Audit 395336

Finding Reference 2025-02 Assistance Listing Number 21.027 Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency Department of Treasury Type of Finding Material Weakness on Internal Control and Noncompliance Condition During the audit, management initially provided a Schedule of Expenditures of Federal Awards (SEFA) that required revision because the total federal expenditures reported for Program 21.027, Coronavirus State and Local Fiscal Recovery Funds, were incomplete. Specifically, expenditures totaling $1,084,942 that had already been reported to the pass-through entity were omitted from the SEFA, resulting in an understatement of total federal awards expended under the program. A similar condition was reported in the prior year’s single audit as finding No. 2024-05. Criteria In accordance with 2 CFR § 200.510(b) (Financial Statements and SEFA Requirements), the auditee must: 1. Prepare an accurate SEFA that includes the total federal awards expended for the period under audit. 2. Ensure the SEFA is complete, accurate, and properly classified by fiscal year. 3. Provide sufficient information to allow auditors to test compliance with federal requirements. Cause The errors in the preparation of the SEFA indicate deficiencies in internal controls over the financial reporting process related to federal awards. Specifically, management did not implement sufficient oversight and reconciliation procedures to ensure that all federal expenditures were accurately identified, classified, and reported within the appropriate fiscal year. In addition, the review process over the SEFA prior to submission to the auditors was not adequately designed or executed to detect and correct reporting omissions and misstatements. Effect As a result of the deficiencies in internal controls over SEFA preparation, the Schedule of Expenditures of Federal Awards was initially misstated and required revision to properly reflect total federal awards expended under Assistance Listing No. 21.027. The omission of expenditures increased the risk of material misstatement in the SEFA and could have resulted in an inaccurate representation of federal funding expended by the Authority. Additionally, the failure to initially prepare a complete and accurate SEFA resulted in noncompliance with 2 CFR § 200.510(b), which requires the auditee to provide a full and accurate accounting of federal expenditures for the period under audit. Questioned Costs No questioned costs were identified, as the issue relates to the misclassification and misstatement of expenditures, rather than the allowability of costs. Recommendation To ensure compliance with 2 CFR § 200.510(b) and improve internal controls over SEFA preparation, we recommend that the Authority: 1. Implement a formal review and reconciliation process to ensure federal expenditures are accurately reported in the correct fiscal year. 2. Enhance communication between finance and grant administration personnel to improve accuracy in expenditure classification. 3. Provide additional training to staff responsible for SEFA preparation on Uniform Guidance requirements for federal reporting. 4. Require a final, documented supervisory review of the SEFA before submission for audit to prevent reporting inaccuracies. Views of Responsible Officials Refer to Management’s unaudited corrective action plan.

Finding Reference 2025-03 Assistance Listing Number 21.027 Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency Department of Treasury Compliance Requirement Reporting Type of Finding Significant Deficiency on Internal Control and Noncompliance Condition From a sample of eight (8) expenditure reports examined, the auditors noted that five (5) reports were submitted after the due dates established by the pass-through entity. A similar finding was reported during the prior year’s single audit as finding No. 2024-04. Criteria In compliance with the reporting requirements set by the pass-through entity, the Authority must submit expenditure reports on the first and third Friday of each month to disclose expenditures under ALN 21.027. The Uniform Guidance section 200.303 regarding internal controls requires subrecipients to establish, document, and maintain effective internal control over Federal awards that provide reasonable assurance that the management of Federal awards is in compliance with Federal statutes, regulations, and terms and conditions of the Federal awards. This includes accurate financial reporting and proper segregation of duties to prevent any individual from both preparing and reviewing the same transaction or report. Cause The Authority lacks sufficient personnel assigned to oversee, review and make sure the reports are timely issued to the passthrough entity. This process is conducted by an employee without any formal oversight or review, prior to the submission to the passthrough entity. Effect The lack of management review, oversight, and late submission of the expenditure reports increases the risk of noncompliance with federal requirements and inaccuracies in reporting over federal funds. Questioned Costs None. Recommendation To resolve these issues, the Authority should consider the following actions: Strengthen Internal Controls: Implement stronger internal control procedures to ensure accurate financial reporting and supervision. This should include establishing clear protocols for the timely preparation and review of financial reports, with distinct roles assigned to different individuals to maintain segregation of duties. Staffing Issues: Take steps to address the employee shortage, either by hiring additional staff or by training existing staff to take on multiple roles, ensuring that duties can be adequately segregated even with limited personnel. Regular Training and Awareness: Conduct regular training sessions for all relevant staff on compliance with Federal program requirements and the importance of internal controls, including the need for segregation of duties in financial reporting. Views of Responsible Officials Refer to Management’s unaudited corrective action plan.

