Finding 1057110 (2023-003)

Finding 2023 – 003: Activities Allowed/Unallowed and Cost Principles (Internal Control Over Compliance) Significant Deficiency ALN 20.509 Formula Grants for Rural Areas Criteria: Uniform Guidance 2 CFR, §200.313(a) requires that non-federal entities must 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: During our review of Yankton Transit Inc.’s internal controls related to formula grants for rural areas major program, we tested 40 disbursements for control deficiencies and 40 transactions to support the opinion on compliance. Of the 40 transactions tested for control deficiencies, Yankton Transit Inc. did not have appropriate control documentation for at least 2 of the 40 transactions. Although support was found for Point-of-Sale transactions, there was no evidence of approval of the transactions. Of the 40 transactions tested to support the opinion on compliance, 0 transactions were out of compliance. Questioned Costs: None Cause: Yankton Transit Inc.’s current policies do not address the specific procedures related to processing POS transactions prior to the transactions being processed. Effect: Disbursements are being processed without proper approval, resulting in the possibility of disallowed expenditures. Recommendation: We recommend Yankton Transit Inc. become familiar with requirements of 2 CFR, §200.313(a) and establish appropriate internal control policies and procedures and that all staff be trained on those policies and procedures, so they are familiar with the requirements. We further recommend Yankton Transit Inc. does not process payments for disbursements that do not contain necessary approval of purchases. Views of Responsible Officials: See the corrective action plan that accompanies the schedule of findings and questioned costs.