Finding Text
2024-007 Document Policies and Procedures over Federal Awards (Significant Deficiency) Cluster/Program: All Federal Programs Type of Finding: Compliance – Other Matters Internal Control over Compliance – Significant Deficiency Criteria or Specific Requirement: OMB’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (UG) established significant requirements related to Federal awards. The requirements stipulate that federal award recipients must document their policies and procedures over certain aspects of financial program management. Specifically, written policies are required for the following: • Determination of allowable costs • Employee travel • Cash Management • Equipment and inventory • Procurement and Suspension and Debarment • Subrecipient monitoring and management. Condition: During our review of the Town's administration of federal awards, we noted that the Town had not formally established, documented, and adopted written policies and procedures addressing the applicable federal award requirements identified above. Specifically, the Town did not have a comprehensive set of written policies governing the determination of allowable costs, employee travel, cash management, equipment and inventory management, procurement and suspension and debarment, and subrecipient monitoring and management. The absence of formally documented policies and procedures limits the Town's ability to demonstrate that responsibilities, processes, and internal controls over federal award activities have been consistently established and communicated. Furthermore, without written guidance, the administration of federal awards relies on existing practices and individual knowledge rather than a formalized framework designed to promote consistent application of applicable federal requirements. Cause: The condition appears to be attributable to weaknesses in the formal documentation and implementation of internal controls over federal award administration. The Town had not established a process to ensure that written policies and procedures addressing the applicable Uniform Guidance requirements were developed, formally approved, periodically reviewed, and updated as necessary. Effect: The absence of written policies and procedures over federal award activities resulted in a lack of formalized guidance for administering federal funds in accordance with applicable requirements. This deficiency reduces the consistency and accountability of the Town's federal grant administration and limits management's ability to demonstrate that appropriate controls have been established over allowable costs, employee travel, cash management, equipment and inventory, procurement, and subrecipient monitoring and management. The lack of documented procedures also reduces the availability of a clear framework for employees responsible for administering federal awards and for management personnel responsible for overseeing compliance. As a result, the Town's internal control framework over federal award administration was not fully documented in accordance with the applicable requirements of the Uniform Guidance. Questioned Costs: There are no questioned costs associated with this finding, as the deficiency relates to the absence of required written policies and procedures rather than to specific questioned expenditures. No costs were identified as questioned as a result of this finding. Identification as Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Town develop, formally adopt, and implement written policies and procedures addressing all applicable federal award requirements under the Uniform Guidance. These policies should address the determination of allowable costs, employee travel, cash management, equipment and inventory management, procurement and suspension and debarment, and subrecipient monitoring and management, as applicable to the Town's federal award activities. The policies should clearly define employee responsibilities, establish required approval and documentation procedures, and identify the internal controls necessary to support compliance with applicable federal requirements. We further recommend that the Town designate appropriate personnel to oversee the development, implementation, and ongoing maintenance of these policies. Once adopted, the policies should be communicated to employees involved in administering federal awards and reviewed periodically to ensure they remain consistent with current federal requirements and the Town's operations. Establishing and implementing these procedures will strengthen the Town's internal control framework, promote consistent administration of federal funds, and provide documented support for the Town's compliance with the Uniform Guidance. Views of Responsible Officials: Management’s views and corrective action plan are included at the end of this report.