CORRECTIVE ACTION PLAN
March 18, 2024
Bedford Regional Water Authority respectfully submits the following corrective action plan for the year ended June 30, 2023.
Name and address of independent public accounting firm:
Brown, Edwards & Company, L.L.P.
3906 Electric Road
Roanoke, VA 24018
Audit period: June 30, 2023
The findings from the June 30, 2023 Schedule of Findings and Questioned Costs (the “Schedule”) are discussed below. The findings are numbered consistently with the number assigned in the Schedule.
FINDINGS – FINANCIAL STATEMENT AUDIT
2023-001: Segregation of Duties (Material Weakness)
Condition:
A fundamental concept of internal controls is the separation of duties. No one employee should have access to both physical assets and the related accounting records or to all phases of a transaction. A proper segregation of duties has not been established in functions related to cash receipts, accounts receivable, cash disbursements, and accounts payable.
Criteria:
• Bank Reconciliations are prepared by the same person who is in charge of cash disbursements.
• Only two individuals can enter accounting information into the Great Plains accounting software system. This reduces the effectiveness of system controls with Great Plains as rights within the software are not able to maintain a segregation of duties.
• The Executive Director has the ability to approve purchase orders, vendor invoices, edit the master vendor files, prepare checks for expenditures, and has check signing authority.
• Journal entries are not reviewed. We recommend that all journal entries be reviewed by someone other than the preparer prior to entry in the general ledger. While review of the periodic financials may detect erroneous entries, reviewing entries prior to entry would reduce the reliance on detection controls and reduce the inherent risk that offsetting erroneous or fraudulent entries are not apparent when aggregated in the monthly financials.
Cause:
The size of the Authority’s accounting staff prohibits complete adherence to segregation of duties.
Effect:
Internal controls are designed to safeguard assets and detect losses from employee dishonesty or error.
Recommendation:
Steps should be taken to eliminate performance of conflicting duties where possible or to implement effective compensating controls. Segregating incompatible functions reduces the risk of exposure to errors and fraud.
Corrective Action:
Management understands this concern and hired additional Finance personnel in October 2023. Procedures are being modified to include review of journal entries and segregating financial duties wherever possible.
2023-002: Timeliness of Reconciliation Review –– Material Weakness
Condition:
During our review of bank reconciliations, we noted that review of the bank reconciliations is not being performed in a timely manner. The January 2023 bank reconciliation was prepared in May 2023, and was reviewed July, 2023. All subsequent bank reconciliations were also delayed in completion.
Criteria:
Bank reconciliations should be prepared and reviewed in a timely manner.
Cause:
The size of the Authority’s accounting staff causes staff to take on a number of roles and responsibilities. As such, certain accounting functions are not always completed in a timely manner.
Effect:
Internal controls over bank reconciliations are designed to safeguard assets and detect losses from employee dishonesty or error.
Recommendation:
We recommend that a schedule of completing reconciliation reviews on a set time frame is implemented and adhered to. Timely reviews are one of the most important internal controls to promptly detect and recognize potential errors or other problems. This could mitigate the risk of errors or problems progressing and provide more accurate reports for management decisions. Also, it is generally easier and less time consuming to review accounts while transactions are fresh in mind.
Corrective Action:
Management recognizes the importance of timely reviews and will develop a procedure to correct this in the current fiscal year. Additional Finance personnel was hired n October 2023 to assist in reconciliations and reviews.
FINDINGS AND QUESTIONED COSTS – MAJOR FEDERAL AWARD PROGRAM AUDIT
2023-003: Procurement Policies and Procedures- COVID-19- Coronavirus State and Local Fiscal Recovery Fund – Assistance Listing #21.027
Condition:
The Authority adheres to and follows Virginia Public Procurement Act “VPPA” for procurement, however, under the requirements of Uniform Guidance, the Authority does not have complete, written procurement policies that are in compliance with the additional standards required by the Uniform Guidance (2 CFR Part 200).
Criteria:
Under the requirements in the Uniform Guidance, all entities are required to have written procurement policies that conform to applicable Federal laws and regulations and standards. The complete procurement standards are located at 2 CFR Part 200, Sections 317 through 326.
Cause:
The Authority does not have its own written procurement policies that conform to applicable Federal laws and regulations and standards.
Effect:
The lack of the Authority’s own written policies under the specific requirements of the Uniform Guidance could result in potential improper procurement using Federal funds.
Recommendation:
Management should update existing written procurement procedures to align with Uniform Guidance requirements for all purchases to be made with Federal funds.
Corrective Action:
Management recognizes the importance of compliance with the Uniform Guidance and will develop a policy that adheres to all requirements by June 30, 2024.
If the Federal Audit Clearinghouse has questions regarding this plan, please call Jill Underwood, Director of Finance at Bedford Regional Water Authority. 540-586-6098.
Sincerely yours,
Jill W. Underwood
Director of Finance