Finding 1191219 (2025-006)

Material Weakness Repeat Finding
Requirement
C
Questioned Costs
-
Year
2025
Accepted
2026-03-27

AI Summary

  • Core Issue: Payments to contractors were not made within the required forty-day timeframe, violating the MOU with FHWA.
  • Impacted Requirements: Compliance with cash management regulations and the MOU is compromised, risking project execution and contractor performance.
  • Recommended Follow-Up: Improve internal controls in accounts payable to ensure timely invoice processing, establish accountability, and conduct regular compliance reviews.

Finding Text

Finding Reference 2025-06 Assistance Listing Number 20.205 Highway Planning and Construction (Federal-Aid Highway Program) Name of Federal Agency Department of Transportation Compliance Requirement Cash Management – Memorandum of Understanding (MOU) Type of Finding Significant Deficiency on Internal Control and Noncompliance Condition Based on a sample of fifty-seven (57) disbursements tested, the auditors identified nine (9) instances in which payments to contractors were not made within the forty (40)-day timeframe established in the Memorandum of Understanding (MOU). Criteria The Memorandum of Understanding (MOU) between the Authority and the Federal Highway Administration (FHWA) requires the Authority to remit payments to contractors within forty (40) days of receipt of a proper invoice. Cause Management indicated that delays in payments were attributable to the implementation of new procedures associated with the Stewardship and Oversight Agreement and the related transition of responsibilities to the Authority. As part of this transition, the Authority assumed additional operational and oversight responsibilities, which increased administrative workload and processing demands, contributing to delays in the review, approval, and disbursement of contractor payments. Effect Failure to meet the payment requirements results in noncompliance with federal regulations and the MOU. Additionally, delayed payments may adversely affect project execution, contractor performance, and overall program efficiency. Questioned Costs None. Recommendation The Authority should strengthen internal controls over the accounts payable process to ensure timely processing and payment of contractor invoices. This may include implementing monitoring mechanisms to track invoice receipt and payment deadlines, establishing clear accountability for timely approvals, and conducting periodic reviews to ensure compliance with the MOU requirements. Views of Responsible Officials Refer to Management’s unaudited corrective action plan.

Corrective Action Plan

Finding Reference 2025-06 Corrective Action Plan: To strengthen internal controls, improve monitoring, and reduce delays in the certification and payment process, the Authority will implement the following operational improvements: The Authority is using the Finance Office Dashboard to track the status of certifications and invoices in real time, identify bottlenecks in the approval process, and support proactive management of pending payments. A standardized Construction Certification Compliance Checklist will be used to validate all required federal compliance documentation before certifications are submitted to the Finance Office. This measure is expected to reduce the number of returned submissions and prevent delays during the billing review process. The Authority will develop a Help Desk platform for certification and invoice inquiries to formally manage, document, and track inquiries or claims related to Construction Certifications and Pre- Construction invoices, improving transparency and response times. The Authority will launch the ICMM Payment Tracking Table to consolidate and monitor the payment status of certifications and invoices. Additionally, the Authority is establishing intermediate milestones to progressively reduce the payment processing cycle, with the objective of moving from the current 40-day average toward the 30-day target. As part of this initiative, the Authority is expanding the use of the Project Management Information System (PMIS) to standardize and streamline the processing of construction certifications and payment documentation. Responsible: Mr. Angel M. Felix Cruz, Acting Director, Confidential Finance Office Planned Implementation Date: In process. The first operational improvement has been implemented. The remaining three measures are pending implementation. Expected to be completed on or before June 30, 2026.

Categories

Internal Control / Segregation of Duties Subrecipient Monitoring Cash Management Significant Deficiency Matching / Level of Effort / Earmarking

Other Findings in this Audit

  • 1191215 2025-002
    Material Weakness Repeat
  • 1191216 2025-003
    Material Weakness Repeat
  • 1191217 2025-004
    Material Weakness Repeat
  • 1191218 2025-005
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
20.205 HIGHWAY PLANNING AND CONSTRUCTION $253.58M
20.507 FEDERAL TRANSIT FORMULA GRANTS $53.11M
21.027 CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS $24.10M
20.509 FORMULA GRANTS FOR RURAL AREAS AND TRIBAL TRANSIT PROGRAM $8.21M
20.527 PUBLIC TRANSPORTATION EMERGENCY RELIEF PROGRAM $8.00M
20.513 ENHANCED MOBILITY OF SENIORS AND INDIVIDUALS WITH DISABILITIES $4.01M
20.500 FEDERAL TRANSIT CAPITAL INVESTMENT GRANTS $2.65M
20.525 STATE OF GOOD REPAIR GRANTS PROGRAM $2.50M
97.036 DISASTER GRANTS - PUBLIC ASSISTANCE (PRESIDENTIALLY DECLARED DISASTERS) $1.42M
20.505 METROPOLITAN TRANSPORTATION PLANNING AND STATE AND NON-METROPOLITAN PLANNING AND RESEARCH $965,434
20.526 BUSES AND BUS FACILITIES FORMULA, COMPETITIVE, AND LOW OR NO EMISSIONS PROGRAMS $572,409
20.516 JOB ACCESS AND REVERSE COMMUTE PROGRAM $191,691