Finding 1092978 (2024-002)

Finding 2024-002: Internal Control Structure Capital Funds – 14.872 Material Weakness – Activities Allowed and Unallowed, Cash Management, Period of Performance and Special Tests and Provisions Criteria: The Authority is responsible for establishing an effective internal control process to ensure the Authority complies with the requirements governing the Capital Funds program. Condition: The Authority has limited employees which makes it difficult for the Authority to have controls beyond the Executive Director's knowledge. As a result, we noted the following deficiencies related to the internal control components which are considered a material weakness: • Control Activities — The Authority only had the one staff that handles the Capital Fund program so the Authority has no controls over compliance beyond the Executive Director's knowledge. • Information and Communication — Communication involves providing an understanding of individual roles and responsibilities pertaining to internal control over financial reporting The Authority had not formally documented the procedures as a reference point for employees to perform their duties. Further, internal control procedures should be documented so that the controls in place can be monitored. We further noted the Authority does not have a system to track cumulative obligations to support the total obligations reported in the ELOCCS system. Cause: The Authority has limited resources and one staff. Effect or Potential Effect: The control deficiencies are deficiencies that result in more than a reasonable possibility that material noncompliance with program requirements could occur and not be prevented or detected Recommendation: As noted above, the Authority has limited resources and additional controls are not financially feasible in the hiring of additional staff. In addition, the Board of Commissioners is considered a governing Board and the Board performing management or day-to-day activities is not recommended based on our previous experience and is not intended to be a solution to this situation. The Authority is a small entity and the lack of segregation of duties is common among entities with minimal employees and should be recognized as such. However, it is not our intent to establish internal controls as the Authority's Board should make the final determination in the cost versus benefit. We do however recommend the Authority establish a system to support the obligations figure it reports in ELOCCS. View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding.