SOUTH FLORIDA REGIONAL TRANSPORTATION AUTHORITY

Assistance Listing, Federal Agency, and Program Name – 20.507, 20.525, 20.526, U.S. Department of Transportation, Federal Transit Cluster Federal Award Identification Number and Year – All Pass through Entity – N/A Finding Type – Material weakness Repeat Finding – Yes Criteria – Per 2 CFR 200.508(b), an auditee must properly prepare the schedule of expenditures of federal awards (SEFA). Per 2 CFR 200.510(b), the SEFA for the period covered by the auditee's financial statements must include the total federal awards expended as determined in accordance with 2 CFR 200.502, which describes the basis for determining federal awards expenses. Per 2 CFR 200.71(2), for a SEFA prepared on a cash basis, expenditures are the sum of (i) cash disbursements for direct charges for property and services; (ii) the amount of indirect expense charged; (iii) the value of third-party in-kind contributions applied; and (iv) the amount of cash advance payments and payments made to subrecipients. Condition – The SEFA for the year ended June 30, 2024 was not accurately prepared in accordance with the Authority’s accounting policy for a cash basis SEFA, as it originally included expenditures that were direct charges for property and services, but cash disbursement had not been made as of June 30, 2024. Questioned Costs – None Identification of How Questioned Costs Were Computed – N/A Context – Required revisions were identified during the audit to ensure that the schedule of expenditures of federal awards was accurately stated on a cash basis. These revisions related to $4,642,826 of federal expenditures where goods and services had been received as of June 30, 2024 that were originally on the SEFA, but cash disbursement had not been made for these direct charges as of June 30, 2024 and therefore should not have been included in the cash basis SEFA. Cause and Effect – Internal control procedures relative to the identification of federal expenditures to be reported on the SEFA did not operate effectively to ensure proper presentation of the SEFA under a cash basis model. This resulted in the Authority's schedule of expenditures of federal awards to be overstated prior to auditor identified revisions. Recommendation – The Authority should expand procedures and review processes to ensure the proper expenditures are reported on the schedule of expenditures of federal awards in the proper period. Views of Responsible Officials and Corrective Action Plan – The corrective actions implemented for capital grants on a cash basis for the SEFA will be expanded to include the operating grants.

Assistance Listing, Federal Agency, and Program Name - 20.507, 20.525, 20.526, U.S. Department of Transportation, Federal Transit Cluster Federal Award Identification Number and Year - All Pass-through Entity - N/A Finding Type - Material weakness and material noncompliance Repeat Finding - No Criteria - Per 2 CFR 200.508(b), an auditee must properly prepare the schedule of expenditures of federal awards (SEFA). Per 2 CFR 200.510(b), the SEFA for the period covered by the auditee's financial statements must include the total federal awards expended as determined in accordance with 2 CFR 200.502, which describes the basis for determining federal awards expenses. Per 2 CFR 200.71(2), for a SEFA prepared on a cash basis, expenditures are the sum of (i) cash disbursements for direct charges for property and services; (ii) the amount of indirect expense charged; (iii) the value of third-party in-kind contributions applied; and (iv) the amount of cash advance payments and payments made to subrecipients. Condition - The SEFA for the year ended June 30, 2023 was not accurately prepared in accordance with the Authority’s accounting policy for a cash basis SEFA, as it originally included expenditures that were direct charges for property and services, but cash disbursement had not been made as of June 30, 2023. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - Required revisions were identified during the audit to ensure that the schedule of expenditures of federal awards was accurately stated on a cash basis. These revisions related to $2,591,504 of federal expenditures where goods and services had been received as of June 30, 2023 that were originally on the SEFA, but cash disbursement had not been made for these direct charges as of June 30, 2023 and therefore should not have been included in the cash basis SEFA. Cause and Effect - Internal control procedures relative to the identification of federal expenditures to be reported on the SEFA did not operate effectively to ensure proper presentation of the SEFA under a cash basis model. This resulted in the Authority's schedule of expenditures of federal awards to be overstated prior to auditor identified revisions. Recommendation - The Authority should expand procedures and review processes to ensure the proper expenditures are reported on the schedule of expenditures of federal awards in the proper period. Views of Responsible Officials and Corrective Action Plan - The SEFA was originally prepared on an accrual basis as has been done in prior years. Due to the ability to use Covid-19 funding for operating expenses, the reporting basis was changed from accrual to cash in FY21-22 without changing internal procedures for creation of the SEFA. This caused the FY22-23 SEFA to be completed on an accrual basis and need to be revised and resubmitted to the auditors. The corrective action has been implemented to revise internal procedures to prepare the SEFA on a cash basis for future fiscal years. This includes the creation of a reconciliation schedule to the financial statements which are prepared on an accrual basis.

