60 payroll transactions covering the entire fiscal year for testing and judgmentally selected one additional payroll transaction for testing. Of the 61 transactions that were tested, there were frequent errors regarding: - Personnel files lacking (approved) rates of pay. - Rates of pay documented in personnel files that did not match the actual rates of pay. Recommendation We recommend the Organization establish a system of internal control consisting of policies and procedures whereby personnel files contain appropriately reviewed and approved documentation to support employee rates of pay. Views of Responsible Officials See Corrective Action Plan, below.

Significant Deficiency in Internal Controls Over Equipment and Real Property Management; Noncompliance with Equipment and Real Property Management Federal Award Identification Assistance Listing Program Title: Formula Grants for Rural Areas Assistance Listing Program Number: 20.509 Federal Award ID Number and Year: Various Federal Agency: U.S. Department of Transportation Pass-Through Entity: Nebraska Department of Transportation Criteria Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property (2 CFR 200.313(d)(1)). A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years (2 CFR 200.313(d)(2)). Condition The Organization lacked certain required elements on its vehicle listing. The Organization failed to adequately document the performance of the required physical inventory. Repeat Finding Yes, 2023-006. Cause Procedures within the Organization were inadequate to ensure that required elements are regularly updated on its vehicle listing, and that the physical inventory count and reconciliation is documented. Effect or Potential Effect Federal interests in property are lost or inadequately tracked. Questioned Costs No. Statistical Sample No. Context Nebraska Department of Transportation provides its subrecipients with an online portal through which, among other things, a vehicle listing is kept. The auditor obtained this vehicle listing, noting that most of the elements required by 2 CFR 200.313(d)(1) were present, however, out of the seven federally-funded vehicles on the listing: - Two were missing the FAIN (VINs *8494 and *2891). - One had a total purchase price of $63,670, whereas source documentation suggested a total purchase price of $103,475 (VIN *2891). - One was missing a purchase price. Source documentation suggested a total purchase price of $36,231 (VIN *2472). - One had an acquisition date of 9/30/2019, whereas source documentation suggested an acquisition date of 2/25/2020 (VIN *2891). Management indicates that a physical inventory is performed nightly with all vehicles, however, no documentation exists to prove that this was performed during the audit period. Recommendation We recommend the Organization track all Federally-required elements along with its own internal data points (such as bus number and depreciation system number) in one consolidated listing. Further, we recommend that a policy be instituted whereby a physical inventory and related reconciliation is performed annually on June 30, with the results being documented, reviewed, and approved by appropriate personnel. Views of Responsible Officials See Corrective Action Plan, below.