Finding Reference 2025-04 Assistance Listing Number Transit Services Programs Cluster 20.513Enhanced Mobility of Seniors and Individuals with Disabilities 20.516Job Access and Reverse Commute Program 20.521 New Freedom Program Name of Federal Agency Department of Transportation Compliance Requirement Subrecipient Monitoring Type of Finding Significant Deficiency on Internal Control and Noncompliance Condition From a sample of nine (9) subrecipients, the auditors identified that for one (1) subrecipient, the Authority, did not perform subrecipient monitoring within the required three (3)-year cycle established in its State Management Plan, as of the audit period ended June 30, 2025. Although monitoring activities were scheduled for a subsequent period (2026), such actions occurred after the audit period and do not address the absence of compliance as of June 30, 2025. Criteria 2 CFR 200.332(d) requires pass-through entities to monitor the activities of subrecipients to ensure compliance with Federal statutes, regulations, and the terms and conditions of the subaward. 2 CFR 200.303 requires non-federal entities to establish and maintain effective internal control over Federal awards. FTA Circular 5010.1E (Chapter 5) states that federal oversight activities (e.g., inspections or reviews) do not relieve the recipient of its responsibility to manage and oversee federally funded projects. The Authority’s State Management Plan establishes a risk-based monitoring approach, including a three (3)- year monitoring cycle for subrecipients. Cause The Authority did not ensure that subrecipient monitoring procedures were performed and documented within the required three-year cycle for all subrecipients. Additionally, management relied on the FTA Triennial Review process as evidence of monitoring, which reflects a misinterpretation of federal requirements regarding the Authority’s responsibilities as a pass-through entity. Effect The failure to perform and document subrecipient monitoring within the established cycle increases the risk that noncompliance with federal requirements by subrecipients may not be identified in a timely manner. In addition, federal funds may not be used in accordance with applicable laws, regulations, and grant requirements. The Authority may be exposed to questioned costs, repayment obligations, or increased federal oversight. Questioned Costs None. Recommendation We recommend that the Authority: Ensure that subrecipient monitoring is performed and documented in accordance with its State Management Plan and within the established three-year cycle. Reinforce internal controls and training to clarify that federal reviews (e.g., FTA Triennial Review) do not replace the Authority’s monitoring responsibilities under 2 CFR 200. Views of Responsible Officials Refer to Management’s unaudited corrective action plan.

Finding Reference 2025-05 Assistance Listing Number 20.205 Highway Planning and Construction (Federal-Aid Highway Program) Name of Federal Agency Department of Transportation Compliance Requirement Special Tests and Provisions – Wage Rate Requirements Type of Finding Significant Deficiency on Internal Control and Noncompliance Condition From a sample of forty (40) payroll transactions of construction projects, the following exceptions were identified: Seven (7) instances where certified payrolls were submitted more than seven (7) days after the payroll period, indicating they were not certified on a weekly basis. Four (4) instances where no supporting documentation was provided to ensure compliance with the wage rate requirements. Two (2) instances where certified payrolls were signed by the contractor but did not include a certification date, preventing verification that certification occurred within the required seven (7)-day timeframe. A similar condition was reported in the prior year’s single audit as finding No. 2024-03. Criteria 2 CFR 200 for the Highway Planning and Construction requires recipients and subrecipients to comply with Davis- Bacon and related wage rate requirements, including: Contractors and subcontractors must submit certified payrolls on a weekly basis. Certified payrolls must be complete, accurate, and properly certified, including the date of certification. The recipient must maintain adequate supporting documentation and internal controls to ensure compliance with wage rate requirements. Cause The Authority has not established or consistently implemented effective monitoring controls over contractors responsible for submitting certified payrolls in accordance with Davis-Bacon requirements. Although contractors are responsible for preparing and submitting certified payrolls through the Authority, the Authority did not implement sufficient oversight procedures to: Ensure certified payrolls were submitted timely on a weekly basis in accordance with federal requirements; Perform and document a formal review of payroll submissions for completeness and accuracy, including verification of certification dates; and Follow up on late, incomplete, or missing payroll documentation. This condition indicates that the Authority’s control framework does not clearly define and enforce its oversight responsibility as the recipient to ensure contractor compliance with wage rate requirements. As a result, monitoring activities over contractors were not performed consistently or documented adequately. Effect The Authority was not in compliance with federal wage rate requirements which causes an increased risk that laborers and mechanics may not have been paid in accordance with applicable prevailing wage rates. Lack of documentation impairs the Authority’s ability to demonstrate compliance and increases the risk of undetected errors or noncompliance. Questioned Costs None. Recommendation We recommend the Authority: 1. Strengthen internal controls over wage rate compliance by implementing procedures to: o Ensure certified payrolls are submitted and reviewed weekly; o Verify that all payrolls include complete certification, including dates; and o Maintain adequate supporting documentation for all payroll reviews. 2. Enhance monitoring procedures over contractors and subcontractors, including: o Documented review checklists; o Timeliness tracking of payroll submissions; and o Follow-up on missing or incomplete documentation. 3. Provide training to personnel and contractors on federal wage rate requirements and documentation expectations. Views of Responsible Officials Refer to Management’s unaudited corrective action plan.

Finding Reference 2025-06 Assistance Listing Number 20.205 Highway Planning and Construction (Federal-Aid Highway Program) Name of Federal Agency Department of Transportation Compliance Requirement Cash Management – Memorandum of Understanding (MOU) Type of Finding Significant Deficiency on Internal Control and Noncompliance Condition Based on a sample of fifty-seven (57) disbursements tested, the auditors identified nine (9) instances in which payments to contractors were not made within the forty (40)-day timeframe established in the Memorandum of Understanding (MOU). Criteria The Memorandum of Understanding (MOU) between the Authority and the Federal Highway Administration (FHWA) requires the Authority to remit payments to contractors within forty (40) days of receipt of a proper invoice. Cause Management indicated that delays in payments were attributable to the implementation of new procedures associated with the Stewardship and Oversight Agreement and the related transition of responsibilities to the Authority. As part of this transition, the Authority assumed additional operational and oversight responsibilities, which increased administrative workload and processing demands, contributing to delays in the review, approval, and disbursement of contractor payments. Effect Failure to meet the payment requirements results in noncompliance with federal regulations and the MOU. Additionally, delayed payments may adversely affect project execution, contractor performance, and overall program efficiency. Questioned Costs None. Recommendation The Authority should strengthen internal controls over the accounts payable process to ensure timely processing and payment of contractor invoices. This may include implementing monitoring mechanisms to track invoice receipt and payment deadlines, establishing clear accountability for timely approvals, and conducting periodic reviews to ensure compliance with the MOU requirements. Views of Responsible Officials Refer to Management’s unaudited corrective action plan.