Audit 369998

MATERIAL WEAKNESS IN INTERNAL CONTROL U.S. DEPARTMENT OF TREASURY 2024-001 - Coronavirus State and Local Fiscal Recovery Funds, AL No. 21.027; Coronavirus Capital Projects Fund, AL No.21.029 Condition: Materials were charged to project work orders when removed from inventory and not when installed. Reconciliations to contractor invoices, were not performed timely and differences were not identified in subsequent reconciliations tracking project activity for grant reporting. Criteria: Effective controls are required to ensure reported project materials and related expenses are installed, completed and adequately documented for approved project area. Controls should include timely reconciliation between work order charges and related contractor invoices supporting installation of materials used in order to support proper disbursement and reporting. Cause: Errors existed in the total materials charged to project work orders which were not identified timely by the SEMO Electric Cooperative and Subsidiary’s current monitoring and control activity procedures. Effect: Controls did not exist to adequately reconcile and report the material charges on project work orders used for grant reporting, in a timely manner. As a result, errors may exist in reported project expenses. Recommendation: Procedures should be implemented to ensure more timely reconciliation of material charges to work orders and reporting project grant expenses. Comprehensive documentation should be maintained to validate controls implemented for installation of materials. Procedures should include additional oversight and timely reconciliations of project expenses completed and reported. Identification as a Repeat Finding: This is a repeat of finding 2023-001. Grantee’s Response: Management concurs. There were large fiber installation projects still in process at year-end. Subsequent reconciliations have been completed. Controls and other project processes have been improved to ensure more timely reconciliation of material charge-outs to the timing of the installation of material.

2024-002 U.S. Department Treasury: Coronavirus Capital Projects Fund, AL No.21.029 ACTIVITIES ALLOWED/UNALLOWED; ALLOWABLE COST / COST PRINCIPLES; REPORTING Condition: Materials were charged to project work orders when removed from inventory and not when installed. Reconciliations to contractor invoices, were not performed timely and differences were not identified in subsequent reconciliations tracking project activity for grant reporting. Criteria: Effective controls are required to ensure reported project materials and related expenses are installed, completed and adequately documented for approved project area. Controls should include timely reconciliation between work order charges and related contractor invoices supporting installation and materials used in order to support proper disbursement and reporting. Cause: Errors existed in the total materials charged to project work orders which were not identified timely by the Cooperative’s current monitoring and control activity procedures. Effect: Controls did not exist to adequately reconcile and report the material charges on project work orders used for grant reporting in a timely manner. As a result, errors may exist in reported project expenses. Questioned Cost and Context: Due to timing and volume of activity incurred on the grant project, material charges were evaluated in total for selected work orders as of December 31, 2024 and reconciled to contractor invoices over the same period. A statistically valid, random sample of 60 work order charges for the period of January 1, 2024, through December 31, 2024, revealed 4 work order charges for monthly materials that were not adequately supported. Testing identified errors of $29,962 in material charges of the $729,642 of material tested. Total material reimbursed by this grant was $1,063,778. Recommendation: Procedures should be implemented to ensure more timely reconciliation of material charges to work orders and reporting project grant expenses. Comprehensive documentation should be maintained to validate controls implemented for installation of materials. Procedures should include additional oversight and timely reconciliations of project expenses completed and reported. Grantee’s Response: Management concurs. There were large fiber installation projects still in process at year-end. Subsequent reconciliations have been completed. Controls and other project processes have been improved to ensure more timely reconciliation of material charge-outs to the timing of the installation of material.