Assistance Listing, Federal Agency, and Program Name - 20.507, 20.525, 20.526, U.S. Department of Transportation, Federal Transit Cluster Federal Award Identification Number and Year - COVID-19 - FL-2020-054/FL - 90-YO68 - CARES Pass-through Entity - N/A Finding Type - Material weakness and material noncompliance Repeat Finding - No Criteria - Per 48 CFR section 52.216-7(b), reimbursing of allowable costs includes recorded costs that, at the time of the request for reimbursement, have been paid. Per 2 CFR 200.403, except where otherwise authorized by statute, costs must meet general criteria in order to be allowable under Federal awards, including (e) be determined in accordance with generally accepted accounting principles (GAAP) and (g) be adequately documented. Condition - The billing submitted to the awarding agency on September 7, 2023 for the months of May and June 2023 expenses included $1,653,326 of costs that weren’t allowable. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - The draw submitted on September 7, 2023 totaling $6,235,737 was submitted with details stating that the reimbursement request was for May and June 2023 expenses which included $1,653,326 of expenses that were not allowable. Those expenses were erroneously classified in the general ledger as operating expenditures when they were truly capital in nature. Once the cash was received for this draw, the Authority identified the classification and drawdown error and noted allowable expenses in August 2023 in excess of this $1,653,326 that could be used to replace the capital items that were previously submitted for reimbursement erroneously. As a result, there are no questioned costs since there were allowable expenses prior to the next drawdown request in late September 2023. Cause and Effect - The internal control procedures relative to the identification of total costs incurred as of June 30, 2023 for this award did not operate effectively. The Authority has a control in place in which general ledger accounts are reviewed and identified for all expenditures and classified as either operation or capital and then a second review of that classification is performed by accounting, but the timing of those reviews was not prior to the receipt of the drawdown. This resulted in the Authority's cash draw reported for May and June 2023 costs including $1,653,326 of costs that were not allowable as they were capital in nature. Recommendation - The Authority should review procedures and processes and related timing to ensure the proper expenses are being requested for reimbursement and are submitted with the proper support. Views of Responsible Officials and Corrective Action Plan - SFRTA uses its CARES funding to meet operating shortfalls as allowed by the grant. Human error caused a payment in the amount of $1,653,326 to be misclassified as capital revenue instead of operating revenue which caused our operating shortfall for FY22-23 to be overstated by the same amount. This led to a draw of the incorrect amount for the May/June 2023 period on September 7, 2023. This error was detected and corrected prior the subsequent drawdown of July/August 2023 expenses which occurred on September 27, 2023. At the time of both draws, SFRTA had incurred allowable expenses in excess of the amount drawn down but not for the period being reported. SFRTA has internal controls in place for the creation and review of draws. The order of the processes successfully detected and corrected the error but did not prevent the error. The corrective action has been implemented to modify the order of our preventative internal controls. SFTRA has changed the order of review so the electronic drawdown is not completed by the Budget Office until the Accounting Office has reviewed and approved the draw. This step was previously completed after the drawdown was initiated. Additionally, during review by the Accounting Office, the general ledger line detail will be reviewed to ensure accuracy