Finding 1096676 (2024-010)

2024 - 010 Allowable Activities and Costs/Cost Principles - Payroll (2023-010 and 2022-005) Federal Agency: U.S. Department of Transportation Federal Program Name: Federal Transit Cluster - Federal Transit - Formula Grants Assistance Listing Number: 20.507 Federal Award Identification Number and Year: N1vl-2023-022-00 - 2023 N1vl-2023-036-00 - 2023 Award Period: 5/31/2023 - 9/30/2024 12/18/2023 - 6/30/2025 Type of Finding: • Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: According to §200.303 Internal controls of 2 CFR Part 200, the recipient and subrecipient must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. According to §200.511 Audit findings follow-up of 2 CFR Part 200, the auditee is responsible for follow-up and corrective action on all audit findings. At the completion of the audit, the auditee must prepare a corrective action plan to address each audit finding included in the auditor's report for the current year. According to the City's Corrective Action Plan for the year ended June 30, 2023, the Transit department has established a timeline for the completion and approval of the time card policy, and it is expected that the policy will take effect in April 2024. Condition: During our testing, we noted the City did not have adequate internal controls designed to ensure proper timecard approval. Management's Progress for Repeat Findings: This is a repeated and modified finding. While the City has improved its efforts, there are still opportunities for improvement to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements as well as compliance with City policy. Questioned costs: None Context: During our testing, it was noted that thirteen out of sixteen payroll disbursements did not have approval of the employees' timecards. Cause: The City has not implemented corrective action from the audit for the year ended June 30, 2023. The Transit department is working on the policy and in the final stages of getting the policy updated. Effect: The auditor noted no instances of noncompliance with the provisions of allowable activities and costs/cost principles; however, the lack of internal controls over these compliance requirements provides an opportunity for noncompliance. Recommendation: We recommend the City work to implement full corrective action. Management Response: The City concurs with the finding. Transit Department staff is in the process of developing a policy establishing internal controls over timekeeping and is near finalizing the policy. Once finalized, the policy will be reviewed with appropriate parties. Further, the Transit Department is exploring the purchase and implementation of additional software to assist with enacting these controls. Timeline and Responsible Position: April 2025 - Transit Department Director