BOROUGH OF ELDREDLocal Government

Untimely Single Audit Filing - Condition and criteria: The Borough did not submit their Single Audit Report for the fiscal year ended December 31, 2024 within nine months of the fiscal year end, as required by the Uniform Guidance (2 CFR § 200.512), resulting in a delinquent submission. Cause and Effect: There were inadequate internal controls in place regarding the audit process to ensure that timely submissions of the Single Audit report would be met. The delinquency may lead to the suspension or termination of federal funding, as well as potential penalties or corrective actions from the funding agency. Auditor’s Recommendations: The Borough should establish a system to closely monitor Single Audit deadlines, designate clear responsibilities for the audit process, and proactively communicate with the auditor to ensure timely completion and submission of the report. Borough’s Response: Eldred Borough was unable to contract a CPA to perform the single audit. This process included months of phone calls and emails to over 30 CPA and Accounting Firms across the State of Pennsylvania. The Borough has since contracted with a CPA firm to perform the 2025 single audit and do not anticipate it being delayed in submission.

Adjusting Journal Entries, Required Disclosures and Draft Financial Statements Condition and Criteria: During the current year, adjusting journal entries, along with disclosures were drafted by the auditors and accepted by the Borough to properly reflect the financial statements. The inability of the Borough to prepare financial statements with full disclosures is a material weakness in the entity’s internal control over financial reporting. Without this assistance, the Borough is exposed to the potential risk that the financial statements contain a material misstatement that would go undetected. Cause and Effect: AU-C Section 265 entitled Communicating Internal Control Related Matters Identified in an Audit, issued by the American Institute of Certified Public Accountants (AICPA) considers the need for significant adjusting journal entries and assistance when preparing the financial statements to be indicative of an internal control deficiency. Without this assistance, the potential exists of the Borough’s financial statements not confirming with the basis of accounting as described in Note 1. Auditor’s Recommendation: Although auditors may continue to provide such assistance both now and, in the future, under the pronouncement, the Borough should continue to review and accept both proposed adjusting journal entries and footnote disclosures, along with the draft financial statements. Borough’s Response: The Borough has received, reviewed and accepted all journal entries, footnote disclosures and draft financial statements proposed for the current year audit and will continue to review similar information in future years. Further, the Borough believes it has a thorough understanding of these financial statements and the ability to make informed judgments based on these financial statements. Lastly, the Borough considers such assistance provided by the auditors to be the most cost-effective manner to prepare such information. The Borough will also ensure that in the future all transactions will be properly reflected in the accounting software.

Segregation of Duties - Conditions and Criteria: The Borough is a small office with only a few employees. In such an environment, it is difficult, if not impossible to segregate duties of the general accounting from custody and control over assets such as cash. Cause and Effect: A fundamental element of an effective internal control system is the proper segregation of duties. Proper segregation of duties provides for a system of checks and balances and entails assigning responsibilities of authorizing and recording transactions among different people in the Borough. Generally, assigning different individuals the responsibilities of authorizing transactions, recording transactions, and maintaining custody of the related assets reduces the opportunities for any individual to both perpetrate and conceal errors or fraud in the normal course of business. A lack of segregation of duties increases the potential risk of misappropriation of assets due to fraud. Auditor’s recommendation: We recognize the Borough has attempted to segregate duties to the best of its ability. The Borough should continue to seek opportunities to segregate duties including involvement from Council Members. Borough’s Response: Because of the limited number of personnel in the office, the Borough recognizes the limitations with regards to segregation of duties and therefore will consider mitigating controls. The Borough will continue to seek involvement from the Borough Council in terms of reviewing financial information.

Compliance and Other Matters Year Ended December 31, 2023 Untimely Single Audit Filing Condition and criteria: The Borough did not submit their Single Audit Report for the fiscal year ended December 31, 2023 within nine months of the fiscal year end, as required by the Uniform Guidance (2 CFR § 200.512), resulting in a delinquent submission. Cause and Effect: There were inadequate internal controls in place regarding the audit process to ensure that timely submissions of the Single Audit report would be met. The delinquency may lead to the suspension or termination of federal funding, as well as potential penalties or corrective actions from the funding agency. Auditor’s Recommendations: The Borough should establish a system to closely monitor Single Audit deadlines, designate clear responsibilities for the audit process, and proactively communicate with the auditor to ensure timely completion and submission of the report. Borough’s Response: Eldred Borough was unable to contract a CPA to perform the single audit. This process included months of phone calls and emails to over 30 CPA and Accounting Forms across the State of Pennsylvania. The Borough has since contracted with a CPA firm to perform the 2024 single audit and do not anticipate it being delayed in submission.

