Audit 409177

Subject: Federal Transit Cluster – Internal Controls Federal Agency: Department of Transportation Federal Program: Federal Transit Cluster Assistance Listing Number: 20.507 Federal Award Numbers and Years (or Other Identifying Numbers): IN-2025-019 - IN-90-X850 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Significant Deficiency, Other Matters Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards 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). . . ." Condition: An effective internal control system was not in place at the BPTC to ensure compliance with requirements related to the grant agreement and the activities allowed or unallowed and allowable costs/cost principle compliance requirements. BPTC did not have adequate documentation to support expenditures. Cause: BPTC’s management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed BPTC at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: $50,000 Context: During testing, we noted for one voucher, in a sample of sixty vouchers, BPTC paid $100,000 for an option to purchase land for a capital related project. BPTC incorrectly charged a portion of the land purchase option to an operating grant and was reimbursed $50,000 for the expense. The option is a capital expense that would not qualify for reimbursement under the operating grant. Identification as a repeat finding, if applicable: No. Recommendation: We recommend BPTC review all purchases to ensure only operating related purchases are charged to the operating grants and return the funds incorrectly reimbursed. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.