Finding Text
2025-003 - Lack of Written Federal Program Policies. Type: Material Weakness. Condition: The Village does not have documented policies and procedures specific to the administration of the Water and Waste Disposal for Rural Communities program. This includes the absence of written guidance on key compliance areas such as procurement, subrecipient monitoring, allowable costs, and reporting requirements under Uniform Guidance. Criteria: Per 2 CFR 200.303 and 200.331 of the Uniform Guidance, non-federal entities are required to establish and maintain effective internal controls and written policies to ensure compliance with federal statutes, regulations, and the terms and conditions of federal awards. These policies should be tailored to the specific requirements of each federal program. Cause: The entity has not developed formal written policies and procedures for the Water and Waste Disposal for Rural Communities program, possibly due to reliance on informal practices or general administrative policies that do not address federal-specific requirements. Effect: Without documented policies, there is an increased risk of noncompliance with federal requirements, inconsistent program administration, and lack of accountability. This may result in questioned costs, audit findings, or potential repayment of federal funds. Questioned Costs: n/a. Recommendation: We recommend that the Village develop and implement written policies and procedures specific to the Water and Waste Disposal Systems for Rural communities program. These should include: - Procurement standards in accordance with 2 CFR 200.318 – 200.327. - Subrecipient monitoring protocols. - Guidelines for allowable costs and cost principles. - Reporting and recordkeeping requirements. - Internal control procedures to ensure compliance. Training should also be provided to staff responsible for administering the program to ensure consistent application of these policies. Views of Responsible Officials: Management acknowledges the auditor’s finding regarding the absence of formally documented federal program policies. We recognize the importance of maintaining written procedures to ensure consistent compliance with Uniform Guidance requirements and to strengthen internal controls over federal awards. While informal practices have historically guided our federal program administration, we agree that formalizing these policies will enhance transparency, accountability, and operational efficiency. Management is currently in the process of developing written policies covering key areas such as procurement, allowable costs, subrecipient monitoring, and cash management. We anticipate completing this documentation and implementing the policies by February 28, 2026. We are committed to continuous improvement and appreciate the auditor’s recommendations as part of our efforts to maintain strong compliance and stewardship of federal funds.