Compliance and Other Matters Year Ended December 31, 2023 Untimely Single Audit Filing Condition and criteria: The Borough did not submit their Single Audit Report for the fiscal year ended December 31, 2023 within nine months of the fiscal year end, as required by the Uniform Guidance (2 CFR § 200.512), resulting in a delinquent submission. Cause and Effect: There were inadequate internal controls in place regarding the audit process to ensure that timely submissions of the Single Audit report would be met. The delinquency may lead to the suspension or termination of federal funding, as well as potential penalties or corrective actions from the funding agency. Auditor’s Recommendations: The Borough should establish a system to closely monitor Single Audit deadlines, designate clear responsibilities for the audit process, and proactively communicate with the auditor to ensure timely completion and submission of the report. Borough’s Response: Eldred Borough was unable to contract a CPA to perform the single audit. This process included months of phone calls and emails to over 30 CPA and Accounting Forms across the State of Pennsylvania. The Borough has since contracted with a CPA firm to perform the 2024 single audit and do not anticipate it being delayed in submission.

Compliance and Other Matters Year Ended December 31, 2023 Untimely Single Audit Filing Condition and criteria: The Borough did not submit their Single Audit Report for the fiscal year ended December 31, 2023 within nine months of the fiscal year end, as required by the Uniform Guidance (2 CFR § 200.512), resulting in a delinquent submission. Cause and Effect: There were inadequate internal controls in place regarding the audit process to ensure that timely submissions of the Single Audit report would be met. The delinquency may lead to the suspension or termination of federal funding, as well as potential penalties or corrective actions from the funding agency. Auditor’s Recommendations: The Borough should establish a system to closely monitor Single Audit deadlines, designate clear responsibilities for the audit process, and proactively communicate with the auditor to ensure timely completion and submission of the report. Borough’s Response: Eldred Borough was unable to contract a CPA to perform the single audit. This process included months of phone calls and emails to over 30 CPA and Accounting Forms across the State of Pennsylvania. The Borough has since contracted with a CPA firm to perform the 2024 single audit and do not anticipate it being delayed in submission.

Compliance and Other Matters Year Ended December 31, 2023 Untimely Single Audit Filing Condition and criteria: The Borough did not submit their Single Audit Report for the fiscal year ended December 31, 2023 within nine months of the fiscal year end, as required by the Uniform Guidance (2 CFR § 200.512), resulting in a delinquent submission. Cause and Effect: There were inadequate internal controls in place regarding the audit process to ensure that timely submissions of the Single Audit report would be met. The delinquency may lead to the suspension or termination of federal funding, as well as potential penalties or corrective actions from the funding agency. Auditor’s Recommendations: The Borough should establish a system to closely monitor Single Audit deadlines, designate clear responsibilities for the audit process, and proactively communicate with the auditor to ensure timely completion and submission of the report. Borough’s Response: Eldred Borough was unable to contract a CPA to perform the single audit. This process included months of phone calls and emails to over 30 CPA and Accounting Forms across the State of Pennsylvania. The Borough has since contracted with a CPA firm to perform the 2024 single audit and do not anticipate it being delayed in submission.

Internal Control over Schedule of Expenditures of Federal Awards Year Ended December 31, 2023 Segregation of Duties Condition and criteria: During our audit of the Borough’s Schedule of Expenditures of Federal Awards, we noted that the Borough does not have adequate segregation of duties in place. Specifically, the same individual is responsible for initiating and recording journal entries and disbursements and reconciling the bank accounts. In accordance with 2 CFR § 200.303(a), the 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. Cause and Effect: The Borough is a small entity with limited administrative and accounting staff, which makes it difficult to achieve a complete segregation of duties. Due to resource constraints, individual staff members are assigned multiple roles that overlap key financial processes. Without proper segregation of duties, there is an increased risk that errors or irregularities, including potential misappropriation of assets or fraud, could occur and remain undetected. This condition could lead to noncompliance with applicable federal requirements and inaccuracies in financial reporting. Auditor’s Recommendations: We recommend that Eldred Borough assess the current structure and implement compensating controls where full segregation of duties is not feasible due to staffing limitations. These may include enhanced supervisory review, periodic oversight by the board or executive leadership, documentation of independent reviews, and rotation of duties when possible. Borough’s Response: Eldred Borough has board oversight and will continue to do so. The Borough employees do cover duties of the other employee when necessary and will continue to do so. Bank Reconciliations will be signed by Council. Pay Requisitions are signed by Council and will continue to do so.

