March 30, 2023, Southwestern Virginia Transit Management Company [SVTMC] respectfully submits the corrective action plan for the Year Ended June 30, 2022. Name and address of Independent Accounting Firm: Brown, Edwards & Company, L.L.P. 3906 Electric Road, Roanoke, Virginia 24018 Audit Period: June 30, 2022 The findings from the June 30, 2022 Schedule of Findings and Questioned Costs [the "Schedule"] are discussed below. The findings are numbered consistently with the number assigned in the Schedule. B. FINDINGS - FINANCIAL STATEMENT AUDIT 2022-001: Segregation of Duties and Management Oversight (Material Weakness) Condition: Due to staff turnover, duties handled by the Director of Finan ce included incompatible duties such as: ? Collection of cash, post receipts to general ledger, and prepare bank deposit slips Criteria : A fundamental concept of internal controls is the separation of duties. No one employee should have access to both physical assets and the related account in g records, or to all phases of a transaction. In addition, all significant transactions and controls should involve reconciliations and supervisory, or management level, reviews of those processes. An effective and timely review process is intended to prevent and detect both fraud and errors. Cause: Turnover in key positions can result in individuals performing duties that are not appropriately segregated. In addition, turnover can also create challenges in the oversight or review function. Effect: Internal controls are designed to safeguard assets and detect losses from employees dishonesty or error. Recommendation: Steps should be taken to eliminate conflicting duties and implement compensating controls, where possible. View of Responsible Officials and Corrective Action Plan: In August 2022, a new Director of Finance updated procedures to remove the aforementioned duties from the position. Currently, two Accounting Associates and the Money Room Shift Leader process bus station and accounts receivable receipts. Cash fares are counted twice weekly by a minimum of three staff members, not including the Director of Finance. With minimal exceptions, all monies received are kept in a locked safe and transported to the bank by an armored cash handling company. 2022-002: Grant Management and Operating Assistance (Material Weakness) Condit ion: During 2022, various functions related to financial management were not performed timely resulting in difficulties and delays in completion of the annual audit, including the need to prepare material adjustments to both the current year financials and a restatement to prior year balances. Criteria: Internal controls related to financial management should be designed to ensure timely reconciliations are performed, including submission of reim bursement requests and reconciling grant and local revenue. Timely and effective reconciliations ensure the financials provided for the annual audit are provided based on the agreed upon sch edule with the auditors which allows timely inclusion in the City's financial report as well as to meet federal reporting deadlines. In addition, these reconciliations will ensure that financials do not require adjustments. Cause: Turnover in financial positions, increased levels of federal and state gran ts , and implementation of a new financial software caused significant delays in performance of and reduction in effectiveness of certain financial duties. Effect: Current and prior period audit adjustments were required to prepare the financials in accordance with Generally Accepted Accounting Principles. In addition, there were significant delays in completion of the annual audit . Recommendation: We recommend that the Company establish financial management procedures to ensure th at timely reconciliations and submissions of reimbursement request s. We would recommend these procedures be performed monthly and include tracking and reconciling grant activity by type (federal, state, and local). Views of Responsible Officials and Planned Corrective Actions: During FY2022, a new Director of Finance and Accounting Supervisor were hired. They are in the process of reviewing operating procedures and have created a monthly close checklist to create consistency in the timing and manner of recording financial activities. Beginning in FY2024, staff will be assigned specific monthly close duties and monthly activity should be fully recorded by the 20th of the subsequent month. Members of the Accounting Team have been receiving financial system training on various topics from the system vendor and management is researching additional outside training opportunities. 2022-003: Bank Reconciliations (Material Weakness) Condition: Monthly bank reconciliations were not prepared by an account ant and reviewed and approved by a supervisor in a timely manner. Criteria: Monthly bank reconciliations should be performed by the 15th of the next month. Cause: Staff shortage and lack of cash flow management. Effect: Poor cash flow management resulting in vendor and cont ractor invoices not being paid timely . Recommendation: We recommend bank reconciliations be prepared by an accountant and reviewed by a supervisor to ensure unreconciled or unusual items, or other matters noted in the reconciliation, are detected and addressed in a timely manner. Views of Responsible Officials and Planned Corrective Actions: Specific Accounting Team members have been assigned responsibility for reconciling individual bank account activity. Staff will receive the required system training and delinquent reconciliations will be completed by June 30, 2023. A new monthly close checklist has been developed, and includes preparation and review of these reconciliations. Beginning in FY2024, all monthly close items should be completed by the 20th of the subsequent month. 2022-004: Virginia Public Procurement Act Prompt Payment Requirement Condition: As discussed in later findings, the Company did not pay cert ain contractors for the construction of the bus transfer station on a timely basis. Criteria: Section 2.2-4352 of the Code of Virginia requires that every agency of local government that acquires goods or services shall promptly pay for the completed delivered goods or services by the required payment date. The required payment date shall be either {i) the date on which payment is due under the terms of the contract for the provision of the goods or services or (ii) if a date is not established by contract, not more than forty-five days after goods or services are received or the invoice is rendered. Cause: Due to a lack of cash flow and grant management, insufficient funds were available to pay certain contractors timely. Effect: A contractor upon delay of receipt of payment within a reas onable timeframe contacted the City of Roanoke requesting payment. Recommendation: All vendors are to be paid in a timely manner as defined by the Code of Virginia. Views of Responsible Officials and Planned Corrective Action s: Due to technical issues, staff was unable to submit grant draw requests to the Federal Transit Authority through their Electronic Clearing House Operation [ECHO] system, significantly effecting the company's cash flow. This system access issue is now resolved and management has targeted April 30, 2023 to complete eligible drawdowns. Additionally, detailed spreadsheets tracking grant activity have been developed, which will allow staff to better monitor reimbursement requests and a specific task related to ensuring payment to the transfer station construction vendor has been added to the newly-developed monthly close list. C. FINDINGS AND QUESTIONED COSTS- MAJOR FEDERAL AWARD PROGRAM AUDIT 2022-005: Federal Transit Cluster-AL# 20.507, Cash Management- Material Noncompliance/Material Weakness in Controls over Compliance Condition: A lack of cash flow and grant management oversight resulted in contractors not being paid timely for the construction of the bus transfer station. Criteria: All grant activities should include management level oversight to ensure timeliness, accuracy, and compliance with specified grant requirements. Cause: Lack of proactive cash flow and grant management occurred when invoices received. Effect: Contractors were not paid for over 30 days after receipt of invoice. Repeated delays in payments could result in work stoppage and project delays. Recommendation: A designated management level individual should have oversight to require timely drawdowns of capital grants and timely payment of invoices. Views of Responsible Officials and Planned Corrective Actions: Due to technical issues, staff was unable to submit grant draw requests to the Federal Transit Authority through their Electronic Clearing House Operation [ECHO] system, significantly effecting the company's cash flow. This system access issue is now resolved and management has targeted April 30, 2023 to complete eligible drawdowns. Additionally, detailed spreadsheets tracking grant activity have been developed, which will allow staff to better monitor reimbursement requests and a specific task related to ensuring payment to the transfer station construction vendor has been added to the newly-developed monthly close list. Greater Roanoke Transit Company P.O. Box 13247 ? Roanoke, Virginia 24032 ? Phone: 540.982.0305 ? Fax: 540.982.2703 ? www.valleymetro.com