Finding Text
Section III – Federal Award Findings and Questioned Costs 2025-004 Federal Awards Internal Control Policy and Procedures Federal Agency: U.S. Department of Transportation Program Name: Highway Planning and Construction ALN: 20.205 Award Number & Year: STBG 5925(127), 2025 Pass-Through Agency: Minnesota Department of Transportation Type of Finding: Significant Deficiency in Internal Control over Compliance and Compliance Criteria: Uniform Guidance requires non-Federal entities to use and document procurement procedures applicable to Federal awards (2 CFR § 200.318(a)). In addition, non-Federal entities must maintain written standards of conduct covering conflicts of interest and governing the actions of employees engaged in the selection, award, and administration of contracts supported by Federal funds (2 CFR § 200.318(c)(1)). Uniform Guidance further requires non-Federal entities to 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 Federal awards (2 CFR § 200.303). These requirements contemplate the adoption and implementation of written procurement policies and procedures governing procurements charged to Federal awards. Condition: The County had not established and formally adopted written policies and procedures governing the administration of Federal awards and compliance with Uniform Guidance requirements. Specifically, written guidance addressing key compliance areas such as allowable costs, procurement, reporting, subrecipient monitoring, cash management, and records retention had not been developed or approved by the County Board. Questioned Costs: None. Context: As part of our evaluation of internal controls over compliance and compliance with Uniform Guidance, we assessed whether the County had documented policies and procedures governing the administration of Federal awards. Cause: County management had not established a process to develop and obtain approval of a comprehensive Federal awards policy. Effect: Without an approved Federal expenditures policy, there is an increased risk that Federal awards may not be administered consistently in accordance with Uniform Guidance requirements. This could result in noncompliance with applicable Federal regulations and increase the likelihood that compliance requirements are not identified, communicated, or monitored appropriately. Recommendation: We recommend the County develop, formally approve, and implement a federal expenditures policy that addresses applicable Uniform Guidance requirements, including internal controls over compliance, allowable costs, cash management, procurement, subrecipient monitoring, reporting, and record retention. Repeat Finding: No. View of Responsible Officials: Acknowledged.