Internal Control over Schedule of Expenditures of Federal Awards Year Ended December 31, 2023 Segregation of Duties Condition and criteria: During our audit of the Borough’s Schedule of Expenditures of Federal Awards, we noted that the Borough does not have adequate segregation of duties in place. Specifically, the same individual is responsible for initiating and recording journal entries and disbursements and reconciling the bank accounts. In accordance with 2 CFR § 200.303(a), the 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. Cause and Effect: The Borough is a small entity with limited administrative and accounting staff, which makes it difficult to achieve a complete segregation of duties. Due to resource constraints, individual staff members are assigned multiple roles that overlap key financial processes. Without proper segregation of duties, there is an increased risk that errors or irregularities, including potential misappropriation of assets or fraud, could occur and remain undetected. This condition could lead to noncompliance with applicable federal requirements and inaccuracies in financial reporting. Auditor’s Recommendations: We recommend that Eldred Borough assess the current structure and implement compensating controls where full segregation of duties is not feasible due to staffing limitations. These may include enhanced supervisory review, periodic oversight by the board or executive leadership, documentation of independent reviews, and rotation of duties when possible. Borough’s Response: Eldred Borough has board oversight and will continue to do so. The Borough employees do cover duties of the other employee when necessary and will continue to do so. Bank Reconciliations will be signed by Council. Pay Requisitions are signed by Council and will continue to do so.

Compliance and Other Matters Year Ended December 31, 2023 Untimely Single Audit Filing Condition and criteria: The Borough did not submit their Single Audit Report for the fiscal year ended December 31, 2023 within nine months of the fiscal year end, as required by the Uniform Guidance (2 CFR § 200.512), resulting in a delinquent submission. Cause and Effect: There were inadequate internal controls in place regarding the audit process to ensure that timely submissions of the Single Audit report would be met. The delinquency may lead to the suspension or termination of federal funding, as well as potential penalties or corrective actions from the funding agency. Auditor’s Recommendations: The Borough should establish a system to closely monitor Single Audit deadlines, designate clear responsibilities for the audit process, and proactively communicate with the auditor to ensure timely completion and submission of the report. Borough’s Response: Eldred Borough was unable to contract a CPA to perform the single audit. This process included months of phone calls and emails to over 30 CPA and Accounting Forms across the State of Pennsylvania. The Borough has since contracted with a CPA firm to perform the 2024 single audit and do not anticipate it being delayed in submission.

Compliance and Other Matters Year Ended December 31, 2023 Untimely Single Audit Filing Condition and criteria: The Borough did not submit their Single Audit Report for the fiscal year ended December 31, 2023 within nine months of the fiscal year end, as required by the Uniform Guidance (2 CFR § 200.512), resulting in a delinquent submission. Cause and Effect: There were inadequate internal controls in place regarding the audit process to ensure that timely submissions of the Single Audit report would be met. The delinquency may lead to the suspension or termination of federal funding, as well as potential penalties or corrective actions from the funding agency. Auditor’s Recommendations: The Borough should establish a system to closely monitor Single Audit deadlines, designate clear responsibilities for the audit process, and proactively communicate with the auditor to ensure timely completion and submission of the report. Borough’s Response: Eldred Borough was unable to contract a CPA to perform the single audit. This process included months of phone calls and emails to over 30 CPA and Accounting Forms across the State of Pennsylvania. The Borough has since contracted with a CPA firm to perform the 2024 single audit and do not anticipate it being delayed in submission.

