ENDLESS MOUNTAINS TRANSPORTATION AUTHORITYLocal Government

Finding 2024-003 – Segregation of Duties U.S. Department of Transportation Formula Grants for Rural Areas and Tribal Transit Program – ALN 20.509 U.S. Department of Health and Human Services Medicaid Cluster/Medical Assistance Program – ALN 93.778 Activities Allowed or Unallowed/Allowable Costs Condition: One position within the finance group had access to the blank checks, the ability to process invoices, and the responsibility for reviewing the vendor statements. Criteria: An effective system of internal accounting control necessitates an adequate segregation of duties so that no one individual handles a transaction from its inception to its completion. Cause: Due to the size of the finance group and transition that occurred during the year, we found some critical duties are combined and assigned to the available employees. Effect: The internal control system is more susceptible to errors and other irregularities, either intentional or unintentional, not being discovered. Repeat Finding: This is a repeat finding of 2023-004. Questioned Costs: None Recommendation: Although additional staffing was implemented in January 2024 which allowed for segregation of duties over the disbursement process, management should continue to review staff responsibilities and analyze where segregation of duties can be established and maintained. A final cross check of the invoice, purchase order, and check requisition should be done by someone that does not have access to any of the processes involved in generating the source documents. Views of Responsible Official and Planned Corrective Action: Management agrees with the finding. See separate Corrective Action Plan.

Finding 2023-004 – Segregation of Duties U.S. Department of Transportation Formula Grants for Rural Areas and Tribal Transit Program – ALN 20.509 Activities Allowed or Unallowed/Allowable Costs Condition: One position within the finance group had access to the blank checks, the ability to process invoices, and the responsibility for reviewing the vendor statements. Criteria: An effective system of internal accounting control necessitates an adequate segregation of duties so that no one individual handles a transaction from its inception to its completion. Cause: Due to the size of the finance group and transition that occurred during the year, we found some critical duties are combined and assigned to the available employees. Effect: The internal control system is more susceptible to errors and other irregularities, either intentional or unintentional, not being discovered. Repeat Finding: This is a repeat finding of 2022-004. Recommendation: Management should continue to review staff responsibilities and analyze where segregation of duties can be established and maintained. A final cross check of the invoice, purchase order, and check requisition should be done by someone that does not have access to any of the processes involved in generating the source documents. Views of Responsible Official and Planned Corrective Action: Management agrees with the finding. See separate Corrective Action Plan.

Material Weakness Segregation of duties. Criteria An effective system of internal accounting control necessitates an adequate segregation of duties so that no one individual handles a transaction from its inception to its completion. Condition One position within the finance group had access to the blank checks, the ability to process invoices, and the responsibility for reviewing the vendor statements. Cause Due to the size of the finance group, we found some critical duties are combined and assigned to the available employees. Effect The internal control system is more susceptible to errors and other irregularities, either intentional or unintentional, not being discovered. Recommendation Management should continue to review staff responsibilities and analyze where segregation of duties can be established and maintained. A final cross check of the invoice, purchase order, and check requisition should be done by someone that does not have access to any of the processes involved in generating the source documents. Management's Response and Corrective Action See attached response.

Material Weakness Management override of controls. Criteria An effective system of internal accounting control necessitates the ability to detect and prevent management override of the control environment. Condition The former general manager was able to circumvent the Authority's procurement process and enter into contacts without proper approval. Subsequent to June 30, 2022, the Authority expended $26,850 related to the project that did not go through the proper procurement procedures. Cause Due to the size of the finance group, we found some controls were not being effectively maintained to detect and prevent management override of the control environment. Effect The internal control system is more susceptible to errors and other irregularities, either intentional or unintentional, not being discovered. Recommendation Management should follow all procurement procedures as outlined in the Authority's policy documents. A final cross check of proper approvals should be done by someone that does not have access to any of the processes involved in generating the source documents. Management's Response and Corrective Action See attached response.

The requirements in Section 200.512 of the Uniform Guidance Act state that the audit must be completed, and the data collection form and reporting package must be submitted within the earlier of 30 calendar days after receipt of the auditor's report, or nine months after the end of the audit period. Criteria A transit agency entity that expends $750,000 or more during the non-Federal entity's fiscal year in Federal Awards must have a single audit conducted in accordance with Section 200.514 of the Uniform Guidance Act. Condition The Authority was not able to complete the June 30, 2021 audit in time to submit by the required deadline. Cause The Authority's personnel were unable to provide the assistance needed to complete the financial statement audit in a timely fashion. Effect The Authority's financial statements were not submitted timely to the Federal Audit Clearinghouse. Recommendation The Authority should review job descriptions and personnel levels to ensure the Authority's staff is able to comply with the Uniform Guidance Act requirements. Management's Response and Corrective Action See attached response.

