Audit 412764

2025-004 - 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. The corrective action described in response to Finding 2 applies uniformly to disbursements of the RLF program funds, with no separate or exception process. This uniform application ensures RLF disbursement receives the same level of control as all other organizational expenditures.

2025-005 UNALLOWABLE COSTS DUE TO EXPENSE CLASSIFICATION ALN 11.307 Grant Number 05-79-06072 US Department of Commerce - Economic Development Cluster Type of Finding: Noncompliance Related to Federal Awards Criteria: Under Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) 200.403, costs charged to a federal award must be allowable. In general, allowable costs must be necessary and reasonable for the performance of the award, allocable to the federal award, consistent with applicable policies and procedures, consistently treated, not used to meet cost-sharing or matching requirements of another federal program, adequately documented, and incurred during the approved budget period. Condition: During our testing of the Allowable Costs compliance requirement, we identified $2,871 in expenses charged to the federal award that were not allowable, based on a review of supporting documentation. Cause: The condition occurred because the District’s procedures for reviewing and approving costs charged to federal awards did not consistently identify whether expenses were properly classified and allocable to the award. Effect: The District is out of compliance with 2 CFR 200.403. Recommendation: We recommend that management strengthen controls over costs charged to federal awards. Recommended actions include implementation and enhancement of grant coding review procedures. Management's Response: Northern Rocky Mountain Economic Development District (NRMEDD) agrees with the recommendation. The $2,871 misclassified expenditures has been reclassified to the correct account. The corrective action described in response to Finding 1 applies uniformly to expense classifications, with no separate or exception process.