Finding 2023-003 – Material Weakness
AL No: 20.507
Federal Grantor: U.S. Department of Transportation, Federal Transit Administration, Federal
Transit Formula Grants - Direct Award
Compliance Requirements: Activities Allowed or Unallowed and Allowable Costs/Cost
Principles.
Condition: The District’s...
Finding 2023-003 – Material Weakness
AL No: 20.507
Federal Grantor: U.S. Department of Transportation, Federal Transit Administration, Federal
Transit Formula Grants - Direct Award
Compliance Requirements: Activities Allowed or Unallowed and Allowable Costs/Cost
Principles.
Condition: The District’s internal controls over compliance requirements did not identify
ineligible costs applied to four separate Federal Transit Administration (FTA) grants as follows.
• Section 5307 Grant Award CA-2020-173-01: The District overclaimed Route 42 and
Woodland fixed route operating expenses that should have been reimbursed by a local match
as required by other FTA grants applied to the same routes, resulting in ineligible costs of
$1,073,260 being charged to the program.
Questioned Costs: $1,073,260.
• Section 5307 Grant Award CA-2022-140-01: The District overclaimed Route 42 expansion
fixed route operating expenses that should have been reimbursed by a local match as the wrong
federal percentage was applied in the claims, resulting in ineligible costs of $33,129 being
charged to the program.
Questioned Costs: $33,129. Section 5307 Grant Award CA-2022-147-04: The District overclaimed communication
expenses for Woodland paratransit operating routes, resulting in ineligible costs of $12,513
being charged to the program.
Questioned Costs: Ineligible costs were below the $25,000 floor for questioned costs under 2
CFR Part 200, Subpart F (Uniform Guidance), Section 200.516.
• Section 5307 Grant Awards CA-2022-204-01 and CA-2021-162-03: The District claimed
engine overhaul expenses that did not qualify as preventative maintenance costs allowed by the
terms and conditions of the grant, resulting in ineligible costs of $17,902 being charged to the
program.
Questioned Costs: Ineligible costs were below the $25,000 floor for questioned costs under 2
CFR Part 200, Subpart F (Uniform Guidance), Section 200.516.
Criteria: 2 CFR Part 200, Subpart E (Uniform Guidance) Section 200.303 states that “The
nonfederal 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.”
Cause: Several federal grants applied to these routes had local match requirements that were not
captured by the District’s review procedures due to recent staff turnover and lack of documented
procedures to track expenses charged to all funding sources combined. Not all paratransit operating
expenses were reported and tracked separately in the allocation spreadsheet leading to expenses
being double claimed under different grants for different purposes. This is due to the allocation
spreadsheet not having a summary page totaling all expenses charged to programs to make sure the
total expenses allocated agree to the total population of expenses allocated.
Effect: Expenses were charged to more than one grant when filing claims and ineligible costs were
applied, resulting in the overclaimed amounts cited above.
Context: The ineligible costs were discovered through reconciliation of the operating expenses
and capital costs from the claims to the general ledger. It was noted that the District did not have
any FTA awards for capital maintenance during the year. The overclaimed amounts of $1,073,260,
$33,129, and $12,513 have been removed from revenue as the FTA has currently approved the
District claiming the expenses under different grants. There were potentially additional operating
expenses under Paratransit services that could have offset some of these overclaimed amounts. The
ineligible costs of $17,902 have been submitted to the FTA through a budget revision to allow for
capital funding under the two related awards and is currently pending FTA approval.
Recommendation: We recommend the District develop written procedures for allocating
expenses to routes and purposes used to claim expenses under federal grants and to track the
different funding sources applied. A summary tab should be added to the allocation spreadsheet to
sum amounts for each route computed on separate tabs on the spreadsheet to make it easier to
reconcile total operating expenses, preventive maintenance, insurance, communications and other
expenses allocated to the population of expenses in the general ledger.
View of Responsible Officials and Planned Corrective Action:
Management acknowledges the audit finding and agrees with the recommendation. The District is
taking immediate corrective action by training staff and seeking temporary assistance to support
operations during ongoing training and improvement. While the new financial system aimed to
enhance our processes and efficiencies, we recognize the need to modify the general ledger
processes to better detect required transactions. The District will focus promptly on resolving these issues to prevent future errors and oversights. Further, we will prioritize reviewing all grant award
agreements and collaborating closely with our grant program coordinators to ensure compliance
and accuracy in grant-related activities.