Audit 372591

2024-4 Federal Expenditure Policies Criteria: The Borough is required by the Uniform Guidance to have written policies addressing procurement procedures specific to federal award expenditures, federal procurement processes, 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.

2024-5 Suspension and Debarment Verification Criteria: In accordance with 2 CFR §200.214 and the specific compliance requirement for Suspension and Debarment, non-Federal entities are prohibited from contracting with or making covered transactions with parties that are suspended, debarred, or otherwise excluded from participation in Federal programs. To comply, entities must verify the status of vendors and contractors prior to entering into covered transactions by performing one of the following: 1. Checking the System for Award Management (SAM.gov) exclusion listings, 2. Collecting a certification from the vendor, or 3. Adding a clause or condition in the contract confirming that the vendor is not suspended or debarred. Adequate documentation of the verification process must be maintained. Condition: During our audit, we noted that the Borough does not verify whether contractors or vendors receiving Federal funds are suspended or debarred from doing business with the Federal government. The Borough also does not maintain documentation demonstrating that such checks were performed. Cause: The Borough was not aware of the specific requirement to verify and document vendor suspension and debarment status for transactions funded with Federal awards. Effect: Failure to verify suspension and debarment status increases the risk that the Borough could enter into contracts or make payments to parties that are ineligible to participate in Federal programs. This exposes the Borough to potential noncompliance with Federal regulations and could result in disallowed costs or repayment of Federal funds.Recommendation: We recommend that the Borough establish and implement procedures to verify and document that all vendors and contractors receiving Federal funds are not suspended or debarred prior to entering into covered transactions. Acceptable procedures include checking vendor status on the SAM.gov website and printing or saving verification documentation, or obtaining vendor certifications confirming compliance. This review should be documented and retained for audit purposes.

2024-6 Segregation of Duties 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: Sound internal control and governance practices require that all disbursements of Federal funds be properly reviewed and approved prior to payment. The board's approval of disbursements iscrucial to ensure expenditures are authorized and supported by governance. Non-federal entities must establish and maintain effective internal control over Federal awards that provides reasonable assurance of compliance with Federal statutes, regulations, and the terms and conditions of the award. Condition: During our testing of ARPA-funded disbursements, we noted several individual payments that were not specifically approved by the Borough Council. While the Council had approved the overall ARP A-funded projects, documentation of approval for certain individual expenditures within those projects was not present in the meeting minutes or other supporting materials. Cause: The Borough's current approval process for ARPA-funded projects focuses on authorizing the overall project budget rather than approving each related transaction. As a result, individual disbursements associated with approved projects were not always submitted to the Council for explicit approval. Effect: Without formal approval of individual disbursements, there is an increased risk that payments could be made for unallowable or unauthorized purposes under the Federal award. The absence of detailed approval documentation also weakens the audit trail supporting management oversight and could lead to questioned costs if expenditures were later found to be inconsistent with Federal or project requirements. Recommendation: We recommend that the Borough strengthen its internal controls over the authorization of ARPA-funded expenditures by ensuring that all individual disbursements are reviewed and approved by the Borough Council or other designated officials prior to payment. Alternatively, if the Borough intends to continue approving projects on an overall basis, it should establish and document clear procedures specifying when and how individual payments within approved projects are deemed authorized.