Audit 412398

2024-04 SINGLE AUDIT REPORTING PACKAGE Type of Finding: Noncompliance Related to Federal Awards Criteria: Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) 200.512(a) requires the reporting package and data collection form to be submitted to the Federal Audit Clearinghouse the earlier of 30 calendar days after the reports are received from the auditor or nine months after the end of the audit period. Condition: The 2023 audit reporting package was submitted after the deadline. The 2024 audit reporting package will also be submitted after the deadline. Cause: The District's audits were not completed by nine months after the end of the audit period. Effect: The District is out of compliance with 2 CFR 200.512(a). Recommendation: Procedures should be developed to ensure the single audit reporting package and data collection form are filed by the due date. Management's Response: Northern Rocky Mountain Economic Development District (NRMEDD) agrees with the recommendation. The delay in filing the 2023 and 2024 reporting packages resulted from the late receipt of prior audit findings and the unexpected termination of services by the previous audit firm. Despite diligent efforts to secure a new firm, NRMEDD encountered a significant shortage of auditors willing to service small non-profits with complex federal compliance requirements. To ensure future compliance with 2 CFR 200.512(a), NRMEDD has established a long-term partnership with Amatics CPA Group to stabilize the audit cycle and ensure all future reporting packages are submitted to the Federal Audit Clearinghouse within the required regulatory timeframe.

2024-05 - LACK OF SEGREGATION OF DUTIES OVER DISBURSEMENTS OF FEDERAL FUNDS Type of Finding: Significant Deficiency in Internal Control Over Compliance and Other Matters Criteria: The Federal Internal Control Standards issued by the GAO requires management to design control activities to achieve objectives and respond to risks. The segregation of duties attribute contributes to the design, implementation, and operating effectiveness of this principle by dividing responsibilities among different people to reduce the risk of error, misuse, or fraud. Condition: The District did not properly segregate duties over expenditures. Cause: The Executive Director is responsible for initiating and authorizing expenditures, as well as for maintaining custody of the District's funds. For administrative expenses paid out of RLF income, there is no secondary review or approval of the expenditures, resulting in a lack of segregation of duties. Effect: There is no secondary review or approval for expenditures, other than loan fund disbursements. Administrative and other expenditures only require Executive Director approval and the Executive Director is also responsible for initiating those payments. Recommendation: We recommend the District segregate duties related to expenditures and implement controls that would serve to prevent, or detect and correct, any misstatements and any noncompliance with federal program compliance requirements. Management's Response: Northern Rocky Mountain Economic Development District (NRMEDD) agrees with the recommendation and will extend the board oversight procedures implemented for general disbursements to all federal and administrative expenditures. To address the lack of segregation of duties, staff will include all expenditures paid from Revolving Loan Fund (RLF) income and other federal sources in the comprehensive disbursement report provided at each Board meeting. The NRMEDD Board or a designated officer will review these expenditures against supporting documentation and bank activity to provide the necessary secondary approval, ensuring that all federal funds are disbursed in compliance with GAO Internal Control Standards and documented in the official meeting minutes.

2024-06 LACK OF CONTROLS OVER FEDERAL FINANCIAL REPORTS Type of Finding: Material Weakness in Internal Control Over Compliance and Other Matters Criteria: The Federal Internal Control Standards issued by the GAO requires management to design control activities to achieve objectives and respond to risks. Standard internal control practices over federal award reporting require that all submitted reports include evidence of formal review and documentation of the date of submission. Condition: Until December 2024, the District did not properly segregate duties over the preparation of Federal financial reports. Federal reports were completed without review or input. Cause: The District did not have sufficient time nor staffing to implement the corrective actions after the completion of the previous audits. Effect: The Federal financial reports submitted were not prepared or reviewed by the Accountant. As a result, Federal reports were not completed accurately and do not reconcile to the underlying financial data. Recommendation: We recommend the District implement formal procedures requiring documented supervisory review and reconciliation of all reports prior to submission. Management's Response: Similar to finding 2024-02, this issue persisted because NRMEDD did not have sufficient time or staffing to implement corrective actions following the delayed receipt of the 2023 audit findings in December 2024. To ensure compliance, NRMEDD has implemented a formal reconciliation process where the NRMEDD Loan Manager prepares all federal financial reports and submits them to the Bookkeeper for a secondary review. The Bookkeeper will verify that each report reconciles to the underlying financial data and general ledger before final submission, providing documented evidence of supervisory review from the Executive Director to satisfy GAO Internal Control Standards.