Finding 384236 (2023-001)

Significant Deficiency Repeat Finding

Requirement

Questioned Costs

Year

2023

Accepted

2024-03-25

Audit: 297379

Organization: Town of Easton (the Easton Utilities Commission) (MD)

Auditor: Cliftonlarsonallen LLP

AI Summary

Core Issue: The Commission lacks proper documentation for inventory expenditure approvals, leading to potential non-compliance with federal requirements.
Impacted Requirements: Internal controls must align with 2CFR § 200.303(a) and COSO standards to ensure compliance and effective management of federal awards.
Recommended Follow-Up: Continue implementing and reinforcing the policies established in March 2023 to ensure all inventory expenditures are reviewed and approved properly.

Finding Text

2023 – 001 Federal Agency: U.S. Department of Agriculture Federal Program Name: Rural eConnectivity Pilot Program Assistance Listing Number: 10.752 Federal Award Identification Number and Year: MD 1701-A64, 2020 Award Period: July 1, 2020 – July 1, 2025 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or Specific Requirement: Per 2CFR § 200.303(a), nonfederal entities must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). COSO/Internal Control Framework defines control activities as “policies and procedures that help ensure management’s directives are carried out.” Management review controls are defined as, “the activities of a person, different than the preparer, through analyzing and performing oversight of activities performed, and is an integral part of any internal control structure.” Questioned Costs: None Condition/Context: The Commission did not maintain evidence of the approval of inventory expenditures charged to the grant for the first eight months of fiscal year ended June 30, 2023. Cause: The Commission did not have sufficient policies and procedures over internal controls to maintain evidence of review and approval of inventory expenditures are properly documented until March 2023. Effect: Inventory expenditures may be charged to the grant that are not eligible. Repeat Finding: This is a repeat finding. Recommendation: We recommend the Commission continue with established policies and procedures implemented in March 2023 over internal controls to ensure review and approval of inventory expenditures are properly documented. Views of Responsible Officials: Management agrees with the finding.

Corrective Action Plan

2023-001 ReConnect Program: Rural Assistance – Assistance Listing No. 10.752 Recommendation: We recommend the Commission continue with established policies and procedures implemented in March 2023 over internal controls to ensure review and approval of inventory expenditures are properly documented. Explanation of disagreement with audit finding: There is no disagreement with the audit finding. Action taken in response to finding: In July 2022, EUC implemented a process in which the Supervisor of Velocity Plant Operations reviews material requisitions before the paper requisitions move to Accounting for entry into the accounting system. In March of 2023, EUC implemented the requirement for material requisitions to be initialed in order to document the review process. In May 2023, EUC moved to an electronic material requisition process which does not allow material requisitions to be available for Accounting to enter until they have been approved by a designated approver. All costs are additionally reviewed by the Senior Staff Accountant and the Chief Financial Officer before being submitted for reimbursement to the USDA. Name of the contact person responsible for corrective action: Steve J. Ochse Planned completion date for corrective action plan: Corrective action was taken March 2023.

Other Findings in this Audit

384237 2023-002

Significant Deficiency
384238 2023-003

Significant Deficiency
384239 2023-003

Significant Deficiency
960678 2023-001

Significant Deficiency Repeat
960679 2023-002

Significant Deficiency
960680 2023-003

Significant Deficiency
960681 2023-003

Significant Deficiency

Programs in Audit

ALN	Program Name	Expenditures
10.752	Rural Econnectivity Pilot Program (b, E)	$6.39M
21.027	Coronavirus State and Local Fiscal Recovery Funds	$833,224
10.863	Community Connect Grant Program	$313,417
32.002	Universal Service Fund - High Cost	$18,905