Finding Text
SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Public Utility District No. 1 of Skamania County January 1, 2024 through December 31, 2024 2024-001 The District did not have adequate internal controls and did not comply with time-and-effort requirements. Assistance Listing Number and Title: 11.307, Economic Adjustment Assistance Federal Grantor Name: U.S. Department of Commerce Federal Award/Contract Number: N/A Pass-through Entity Name: Economic Development Administration Pass-through Award/Contract Number: 07-79-07485 Known Questioned Cost Amount: $63,721 Prior Year Audit Finding: N/A Background During fiscal year 2024, the District spent $580,514 in federal funds from the Economic Adjustment Assistant grant. The primary objective of the Economic Adjustment Assistance program is to assist communities with revitalizing and expanding their physical and economic infrastructure and support the creation and retention of jobs for area residents by helping eligible recipients promote the economic development of their local economies. The District used federal funds for the upgrade of the North Bonneville substation and feeder upgrade project. Federal regulations require recipients to establish, document and maintain effective internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. The District is responsible for ensuring it supports all payroll costs it charges to the program with adequate time-and-effort documentation, as required by federal regulations and the awarding agency. Description of Condition The District’s internal controls were ineffective for ensuring it supported all salaries and benefits it charged to the program with appropriate time-and-effort documentation, as federal regulations require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition District staff did not anticipate charging payroll costs to the grant. Therefore, the District did not establish a system of internal controls to track staff time that meets federal requirements. Effect of Condition and Questioned Costs The District did not obtain time-and-effort documentation for four employees whose payroll and benefits totaling $63,721 it charged to the program. Without adequate time-and-effort documentation, the District cannot demonstrate compliance with the awarding agency’s documentation requirement to support costs charged to federal programs. Further, the District cannot assure federal grantors that payroll costs it charged to the program were accurate and valid. Federal regulations require the State Auditor’s Office to report known questioned costs that are more than $25,000 for each type of compliance requirement. We question costs when we find the District does not have adequate documentation to support expenditures. Recommendation We recommend the District implement and follow internal controls to ensure it complies with federal requirements for obtaining signed time-and-effort documentation timely. District’s Response The District acknowledges allowable payroll expenses for grant reimbursement did not adequately satisfy time-and-effort documentation per federal regulation requirements. Project payroll expenditures were pre-approved in the project budget by the Economic Development Administration (EDA). In response to your recommendation, the District will track all grant project labor hours through an official approved timesheet. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, Subpart E, Cost Principles, establishes requirements for determining allowable costs and supporting costs allocated to federal programs.