Audit 406718

Section III - Federal Award Findings and Questioned Costs FINDING 2025-002 Subject: Water and Waste Disposal Systems for Rural Communities - Reporting Federal Agency: Department of Agriculture Federal Program: Water and Waste Disposal Systems for Rural Communities Assistance Listings Number: 10.760 Federal Award Number and Year (or Other Identifying Number): TRSW222216 Compliance Requirement: Reporting Audit Finding: Material Weakness Condition and Context Recipients of the Water and Waste Disposal Systems for Rural Communities award funds are required to submit the RD 442-2 (Statement of Budget, Income and Equity) and the RD 442-3 (Balance Sheet); or an annual audit may be submitted in lieu of those forms. The Town did not have a documented oversight, review, or approval process in place to ensure the required RD 442-2, RD 442-3, or an annual audit, were completed and submitted timely and accurately to the United States Department of Agriculture. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 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). . . ." Cause A proper system of internal controls was not designed by the management of the Town. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the Town's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the Town could not ensure that the required reports were filed with the awarding agency. As such, the awarding agency may not have accurate and current information to discern the financial status of the Town's project. Furthermore, noncompliance with the provisions of federal statutes, regulations, and the terms and conditions or the federal award could result in the loss of future federal funding to the Town. INDIANA STATE BOARD OF ACCOUNTS 16 TOWN OF WESTPORT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the Town's management establish a system of internal controls, including segregation of duties, related to the grant agreement and compliance requirement listed above. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.