Finding Text
U.S. Department of Transportation Federal Program Name: Federal Transit Cluster Assistance Listing Number 20.500-CL North Carolina Department of Transportation State Program Name: State Maintenance Assistance Program Allowable Costs/Activities, Period of Availability and Reporting Material Weakness Finding 2022-001 Criteria: The City of Winston-Salem (the ?City?) is required to follow the Urbanized Area Formula Program Guidance, FTA C 5010.1E, which incorporates the Uniform Grant Guidance. Per Section 200.303 of the Uniform Grant Guidance, a non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The City contracts its operations of the Winston Salem Transit Authority (?WSTA?) to an outside contractor. During our testing, we noted that controls on reviewing invoices from the outside contractor were not considered adequate to properly prevent and detect errors on a timely basis. The City had implemented a more thorough review process for non-payroll related expenditures submitted by the outside contractor during fiscal year 2022, but had not implemented a similar process for the payroll related invoices submitted by the contractor. Additionally, the contractor completed, reviewed, and submitted the City?s Annual Operating Statistics Report to the North Carolina Department of Transportation on behalf of the City. While a City employee also reviewed the financial data prior to submission, no review of the nonfinancial components was noted by a City employee. Context: All State Maintenance Assistance Program expenditures requested for reimbursement under the grant program related to payroll expenses of the outside contractor. Approximately $3,000,000 of the approximate total expenditures under the Federal Transit Cluster of $6,800,000 were related to payroll expenses of the outside contractor. Effect: The City could be requesting reimbursement for unallowable expenses or expenses outside the period of availability of the federal and state grant agreements Cause: The City did not have an adequate process in place to review the outside contractor?s payroll, related expenditures prior to payment of the contractor?s invoice or the nonfinancial information contained in the Annual Operating Statistics Report. Recommendation: We recommend the City implement a more thorough control process for review of all the contractor?s invoices, including payroll-related expenditures to ensure all costs are allowable, reasonable and within the period of availability of each grant agreement by an appropriate individual with direct knowledge of the services being provided. We also recommend the City implement proper controls to ensure a City employee reviews the nonfinancial information in the Annual Operating Statistics Report prior to submission. Views of responsible officials: Management agrees with the finding and is implementing procedures to correct this, which is further discussed in the corrective action plan.