CORRECTIVE ACTION PLAN
December 13, 2024
Bedford Regional Water Authority respectfully submits the following corrective action plan for the year ended June 30, 2024.
Name and address of independent public accounting firm:
Brown, Edwards & Company, L.L.P.
3906 Electric Road
Roanoke, VA 24018
Audit period: June 30, 2024
The findings from the June 30, 2024 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
2024-001: 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:
• Only three 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.
View of Responsible Officials and Planned 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. Progress has been made on the review processes for payroll and accounts payable. Bank entries are reviewed before posting and the reviewer and person that performs the bank reconciliation are different individuals.
FINDINGS AND QUESTIONED COSTS – MAJOR FEDERAL AWARD PROGRAM AUDIT
2024-002: 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 2024 bank reconciliation was prepared in March 2024, and was reviewed April 2024. 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:
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.
View of Responsible Officials and Planned Corrective Action:
Management recognizes the importance of timely reviews and will develop a procedure to correct this in the current fiscal year.
2024-003: 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.
View of Responsible Officials and Planned Corrective Action:
Management recognizes the importance of compliance with the Uniform Guidance and plans to develop a policy that adheres to all requirements in the current fiscal year.
2024-004: 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 is required to include provisions from Appendix II of the uniform Guidance in procurement contracts. The Authority does not include language in all contracts containing the provisions required by the Uniform Guidance.
Criteria:
Under the requirements of the Uniform Guidance, all required applicable provisions contained in Appendix II to the Uniform Guidance are to be included in procurement contracts.
Cause:
Provision language is required by Appendix II of the Uniform Guidance was not included in one procurement contract viewed.
Effect:
The lack of the Authority’s adherence to the specific requirements of the Uniform Guidance could result in potential improper procurement using Federal funds.
Recommendation:
Management should update existing written procurement contracts to align with Uniform Guidance requirements for all purchases to be made with Federal funds.
View of Responsible Officials and Planned Corrective Action:
Management recognizes the importance of compliance with the Uniform Guidance and has updated language in contracts entered into in the current fiscal year that adheres to all requirements.
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 Underwood.
Director of Finance