Finding Text
Criteria: Sound internal control and governance practices require that all disbursements of Federal funds be properly reviewed and approved prior to payment. The board's approval of disbursements iscrucial to ensure expenditures are authorized and supported by governance. Non-federal entities must establish and maintain effective internal control over Federal awards that provides reasonable assurance of compliance with Federal statutes, regulations, and the terms and conditions of the award. Condition: During our testing of ARPA-funded disbursements, we noted several individual payments that were not specifically approved by the Borough Council. While the Council had approved the overall ARP A-funded projects, documentation of approval for certain individual expenditures within those projects was not present in the meeting minutes or other supporting materials. Cause: The Borough's current approval process for ARPA-funded projects focuses on authorizing the overall project budget rather than approving each related transaction. As a result, individual disbursements associated with approved projects were not always submitted to the Council for explicit approval. Effect: Without formal approval of individual disbursements, there is an increased risk that payments could be made for unallowable or unauthorized purposes under the Federal award. The absence of detailed approval documentation also weakens the audit trail supporting management oversight and could lead to questioned costs if expenditures were later found to be inconsistent with Federal or project requirements. Recommendation: We recommend that the Borough strengthen its internal controls over the authorization of ARPA-funded expenditures by ensuring that all individual disbursements are reviewed and approved by the Borough Council or other designated officials prior to payment. Alternatively, if the Borough intends to continue approving projects on an overall basis, it should establish and document clear procedures specifying when and how individual payments within approved projects are deemed authorized.