Audit 352712

Federal Reporting - Criteria – The Uniform Guidance, Part 200.303, requires the Agency to establish and maintain effective internal control over the federal award which provides reasonable assurance the Agency is managing the federal award in compliance with federal statutes, regulations and the terms of the federal award. The SF-425 report, “Federal Financial Report”, is the quarterly summary of financial activity for the federal award. The Complete Trip - ITS4US Deployment Program Phases 2 and 3 contract requires that the recipients of ITS4US grants must submit an SF-425 report quarterly, due the 30th calendar day of the month after the quarter being reported. In addition, the contract requires recipients to file monthly progress reporting in two parts: Part I: Technical Progress and Status Summary and Part II: Financial Status Summary. The monthly reports must be submitted no later than the tenth calendar day of the month following the reporting period. Condition – For the two SF-425 reports tested, reports were submitted timely, but the reports did not agree with the Agency’s financial information at the end of each quarter. In addition, there was no documentation of independent review of the quarterly reports prior to submission. For the two monthly progress reports tested, reports were filed with the required information, but each report was submitted nine days late and there was no documentation of independent review of the monthly reports prior to submission. Cause – The Agency did not have policies and procedures in place to reconcile SF-425 reports to financial information ensuring accurate reporting and to ensure the required federal reports were reviewed by an independent person with knowledge of the program prior to submission. In addition, procedures have not been established to ensure timely reporting. Effect - The lack of documented review including reconciliation of financial information increases the risk for undetected reporting errors or misstatements. In addition, the lack of policies and procedures in place by the Agency could result in late submission of reports. Recommendation – The Agency should establish policies and procedures to ensure all federal reports are reviewed and approved by an independent person who is knowledgeable about the program. This independent review should be documented by the reviewer’s signature or initials and date of review prior to submission. In addition, the Department should establish policies and procedures to ensure reports agree with the Agency’s records and are submitted timely. Response – We will update our Accounting Policy Manual and establish additional internal controls. Conclusion – Response accepted.

Payroll Distribution - Criteria – The Uniform Guidance, Part 200.430(i), states “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed.” These records must “Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity.” Also, “Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: The system for establishing the estimates produces reasonable approximations of the activity actually performed; significant changes in the related work activity (as defined by the recipient’s or subrecipient’s written policies) are promptly identified and entered into the records. Short term (such as one or two months) fluctuation between workload categories do not need to be considered as long as the distribution of salaries and wages is reasonable over the long term; and the recipient’s or subrecipient’s system of internal controls includes processes to perform periodic after-the-fact reviews of interim charges made to a Federal award based on budget estimates. All necessary adjustments must be made so that the final amount charged to the Federal award is accurate, allowable, and properly allocated.” Condition – The Agency uses budget estimates to allocate employee payroll costs to federal programs. Employees are not tracking or reporting actual time worked on each federal program. Cause – The Agency did not have policies and procedures in place to ensure all employee time is recorded to the correct federal program. Effect – Payroll costs could be omitted from federal programs or charged to incorrect programs. The result could be incorrect payroll cost allocation and reporting. The effect on individual programs is undeterminable. Recommendation – The Agency should review time reporting for all pay periods and determine if time is or should be charged to federal programs. In addition, the Agency should implement policies and procedures to ensure proper distribution of salaries and wages, and these policies and procedures should be followed. Response – We will update our Accounting Policy Manual and create formal time tracking procedures for staff working Federal projects. Conclusion – Response accepted.

Federal Reporting - Criteria – The Uniform Guidance, Part 200.303, requires the Agency to establish and maintain effective internal control over the federal award which provides reasonable assurance the Agency is managing the federal award in compliance with federal statutes, regulations and the terms of the federal award. The SF-425 report, “Federal Financial Report”, is the quarterly summary of financial activity for the federal award. The Complete Trip - ITS4US Deployment Program Phases 2 and 3 contract requires that the recipients of ITS4US grants must submit an SF-425 report quarterly, due the 30th calendar day of the month after the quarter being reported. In addition, the contract requires recipients to file monthly progress reporting in two parts: Part I: Technical Progress and Status Summary and Part II: Financial Status Summary. The monthly reports must be submitted no later than the tenth calendar day of the month following the reporting period. Condition – For the two SF-425 reports tested, reports were submitted timely, but the reports did not agree with the Agency’s financial information at the end of each quarter. In addition, there was no documentation of independent review of the quarterly reports prior to submission. For the two monthly progress reports tested, reports were filed with the required information, but each report was submitted nine days late and there was no documentation of independent review of the monthly reports prior to submission. Cause – The Agency did not have policies and procedures in place to reconcile SF-425 reports to financial information ensuring accurate reporting and to ensure the required federal reports were reviewed by an independent person with knowledge of the program prior to submission. In addition, procedures have not been established to ensure timely reporting. Effect - The lack of documented review including reconciliation of financial information increases the risk for undetected reporting errors or misstatements. In addition, the lack of policies and procedures in place by the Agency could result in late submission of reports. Recommendation – The Agency should establish policies and procedures to ensure all federal reports are reviewed and approved by an independent person who is knowledgeable about the program. This independent review should be documented by the reviewer’s signature or initials and date of review prior to submission. In addition, the Department should establish policies and procedures to ensure reports agree with the Agency’s records and are submitted timely. Response – We will update our Accounting Policy Manual and establish additional internal controls. Conclusion – Response accepted.

Payroll Distribution - Criteria – The Uniform Guidance, Part 200.430(i), states “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed.” These records must “Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity.” Also, “Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: The system for establishing the estimates produces reasonable approximations of the activity actually performed; significant changes in the related work activity (as defined by the recipient’s or subrecipient’s written policies) are promptly identified and entered into the records. Short term (such as one or two months) fluctuation between workload categories do not need to be considered as long as the distribution of salaries and wages is reasonable over the long term; and the recipient’s or subrecipient’s system of internal controls includes processes to perform periodic after-the-fact reviews of interim charges made to a Federal award based on budget estimates. All necessary adjustments must be made so that the final amount charged to the Federal award is accurate, allowable, and properly allocated.” Condition – The Agency uses budget estimates to allocate employee payroll costs to federal programs. Employees are not tracking or reporting actual time worked on each federal program. Cause – The Agency did not have policies and procedures in place to ensure all employee time is recorded to the correct federal program. Effect – Payroll costs could be omitted from federal programs or charged to incorrect programs. The result could be incorrect payroll cost allocation and reporting. The effect on individual programs is undeterminable. Recommendation – The Agency should review time reporting for all pay periods and determine if time is or should be charged to federal programs. In addition, the Agency should implement policies and procedures to ensure proper distribution of salaries and wages, and these policies and procedures should be followed. Response – We will update our Accounting Policy Manual and create formal time tracking procedures for staff working Federal projects. Conclusion – Response accepted.