Finding Text
Assistance Listing No. 20.205 Highway Planning and Construction (Federal-Aid Highway Program)
Name of Federal Agency Department of Transportation
Compliance Requirement Matching
Type of Finding Significant Deficiency on Internal Control and Non-Compliance
Condition:
From a sample of forty federal construction projects examined, we noticed that for three projects, the toll credit usage reported in the Authority’s Toll Credits Report differed from the amounts reported in the Federal-Aid Project Agreements as approved by the Federal Highway Administration (FHWA). In addition, the Authority was unable to provide sufficient evidence for the auditors to validate the toll credit usage amounts for seven projects during the fiscal year. Furthermore, it was observed that the Authority lacks sufficient personnel designated to the oversight and review of the toll credits reporting process. This has resulted in the reporting procedure being conducted by a single individual without any formal oversight or review by additional staff or management, leading to a lack of checks and balances in this compliance area.
A similar finding was reported during the prior year’s single audit as finding number 2022-02.
Criteria:
In accordance with the signed Memorandum of Understanding (MOU) between the Authority and FHWA (signed on February 25, 2016), the Authority shall implement modifications to its processes for approving, tracking, and reconciling toll credits as identified by the FHWA and submit a report (i.e., Toll Credits Report) and a certification to FHWA ascertaining that it has implemented these modifications. FHWA shall accurately identify the amount of toll credits available for use by the Authority and identify the modifications that the Authority must make to its processes for approving, tracking, and reconciling toll credit usage, as applicable.
Cause:
The causes for this finding include:
1) Recordkeeping Issues: The Authority does not have adequate recordkeeping systems for tracking toll credit usage. This could lead to discrepancies between the reported amounts in the Toll Credits Report and those in the Federal-Aid Project Agreements.
2) Lack of Adequate Internal Controls: The Authority does not have adequate internal control mechanisms in place to ensure the accuracy and completeness of the toll credit usage reporting. This includes the failure to reconcile amounts reported in the Toll Credits Report with those approved in the Federal-Aid Project Agreements.
Effect:
Non-compliance with the toll credits matching requirement per the MOU requirements. In addition, the Authority could inadvertently use toll credits for a federal project that may lack toll credits balances.
Questioned Costs:
Could not be determined.
Recommendation:
To address the identified compliance issues related to the discrepancies in toll credit usage reporting and the lack of sufficient evidence for certain projects, the auditors recommend the following:
• Strengthen Internal Controls: Enhance internal control procedures to ensure accurate and compliant reporting of toll credit usage. This includes establishing clear guidelines for documentation, reporting, and verification processes related to federal construction projects.
• Implement a Review Process: Introduce a formal review process for the toll credits reporting procedure. This review should be conducted by an individual or a team that is independent of the initial reporting process to ensure objectivity. The review should verify the accuracy of the reported toll credit usage against project agreements and supporting documentation.
• Enhance Documentation Practices: Develop and enforce rigorous documentation practices. Ensure that all relevant documents supporting the toll credit usage, such as agreements, approvals, and calculations, are systematically collected, filed, and readily available for audit purposes.
• Training and Awareness: Conduct training sessions for staff involved in the reporting and management of federal construction projects. The training should cover the requirements for toll credit usage, the importance of accurate reporting, and the procedures for ensuring compliance with federal guidelines,
• Regular Reconciliation: Implement regular reconciliation procedures between the toll credits reported in the Authority’s Toll Credits Report and the amounts in the Federal-Aid Project Agreements. Any discrepancies identified should be investigated and resolved promptly.
• Leverage Technology: Consider the use of accounting or project management software that can help track and report toll credit usage accurately. Automation can reduce human errors and improve the efficiency of the reporting process.