Audit 389823

SA 2025-001: Allowable Costs – Non-Payroll Assistance Listing Number: 20.509 Federal Program/Cluster Name: Formula Grants for Rural Areas and Tribal Transit Federal Agency: U.S. Department of Transportation – Federal Transit Administration Federal Award Number: 64BA24-02507/64CA17-02442/64HC22-02180/64RO21-01648/64TO21-01865/64MO21-01910/64HC21-01500 Federal Award Year: July 1, 2024 to June 30, 2025 Compliance Requirement Allowable Costs Criteria Except where otherwise authorized by statute, cost must meet the following general criteria in order to be allowable under federal awards; 1. Be necessary and reasonable for the performance of the federal award and be allocable thereto under the principles in 2 CFR Part 200, Subpart E. 2. Conform to any limitations or exclusions set forth in 2 CFR Part 200, Subpart E or in the federal award as to types or amount of cost items. 3. Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity. 4. Be accorded consistent treatment. A cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost. 5. Be determined in accordance with generally accepted accounting principles (GAAP), except for state and local governments and Indian tribes only as otherwise provided for in 2 CFR Part 200. 6. Not be included as a cost or used to meet cost-sharing or matching requirements of any other federally financed program in either the current or a prior period. 7. Be adequately documented. Condition During the audit of non-payroll expenses charged to the program, an invoice dated May 1, 2025 was approved by the Director of Operations & Maintenance during the General Manager’s absence. The related purchase order was subsequently signed by the General Manager on June 10, 2025, after the invoice had already been received and approved. The procurement policy does not specify the required timing of purchase order approval relative to invoice receipt or approval. Cause The procurement policy lacks clear guidance on the timing of purchase order authorization. The Director of Operations & Maintenance approved the invoice to avoid delays, but the purchase order was not signed until the General Manager’s return. Effect This practice increases the risk of: • Commitments are being made without proper prior authorization. • Noncompliance with federal procurement standards requiring documented procedures that ensure approvals before obligations are incurred. • Potential questioned costs if federal funds were used for expenditures not properly authorized in advance. Questioned Costs None Repeat Findings No Recommendation MARTA should revise the procurement policy to explicitly require purchase order approval prior to invoice receipt or payment. Establish a clear delegation of authority for situations when the General Manager is absent, ensuring that approvals are documented and consistent with federal requirements. Views of Responsible Officials and Planned Corrective Action MARTA recognizes the importance of ensuring all expenses are approved before they are incurred. To address this finding, MARTA is updating its internal procurement rules to clearly state that a purchase order must be signed prior to ordering any items or initiating any services. This measure will prevent the receipt of invoices for costs that have not been officially authorized. Additionally, MARTA is creating a formal backup approval plan. Under this plan, if the General Manager is unavailable, another designated leader will have the documented authority to approve purchases immediately, eliminating the need to wait for the General Manager’s return to complete the necessary paperwork. Finally, MARTA’s finance team will implement a new check-and-balance step in the payment process. Moving forward, the team will verify that the date on the approved purchase order comes before the date on the vendor's invoice. If the dates are out of sequence, the payment will be flagged for review. In addition, MARTA will conduct a training session for all department heads to reinforce that verbal orders are not permitted and that written authorization must always be obtained first. This plan is designed to ensure full compliance with federal grant requirements and prevent any future delays in the approval process. Personnel responsible: Sandra Benson, General Manager Anticipated completion date: October 2026

SA 2025-002: Develop Written Policies and Procedures Assistance Listing Number: 20.509 Federal Program/Cluster Name: Formula Grants for Rural Areas and Tribal Transit Federal Agency: U.S. Department of Transportation – Federal Transit Administration Federal Award Number: 64BA24-02507/64CA17-02442/64HC22-02180/64RO21-01648/64TO21-01865/64MO21-01910/64HC21-01500 Federal Award Year: July 1, 2024 to June 30, 2025 Compliance Requirement Others Criteria 2 CFR 200.303 requires nonfederal entities to establish and maintain effective internal control over federal awards to provide reasonable assurance that organizations who manage the federal award: • Understand and comply with the federal statutes, regulations, and terms and conditions of the award; • Evaluate and monitor compliance; • Take prompt action when instances of noncompliance is identified. These internal controls should be in compliance with guidance in Standards for Internal Control in the Federal Government, issued by the Comptroller General of the United States, or the Internal Control Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Additionally, the Uniform Guidance requires non-federal entities to develop written procedures related to the following areas: 1. Cash Management 2 CFR 200.302(b)(6) states that the financial management system of each non-Federal entity must provide for the written procedures to implement the requirements of 2 CFR 200.305 Federal Payment. 2. Equipment Management Requirements Non-federal entities other than states must follow 2 CFR sections 200.313(c) through (e). Condition MARTA does not have comprehensive written policies and procedures concerning the following key compliance areas which are required by the Uniform Guidance: Cash Management MARTA does not have written procedures to implement the requirements of 2 CFR 200.305 Federal Payment. Equipment and Real Property Management MARTA has an Asset Inventory Policy and Procedures, however, it does not clearly define the policies and procedures that are in place for the use, management and disposition of equipment acquired under a Federal award in accordance with 2 CFR sections 200.313(c) through (e). Cause MARTA’s reliance on informal business practices leads to inconsistencies in its internal controls. Effect The absence of formal policies and procedures in the key compliance areas could result in non-compliance with federal regulations, which may lead to unnecessary sanctions. Additionally, without formal written policies and procedures, it is difficult to ensure consistent practices across the organization. Questioned Costs None Repeat Findings Yes, see the Summary Schedule of Prior Year Audit Findings, SA 2024‑001. The Cash Management and Equipment and Real Property Management policies have not been updated since last year’s audit. Recommendation MARTA should develop and implement formal written policies and procedures for the specific areas required by the Uniform Guidance. These policies and procedures must clearly delineate the requirements of Uniform Guidance. Personnel responsible for these areas should receive adequate training and apply the policies effectively. Regular reviews should be conducted to update the policies and procedures as needed. Views of Responsible Officials and Planned Corrective Action MARTA has grown substantially in the last several years. This progress includes identifying areas that need to be updated or developing new processes and documentation. MARTA has an Asset Inventory Policy and Procedures in which the purpose is to ensure that fixed assets are properly accounted for, identified, and tracked. MARTA also has Cash Handling Policy and Procedures which addresses safeguarding public funds and maximizing the available resources. This is designed to reduce the risks associated with the collection, receipts storage and reporting of cash transactions and to safeguard and maintain the security and integrity of MARTA's fiscal assets. MARTA will review and update these policies and/or create new policies to make sure that they are compliant with the Uniform Guidance. Personnel responsible: Sandy Benson, General Manager Anticipated completion date: October 2026