The Authority did not file quarterly Medical Assistance reports timely. Criteria Quarterly Statement of Expenditures for the Medical Assistance Program are due 30 days after the end of the quarter. Condition The Authority filed one of the Quarterly Statement of Expenditures for the Medical Assistance Program after the specified due date. The report that was due on October 30, 2021 was filed on November 2, 2021. Cause The Authority's personnel were not able to prepare reports in a timely fashion prior to the due date. Effect Consistent late reporting could result in the Authority losing grant funding. Recommendation The Authority should prepare the Quarterly Statement of Expenditures for the Medical Assistance Program prior to the due date in order to ensure timely reporting. Management's Response and Corrective Action See attached response.

Material Weakness Segregation of duties. Criteria An effective system of internal accounting control necessitates an adequate segregation of duties so that no one individual handles a transaction from its inception to its completion. Condition One position within the finance group had access to the blank checks, the ability to process invoices, and the responsibility for reviewing the vendor statements. Cause Due to the size of the finance group, we found some critical duties are combined and assigned to the available employees. Effect The internal control system is more susceptible to errors and other irregularities, either intentional or unintentional, not being discovered. Recommendation Management should continue to review staff responsibilities and analyze where segregation of duties can be established and maintained. A final cross check of the invoice, purchase order, and check requisition should be done by someone that does not have access to any of the processes involved in generating the source documents.

The requirements in Section 200.512 of the Uniform Guidance Act state that the audit must be completed and the data collection form and reporting package must be submitted within the earlier of 30 calendar days after receipt of the auditor's report, or nine months after the end of the audit period. Criteria A transit agency entity that expends $750,000 or more during the non-Federal entity's fiscal year in Federal awards must have a single audit conducted in accordance with Section 200.514 of the Uniform Guidance Act. Condition The Authority was not able to complete the June 30, 2020 audit in time to submit by the required deadline. Cause The Authority's personnel were unable to provide the assistance needed to complete the financial statement audit in a timely fashion. Effect The Authority's financial statements were not submitted timely to the Federal Audit Clearinghouse. Recommendation The Authority should review job descriptions and personnel levels to ensure the Authority's staff is able to comply with the Uniform Guidance Act requirements.

The Authority did not file quarterly Medical Assistance reports timely. Condition The Authority filed two of the Quarterly Statement of Expenditures for the Medical Assistance Program after the specified due date. The first quarter was filed one day late and the second quarter was filed five days late. Corrective Action PennDOT has required the use of the Ecolane Software and dictated the commencement of the use of such software at each agency. The Authority complied with commencement directives. The software includes a time study component. The Authority utilizes the vendor model and the County has oversight of MATP. The County has the ability to claim indirect costs for monitoring if they complete a time study. In the DHS MATP Standards and Guidelines, there is no language that references "vendor" providers being required to do a time study. Vendors simply have a negotiated trip rate with the counties. It should be noted that the Authority is subject to various agency audits and DHS does not require a time study and has not been flagged for compliance. Criteria Quarterly Statement of Expenditures for the Medical Assistance Program are due thirty days after the end of the quarter. Cause Reports were not prepared prior to the due date. In the first quarter, the flat rate billing amount had not been agreed upon by DHS which caused the extended delay. Effect Consistent late reporting could result in the Authority losing grant funding. Recommendation The Authority should prepare the Quarterly Statement of Expenditures for the Medical Assistance Program prior to the due date in order to ensure timely reporting.

The Authority withdrew federal capital funds in advance of the related capital expenditures. The Authority drew federal capital funds of $26,716 99 days in advance of expenditure. This exceeds the three-day limit as per the applicable federal grants. Criteria The Federal Transit Authority only allows the Authority to draw down capital funds three days prior to expenditure. Condition The Authority made a draw on capital funds based on the funding requests which were proposed, and the actual expenditure turned out to be later than planned. Effect Misuse of funds could lead to future funding being withheld. Recommendation The Authority should re-evaluate the draw down process and make sure the drawdowns are within actual allowable amounts incurred.

Material Weakness Management override of controls. Criteria An effective system of internal accounting control necessitates an adequate segregation of duties so that no one individual handles a transaction from its inception to its completion. Condition With the internal control structure in place during the year, members of the management team were able to override the control environment which was in place. Effect The internal control system is more susceptible to errors and other irregularities, either intentional or unintentional, not being discovered. Recommendation Management and the Authority board have the ultimate responsibility for the design, implementation, and maintenance of internal controls. The Authority board should consider a system to enable Authority employees to anonymously report instances to a third party independent of management were board approved policies and procedures are not complied with.

The Authority did not file quarterly Medical Assistance reports timely. Condition The Authority filed each of the Quarterly Statement of Expenditures for the Medical Assistance Program after the specified due date. The first quarter was filed 77 days late, the second quarter was filed 28 days late, the third quarter was 1 day late and the fourth quarter was 4 days late. Criteria Quarterly Statement of Expenditures for the Medical Assistance Program are due thirty days after the end of the quarter. Cause Reports were not prepared prior to the due date. In the first quarter, the flat rate billing amount had not been agreed upon by DHS which caused the extended delay. Effect Consistent late reporting could result in the Authority losing grant funding. Recommendation The Authority should prepare the Quarterly Statement of Expenditures for the Medical Assistance Program prior to the due date in order to ensure timely reporting.

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