Audit 370494

Finding Number: 2024-001 Repeat Finding: Yes; 2023-001, 2022-001, 2021-001 Federal Program Name/Assistance Listing Title: Federal Transit Cluster Federal Assistance Listing Number: 20.507, 20.526 Federal Agency: U.S. Department of Transportation Federal Award Number: 5339-R-2022-GCTD-00039 Federal Pass-Through Agency: Texas Department of Transportation State Program Name: State Urbanized Area Formula Program, State Formula Grants For Rural Areas State Agency: Texas Department of Transportation Type of Finding: Significant Deficiency in Internal Control Over Compliance Compliance Requirement: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Cash Management Questioned Costs: N/A Criteria District management is responsible for establishing and maintaining effective internal controls over federal awards, and specifically, disbursements and reimbursement requests that are adequate to ensure that all financial activities are properly processed, supported, allowable, and allocable to federal grants in compliance with 2 CFR Part 200. Condition The District lacked proper internal controls over disbursements and reimbursement requests. Cause The District’s internal controls over federal awards, and specifically, disbursements and reimbursement requests were not adequate. Effect The District did not have appropriate controls established over compliance related to disbursements and reimbursement requests in accordance with Federal regulations and District policies related to federal awards. Context The sample was not intended to be, and was not, a statistically valid sample. During our review of disbursements and reimbursement requests, we noted the following: The District does not have a formal system of approval of purchases such as a purchase requisition/purchase order before goods and services are received or rendered. The District does not account for grant expenditures separately in the general ledger. Additionally, the District should lock down months after cash is reconciled and all adjusting entries have been posted. The District did not maintain all monthly supporting documentation for the reimbursements requested from FTA/TxDOT. Based on an initial sample of 40 disbursements reviewed, two (2) disbursements did not have a payment requisition form signed by the Executive Director. Recommendation The District should put a purchase approval process in place before the District’s funds are obligated. The District should ensure the rationale for allocation of expenditures to grants is well documented. Alternatively, the District could record expenditures directly to the grants using a system of fund accounting. Adherence to District policies should be monitored. Noncompliance with policies and procedures should be addressed with employees through additional training. Invoices should be paid in a timely manner to ensure late fees are avoided. If late fees are incurred, they should not be charged to grant funds. Finally, the District should ensure all monthly reports are maintained to support reimbursement requests. Views Of Responsible Officials The District agrees with the finding and has taken steps to address this issue as detailed in the Corrective Action Plan.

Finding Number: 2024-002 Repeat Finding: Yes; 2023-002, 2022-002, 2021-002 Federal Program Name/Assistance Listing Title: Federal Transit Cluster Federal Assistance Listing Number: 20.507, 20.526 Federal Agency: U.S. Department of Transportation Federal Award Number: 5339-R-2022-GCTD-00039 Federal Pass-Through Agency: Texas Department of Transportation State Program Name: State Urbanized Area Formula Program, State Formula Grants For Rural Areas State Agency: Texas Department of Transportation Type of Finding: Noncompliance Material to Financial Statements and Federal/State Major Programs, Material Weakness in Internal Control Over Compliance Compliance Requirement: Procurement, Suspension and Debarment Questioned Costs: N/A; In accordance with 2 CFR 200.516(b)(7), when there are known questioned costs but the dollar amount is undetermined or not reported, the audit findings must include a description of why the dollar amount was undetermined or otherwise could not be reported. Based on our description of the finding below, the District was unable to provide evidence that the federal guidelines were followed for purchases exceeding the small purchases threshold. Due to inadequate records being maintained by the District, we were unable to determine if proper procured occurred for each purchase, and could not be located, or proper procurement never occurred. Therefore, we were unable to differentiate transactions as questioned costs from transactions in question caused solely because of deficiencies in internal control. Criteria Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR §§200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR part 200. Additionally, non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR §180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the System of Award Management (SAM) maintained by the General Services Administration (GSA) or (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR §180.300). Condition The District did not meet the requirement to verify that covered transactions were only made to an entity that was not suspended or debarred or otherwise excluded. Additionally, the District did was unable to provide evidence that the federal guidelines for purchases exceeding the small purchases threshold. Cause The District’s internal controls over procurement of goods and services were not adequate. Effect The District was not in compliance with Federal regulations and guidelines related to suspension and debarment or procurement. Context The sample was not intended to be, and was not, a statistically valid sample. During our review of purchasing, we noted the following: For 4 out of 5 procurements reviewed, documentation demonstrating a vendor check for suspension and debarment was not retained. For 2 out of 5 vendors reviewed with total expenditures below the Simplified Acquisition threshold, no documentation of quotes was maintained. For 1 out of 1 vendors reviewed with total expenditures that exceeded the Simplified Acquisition threshold, no documentation of a sealed procurement issued in accordance with federal guidelines was maintained. Recommendation The District should maintain documentation of procurement actions in the vendor file including sealed procurements issued, quotes and suspension and debarment checks. Review of procurement compliance should occur before the District’s funds are obligated. Views of Responsible Officials The District agrees with the finding and has taken steps to address this issue as detailed in the Corrective Action Plan.