CORRECTIVE ACTION PLAN
December 11, 2024
Southwestern Virginia Transit Management Company (SVTMC) respectfully submits the following corrective action plan for the year ended June 30, 2024.
Name and address of independent public accounting firm:
Brown, Edwards & Company, L.L.P. 3906 Electric Road...
CORRECTIVE ACTION PLAN
December 11, 2024
Southwestern Virginia Transit Management Company (SVTMC) respectfully submits the following corrective action plan for the year ended June 30, 2024.
Name and address of independent public accounting firm:
Brown, Edwards & Company, L.L.P. 3906 Electric Road
Roanoke, VA 24018
Audit period: June 30, 2024
The findings from the June 30, 2024, Schedule of Findings and Questioned Costs (the "Schedule “) are discussed below. The findings are numbered consistently with the number assigned in the Schedule.
FINDINGS- FINANCIAL STATEMENT AUDIT
2024-001: Segregation of Duties and Management Oversight (Material Weakness)
Condition:
Due to staff turnover, duties handled by the Director of Finance included incompatible duties during the year under audit such as: collection of cash, post receipts to general ledger, and prepare bank deposit slips. ln addition, the Inventory Manager has access both to physical inventory and to the inventory tracking system.
Criteria:
A fundamental concept of internal controls is the separation of duties. No one employee should have access to both physical assets and the related accounting records, or to all phases of a transaction. ln addition, all significant transactions and controls should involve reconciliations and supervisory, or management level, reviews of those processes. An effective and timely review process is intended to prevent and detect both fraud and errors.
Cause:
Turnover in key positions can result in individuals performing duties that are not appropriately segregated. In addition, turnover can also create challenges in the oversight or review function.
Effect:
Internal controls are designed to safeguard assets and detect losses from employees dishonesty or error.
Recommendation:
Steps should be taken to eliminate conflicting duties and implement compensating controls, where possible.
Corrective Action:
Although turnover in key positions increased the need for staff to undertake incompatible duties, small staff sizes will likely perpetuate the need for the Director of Finance and Inventory Manager to occasionally perform duties
which would be ideally segregated. To help alleviate the risks involved, management will develop additional compensating controls around these activities, including working with system vendors to identify activity logging capabilities and additional reports for periodic review by management.
2024-002: Grant Management and Operating Assistance (Material Weakness)
Condition:
During 2024, various functions related to financial management were not performed timely resulting in difficulties and delays in completion of the annual audit. Additionally, the untimely nature of grant reconciliations and drawdowns has led to significant cash and grant management issues.
Criteria:
Internal controls related to financial management should be designed to ensure timely reconciliations are performed, including submission of reimbursement requests and reconciling grant and local revenue.
Cause:
Turnover in financial positions and increased levels of federal and state grant usage caused significant delays in performance of and reduction in effectiveness of certain financial duties.
Effect:
Untimely drawdowns could result in vendors not being paid timely, result in cash shortages, and inability to pay payroll.
Recommendation:
We recommend that the Company establish financial management procedures to ensure that timely reconciliations and submissions of reimbursement requests. We would recommend these procedures be performed monthly and include tracking and reconciling grant activity by type (federal, state, and local).
Corrective Action:
The Interim Director of Finance and Accounting Supervisor are currently reviewing operating procedures and implementing methods to streamline work and eliminate duplicate activity. A Monthly Close Checklist is under development, which will create consistency in the timing and manner of recording financial activities. Additionally, detailed spreadsheets tracking grant activity have been developed, which will allow staff members to better monitor reimbursement requests and ensure vendors are paid timely moving forward.
2024-003: Bank Reconciliations (Material Weakness)
Condition:
Monthly bank reconciliations were not prepared by an accountant and reviewed and approved by a supervisor in a timely manner.
Criteria:
Monthly bank reconciliations should be performed by the 15th of the next month.
Cause:
Staff shortage and lack of cash flow management.
Effect:
Poor cash flow management resulting in vendor and contractor invoices not being paid timely.
Recommendation:
We recommend bank reconciliations be prepared by an accountant and reviewed by a supervisor to ensure unreconciled or unusual items, or other matters noted in the reconciliation, are detected and addressed in a timely manner.
Corrective Action:
The Interim Director of Finance and Accounting Supervisor are currently reviewing operating procedures and implementing methods to streamline work and eliminate duplicate activity. A Monthly Close Checklist is under development, which will create consistency in the timing and manner of recording financial activities. Currently, the Interim Director of Finance is preparing all company bank reconciliations.
2024-004: Trade Receivables and Revenue- Billing (Material Weakness)
Condition:
There were multiple customer accounts that were not billed throughout the year as services were provided by the Company.
Criteria:
Customers should be billed in a timely manner after being provided with services by the Company.
Cause:
Staff shortage, lack of revenue cycle oversight, and lack of cash flow management.
