Audit 406105

2025-002 – Journal Entries and Disbursement Approval Controls Finding Type. Immaterial Noncompliance/Material Weakness in Internal Control over Compliance (Special Tests and Provisions) Program. Highway Planning and Construction; Passed through Michigan Department of Transportation; Assistance Listing Number 20.205; All Award Numbers. Criteria. Recipients of federal awards are required to maintain adequate internal controls over financial reporting, including ensuring that journal entries are supported by appropriate documentation and that disbursements are properly reviewed and approved in accordance with established policies. Condition. During our testing of journal entries and accounts payable disbursements, we noted certain internal control processes were not consistently performed or documented. This included instances where supporting documentation was not readily available for journal entries and instances where invoices were not consistently reviewed and approved by an individual independent of the preparer in accordance with Commission policy. Cause. These conditions are attributable to insufficiently formalized procedures and enforcement of controls governing journal entry support and disbursement review and approval. Effect. As a result, there is an increased risk that unsupported or inappropriate transactions could be recorded and that disbursements may be processed without proper authorization, increasing the risk of errors or irregularities not being detected in a timely manner. Questioned Costs. No costs were required to be questioned as a result of this finding. Recommendation. We recommend that the Commission strengthen procedures to ensure that all journal entries are supported by appropriate documentation and that all disbursements are reviewed and approved in accordance with established policies, with evidence of such review maintained. View of Responsible Officials. Management will implement procedures to ensure all journal entries are adequately supported and that invoice approvals are documented in accordance with policy requirements.

2025-003 – Procurement, Suspension, and Debarment (repeat) Finding Type. Immaterial Noncompliance/Material Weakness in Internal Control over Compliance (Procurement, Suspension, and Debarment) Program. Highway Planning and Construction; Passed through Michigan Department of Transportation; Assistance Listing Number 20.205; All Award Numbers. Criteria. Federal regulations require that non-federal entities ensure that vendors are not suspended or debarred and that procurement transactions are conducted in a manner providing full and open competition, including maintaining documentation to support procurement decisions and executed contracts. Condition. During our testing of procurement, suspension and debarment, we noted certain procedures were not consistently performed or documented. This included an instance where the Commission did not verify that a vendor was not suspended or debarred, instances where sole source vendor selections were made without formal documentation supporting the basis for the determination or approval, and instances where executed contracts or agreements were not maintained. Cause. These conditions are attributable to insufficient documentation requirements and oversight related to procurement activities and vendor verification procedures. Effect. As a result, there is an increased risk of noncompliance with federal procurement requirements, including the use of vendors that may be suspended or debarred and insufficient support for procurement decisions, which reduces transparency and accountability. Questioned Costs. No costs were required to be questioned as a result of this finding. Recommendation. We recommend that the Commission implement procedures to ensure vendors are verified against suspension and debarment requirements, that all sole source procurement decisions are formally documented and approved, and that executed contracts and agreements are maintained for all applicable transactions. View of Responsible Officials. Management will implement procedures to strengthen procurement documentation, including vendor verification, sole source justification, and retention of executed agreements.

2025-001 – Management Review and Approval Finding Type. Immaterial Noncompliance/Significant Deficiency in Internal Control over Compliance (Special Tests and Provisions) Program. Highway Planning and Construction; Passed through Michigan Department of Transportation; Assistance Listing Number 20.205; All Award Numbers. Criteria. Recipients of federal awards are required to adhere to their established internal policies as well as generally accepted accounting principles (GAAP). Internal control procedures should ensure that payroll disbursements are processed using approved and accurate pay rates and that timesheets are reviewed and approved with documented evidence, including independent review where appropriate. Condition. During our testing of payroll disbursements, we noted certain internal control processes were not consistently performed or documented. This included an instance identified during a payroll conversion in which an individual was compensated using an incorrect pay rate. In addition, timesheet review and approval procedures were informal in nature and not consistently documented, including instances where timesheets were approved through verbal communication and where there was no evidence of independent review for certain personnel. Condition. During our testing of payroll disbursements, we noted certain internal control processes were not consistently performed or documented. This included an instance identified during a payroll conversion in which an individual was compensated using an incorrect pay rate. In addition, timesheet review and approval procedures were informal in nature and not consistently documented, including instances where timesheets were approved through verbal communication and where there was no evidence of independent review for certain personnel. Cause. These conditions are attributable to insufficiently formalized procedures and documentation requirements governing payroll processing and timesheet review and approval. Effect. As a result, there is an increased risk that payroll transactions may be processed using inaccurate rates or unsupported hours and that errors or irregularities may not be detected in a timely manner. Additionally, the absence of documented review reduces accountability and transparency over payroll activities. Questioned Costs. No costs were required to be questioned as a result of this finding. Recommendation. We recommend that the Commission enhance formal procedures to ensure payroll reports are reviewed for accuracy of pay rates and hours prior to processing and that all timesheets are subject to documented review and approval, including independent review where appropriate. View of Responsible Officials. Management will develop and implement formal procedures to strengthen controls over payroll processing and timesheet approvals, including requiring documented evidence of review and ensuring independent oversight where appropriate.