Audit 414503

2024-004 - Material Misstatement of the Schedule of Expenditures of Federal Awards (SEFA) Finding Type: Material weakness in internal control over compliance Compliance Requirement: Reporting Condition/Finding: The Schedule of Expenditures of Federal Awards (SEFA), as initially provided for audit, contained material misstatements. The original version of the SEFA did not accurately report the total amount of federal expenditures and required significant audit adjustments to reflect the proper award amounts and program classifications in accordance with the Uniform Guidance. Criteria: Per 2 CFR §200.510(b), the auditee must prepare a SEFA that accurately and completely discloses all federal awards expended during the fiscal year, including the name of the federal program, assistance listing number, amount expended, and applicable pass-through entities. This schedule must be prepared in accordance with GAAP and the Uniform Guidance. Cause: The misstatements were due to inadequate internal controls over the preparation and review of the SEFA. The Village lacked a formal process to ensure the completeness and accuracy of reported federal expenditures prior to submission for audit. Effect: The SEFA, as originally submitted, materially misstated the Village’s federal expenditures for the fiscal year, which could have resulted in the incorrect identification of major programs and misrepresentation of federal activity in the audit. This represents a material weakness in internal control over compliance. Recommendation: We recommend that the Village implement procedures to ensure that the SEFA is prepared using complete, reconciled grant expenditure data and that it is reviewed by a qualified individual prior to submission for audit. Supporting documentation should be maintained to substantiate amounts reported by federal program. View of Responsible Officials: Management’s response and planned corrective action can be found in the accompanying Corrective Action Plan.

2024-005 - Lack of Written Federal Policies and Procedures Required by Uniform Guidance Finding Type: Material weakness in internal control over compliance Compliance Requirement: Allowable Costs/Cost Principles, Procurement and Suspension and Debarment Condition/Finding: The Village has not developed or implemented the written policies and procedures required under the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Required documentation is absent in areas such as internal controls over compliance, cash management, procurement, and allowable costs. Criteria: Per 2 CFR §200.303 and related sections (including §§200.305 and 200.318–320), non-federal entities expending federal awards must establish and maintain effective internal controls and must document policies and procedures governing compliance with applicable federal statutes, regulations, and terms of award. Cause: The Village has not formally developed Uniform Guidance-compliant policies due to limited administrative resources and competing operational priorities. Effect: The absence of formal written policies and procedures increases the risk of inconsistent or noncompliant treatment of federal expenditures. Without documented controls and expectations, the Village may fail to detect or prevent noncompliance with federal requirements in key grant administration areas. Recommendation: We recommend that the Village adopt written policies and procedures addressing the specific requirements outlined in the Uniform Guidance. These policies should include, but not be limited to, internal controls over compliance, procurement, cash management, subrecipient monitoring (if applicable), and allowable cost determinations. Management should ensure that these policies are communicated and periodically reviewed. View of Responsible Officials: Management’s response and planned corrective action can be found in the accompanying Corrective Action Plan.

2024-006 - Deficiencies in Disbursement Procedures and Documentation Retention Finding Type: Material noncompliance Federal Program: 10.760 Water and Waste Disposal Systems for Rural Communities Compliance Requirement: Allowable Costs/Cost Principles Condition/Finding: During testing of disbursements charged to federal programs, we noted that supporting documentation was in some cases incomplete, missing, or insufficient to verify allowability and compliance with federal requirements. In addition, approval of certain disbursements was not clearly documented or retained in a manner consistent with federal requirements. Criteria: In accordance with 2 CFR §200.303, non-federal entities must establish internal controls that provide reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of federal awards. Per 2 CFR §200.403(g), costs must be adequately documented to be allowable under federal awards. Further, 2 CFR §200.334 requires the retention of records sufficient to support federal expenditures for a period prescribed by the regulation. Cause: The Village has not established or consistently followed formal procedures for the review, approval, and retention of documentation for federal disbursements. Documentation practices vary and are not systematically reviewed for completeness. Effect: The absence of proper documentation or evidence of approval impairs the Village’s ability to demonstrate compliance with federal cost principles. This represents noncompliance with federal documentation and cost allowability requirements that is material in relation to the applicable compliance requirements. Recommendation: We recommend the Village implement formal procedures to ensure that all federal disbursements are properly documented and approved prior to payment, and that supporting records are retained in accordance with Uniform Guidance requirements. Periodic internal review of documentation completeness should also be incorporated as part of the control process. View of Responsible Officials: Management’s response and planned corrective action can be found in the accompanying Corrective Action Plan.

2024-007 - Lack of Separate Bank Account for Restricted Federal Cash Finding Type: Material noncompliance Federal Program: 10.760 Water and Waste Disposal Systems for Rural Communities Compliance Requirement: Allowable Costs/Cost Principles Condition/Finding: The Village did not maintain a separate bank account for restricted federal loan proceeds. These funds were commingled with other Village monies, and no formal ledger-based tracking or reconciliation procedures were in place to isolate federal cash activity. The Village also lacked internal policies or procedures to guide compliance with federal cash management requirements. Criteria: In accordance with 2 CFR §200.305(b), non-federal entities must maintain effective control over, and accountability for, all federal funds. This includes safeguarding assets and ensuring that federal cash is used only for authorized purposes. While physical separation of funds is not explicitly required, entities must have controls in place—such as distinct accounts or ledger tracking—to clearly account for restricted cash in accordance with award terms. Cause: The Village did not establish policies or procedures related to federal cash management and therefore did not implement practices to ensure separation or traceability of restricted federal cash. Effect: The lack of internal policies and procedures, combined with the absence of account-level or ledger-based segregation of restricted federal cash, resulted in noncompliance with federal cash management standards. This condition represents noncompliance that is material in relation to the applicable compliance requirements due to the increased risk of improper use of federal funds and the inability to demonstrate appropriate stewardship over federal cash. Recommendation: We recommend that the Village establish formal procedures addressing the handling of restricted federal cash. This may include either maintaining a separate bank account for federal loan proceeds or implementing a structured ledger system with regular reconciliation to ensure proper tracking and compliance. View of Responsible Officials: Management’s response and planned corrective action can be found in the accompanying Corrective Action Plan.

2024-008 - Late Single Audit Filing Submission Finding Type: Material noncompliance Compliance Requirement: Reporting Condition/Finding: The Village did not submit its Single Audit reporting package to the Federal Audit Clearinghouse by the required deadline. The audit was filed substantially late due to the Village not having its records and financial reporting ready in time to support a timely audit. Criteria: Per 2 CFR §200.512(a), the auditee must submit the data collection form and the reporting package to the Federal Audit Clearinghouse within the earlier of 30 calendar days after receipt of the auditor’s report(s), or nine months after the end of the audit period. Timely submission is required for continued eligibility for federal awards and to meet transparency and accountability standards. Cause: The Village was not prepared to support the audit process within the required time frame and did not have internal procedures in place to monitor and comply with the Single Audit filing deadline. Effect: The delayed filing represents material noncompliance with the Uniform Guidance reporting requirements. Untimely Single Audit submission may negatively affect the Village’s standing with federal agencies, delay access to future funding, and hinder oversight of federally funded programs. This represents noncompliance that is material in relation to the applicable compliance requirements. Recommendation: We recommend that the Village implement procedures to monitor Single Audit deadlines, ensure timely readiness of accounting records, and formally track filing requirements to support on-time submission of future audit reports. View of Responsible Officials: Management’s response and planned corrective action can be found in the accompanying Corrective Action Plan.