Effect:
Poor revenue cycle management, leading to customers not being billed. This leads to cash shortages from operations and a further reliance on grant funding for operations. This could also lead to the Company being unable to collect billed balances, as certain customers were hit with substantial bills when invoices were caught up in June 2024.
Recommendation:
We recommend billing customers for services rendered in a timely manner to improve cash flow and prevent collection issues.
Corrective Action:
Management is working to fill vacant Finance positions, including Accounts Receivable Associate. Until that time, the Interim Director of Finance has taken over responsibility for both advertising and operating billings. A Monthly Close Checklist is under development, which will create consistency in the timing and manner of recording financial activities.
FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAM AUDIT
2024-005: Federal Transit Cluster - AL# 20.507, Cash Management - Material Noncompliance/Material Weakness in Controls over Compliance
Condition:
A lack of cash flow and grant management oversight resulted in contractors and vendors not being paid timely during FY2024 . We noted 14 instances where contractors and vendors were not paid for over 30 days. We also noted four vendors were not paid for over 90 days.
Criteria:
All grant activities should include management level oversight to ensure timeliness, accuracy, and compliance with specified grant requirements.
Cause:
Lack of proactive cash flow and grant management occurred when invoices were received.
Effect:
Multiple contractors and vendors were not paid for over 30 days after receipt of invoice. Four vendors were not paid for over 90 days.
Recommendation:
A designated management level individual should have oversight to require timely drawdowns of capital grants and timely payment of invoices.
Corrective Action:
Issues with the implementation of new Federal and Commonwealth transportation grant portals hindered staff from being able to submit grant draw requests in a timely manner. Management is addressing these issues as they arise. The Interim Director of Finance and Accounting Supervisor are currently reviewing operating procedures and implementing methods to streamline work and eliminate duplicate activity. A Monthly Close Checklist is under development, which will create consistency in the timing and manner of recording financial activities. Additionally, detailed spreadsheets tracking grant activity have been developed, which will allow staff members to better monitor reimbursement requests and ensure vendors are paid timely moving forward.
2024-006: Federal Transit Cluster - AL# 20.507, Period of Performance - Significant Deficiency, Controls over Compliance
Condition:
There were numerous grants awarded to the Company that had award end dates prior to June 30, 2024, that had not been appropriately closed out at year-end.
Criteria:
All grants that are not active should be closed out within the grant awards management system after their award end date.
Cause:
Lack of proactive cash flow and grant management.
Effect:
Out of 18 federal grant awards tested, 6 had award end dates prior to June 30, 2024. All 6 were still marked as active in the grant award management system as of June 30, 2024, with total remaining funds on these awards totaling
$673,179. Two of these grant awards had award beginning dates over 15 years old, had no activity during FY2024, and had not been closed out by June 30, 2024.
Recommendation:
A designated management level individual should close out all grant awards whose period of performance has expired within the grants management system.
Corrective Action:
Five FTA grants are in Active Award/Ready for Closeout (as of August 1 3, 2024), including VA-202 1- 038-01, YA- 2016-009-0 1, VA-202 1- 037-01, YA-2016-016-01 and YA-04-0027-01. Additionally, an inquiry was sent to the FTA on August 19, 2024, on what could be done with the remaining funds in VA-2019-018. Grant VA-2023-002- 00 has experienced delays due to the all-electric vehicle demand and supply chain issues. GRTC has been in communications with the FTA regarding this situation. All other active FTA grants have end of performance dates in 2025.
2024-007: Federal Transit Cluster - AL# 20.507, Procurement - Finding, Non-material Non-compliance
Condition:
As award recipients of Federal Transit Administration (FTA) funds, the Company is required to include certain clauses in contracts funded by FTA funds. We noted that the Company did not include the required " prohibition on certain telecommunications and video surveillance services or equipment" clause and the " notification of legal matters " clause as required clauses in their procurement manual and did not contain these clauses in one contract tested.
Criteria:
The FTA mandates that contracts funded with FTA awards must contain certain clauses related to prohibited vendors under the Code of Federal Regulations section 200.216 and requires contractors to notify the Company and the FTA of any current legal matters.
Cause:
Lack of compliance with FTA contract regulations.
Effect:
Contracts do not meet FTA contract regulations and are non-compliant.
Recommendation:
We recommend that the Company incorporate these required FTA clauses in their procurement manual and their standard contracts to properly incorporate in any future FTA funded contracts.
Corrective Action:
Missing FTA clauses will be addressed via revisions / updates to all of GRTC ' s solicitation and contract templates. As templates can often be edited by mistake, another tool to proof contracts is the " FTA Clause Matrix 2023 Applicability of Third-Party Contract Provisions" . The current version of this matrix includes provision from 2 CFR
200, Master Agreement 30 (FY 23) and Circular 4220.1 F. Procurement received this matrix during an NTI Procurement 101 training course December 2023. Referencing this matrix has been added as a step in project checklists.
If the Federal Audit Clearinghouse has questions regarding this plan, please call Kevin Price , General Manager at 540-982-0305.
Sincerely
Kevin Price
General Manager