Finding 1151051 (2023-003)

FINDING 2023-003 Subject: Water and Waste Disposal Systems for Rural Communities - Reporting Federal Agency: Department of Agriculture Federal Program: Water and Waste Disposal Systems for Rural Communities Assistance Listings Number: 10.760 Federal Award Number and Year (or Other Identifying Number): 15-067-192756261 Compliance Requirement: Reporting Audit Finding: Material Weakness Condition and Context The District had not properly designed or implemented a system of internal controls that would likely be effective in preventing, or detecting and correcting, noncompliance. The District was required to submit annual data reports to the United States Department of Agriculture. Data to be submitted included, but was not limited to, current period assets, current and prior year budgets, and operating income. Both of the reports submitted by the District were supported by the District's records. However, there was no evidence of an internal control, such as a review or approval process, over the data submitted. The lack of internal controls was pervasive in the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal 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. 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). . . ." Cause Management of the District stated that a lack of staff left no knowledgeable individual to review the reports. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, reports for the Water and Waste Disposal Systems for Rural Communities program were prepared, entered, and submitted by one individual with no internal controls to prevent or detect errors. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the District establish a proper system of internal controls and develop policies and procedures to ensure that all reports are properly reviewed before submission. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.