Compliance and Other Matters Year Ended December 31, 2023 Untimely Single Audit Filing Condition and criteria: The Borough did not submit their Single Audit Report for the fiscal year ended December 31, 2023 within nine months of the fiscal year end, as required by the Uniform Guidance (2 CFR § 200.512), resulting in a delinquent submission. Cause and Effect: There were inadequate internal controls in place regarding the audit process to ensure that timely submissions of the Single Audit report would be met. The delinquency may lead to the suspension or termination of federal funding, as well as potential penalties or corrective actions from the funding agency. Auditor’s Recommendations: The Borough should establish a system to closely monitor Single Audit deadlines, designate clear responsibilities for the audit process, and proactively communicate with the auditor to ensure timely completion and submission of the report. Borough’s Response: Eldred Borough was unable to contract a CPA to perform the single audit. This process included months of phone calls and emails to over 30 CPA and Accounting Forms across the State of Pennsylvania. The Borough has since contracted with a CPA firm to perform the 2024 single audit and do not anticipate it being delayed in submission.

Compliance and Other Matters Year Ended December 31, 2023 Untimely Single Audit Filing Condition and criteria: The Borough did not submit their Single Audit Report for the fiscal year ended December 31, 2023 within nine months of the fiscal year end, as required by the Uniform Guidance (2 CFR § 200.512), resulting in a delinquent submission. Cause and Effect: There were inadequate internal controls in place regarding the audit process to ensure that timely submissions of the Single Audit report would be met. The delinquency may lead to the suspension or termination of federal funding, as well as potential penalties or corrective actions from the funding agency. Auditor’s Recommendations: The Borough should establish a system to closely monitor Single Audit deadlines, designate clear responsibilities for the audit process, and proactively communicate with the auditor to ensure timely completion and submission of the report. Borough’s Response: Eldred Borough was unable to contract a CPA to perform the single audit. This process included months of phone calls and emails to over 30 CPA and Accounting Forms across the State of Pennsylvania. The Borough has since contracted with a CPA firm to perform the 2024 single audit and do not anticipate it being delayed in submission.

Internal Control over Schedule of Expenditures of Federal Awards Year Ended December 31, 2023 Segregation of Duties Condition and criteria: During our audit of the Borough’s Schedule of Expenditures of Federal Awards, we noted that the Borough does not have adequate segregation of duties in place. Specifically, the same individual is responsible for initiating and recording journal entries and disbursements and reconciling the bank accounts. In accordance with 2 CFR § 200.303(a), the 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. Cause and Effect: The Borough is a small entity with limited administrative and accounting staff, which makes it difficult to achieve a complete segregation of duties. Due to resource constraints, individual staff members are assigned multiple roles that overlap key financial processes. Without proper segregation of duties, there is an increased risk that errors or irregularities, including potential misappropriation of assets or fraud, could occur and remain undetected. This condition could lead to noncompliance with applicable federal requirements and inaccuracies in financial reporting. Auditor’s Recommendations: We recommend that Eldred Borough assess the current structure and implement compensating controls where full segregation of duties is not feasible due to staffing limitations. These may include enhanced supervisory review, periodic oversight by the board or executive leadership, documentation of independent reviews, and rotation of duties when possible. Borough’s Response: Eldred Borough has board oversight and will continue to do so. The Borough employees do cover duties of the other employee when necessary and will continue to do so. Bank Reconciliations will be signed by Council. Pay Requisitions are signed by Council and will continue to do so.

Internal Control over Schedule of Expenditures of Federal Awards Year Ended December 31, 2023 Segregation of Duties Condition and criteria: During our audit of the Borough’s Schedule of Expenditures of Federal Awards, we noted that the Borough does not have adequate segregation of duties in place. Specifically, the same individual is responsible for initiating and recording journal entries and disbursements and reconciling the bank accounts. In accordance with 2 CFR § 200.303(a), the 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. Cause and Effect: The Borough is a small entity with limited administrative and accounting staff, which makes it difficult to achieve a complete segregation of duties. Due to resource constraints, individual staff members are assigned multiple roles that overlap key financial processes. Without proper segregation of duties, there is an increased risk that errors or irregularities, including potential misappropriation of assets or fraud, could occur and remain undetected. This condition could lead to noncompliance with applicable federal requirements and inaccuracies in financial reporting. Auditor’s Recommendations: We recommend that Eldred Borough assess the current structure and implement compensating controls where full segregation of duties is not feasible due to staffing limitations. These may include enhanced supervisory review, periodic oversight by the board or executive leadership, documentation of independent reviews, and rotation of duties when possible. Borough’s Response: Eldred Borough has board oversight and will continue to do so. The Borough employees do cover duties of the other employee when necessary and will continue to do so. Bank Reconciliations will be signed by Council. Pay Requisitions are signed by Council and will continue to do so.