TOWN OF WOODSBORO TEXASLocal Government

Section III- Federal Award Findings and Questioned Costs Material Weaknesses in Internal Control over Major Federal Programs 2021-005 Lack of Controls Over Financial Reporting Major Programs U.S. Department of Homeland Security Federal Emergency Management Agency Public Assistance Program Pass-through: Texas Division of Emergency Management Homeland Security Grants Disaster Recovery CFDA: 97.036 U.S. Department of Housing and Urban Development Office of Community Planning and Development Pass-through: Texas General Land Office Disaster Recovery Program Infrastructure Project CFDA: 14.228 Criteria The Town is expected to prepare and take responsibility for the schedule of expenditures of federal awards. The Town should have a control structure in place to ensure this Schedule is prepared accurately, completely, and in compliance with regulatory requirements. Statement of Condition The Town has requested that Goldman, Hunt & Notz, L.L.P. (GHN) draft the schedule of expenditures of federal awards. This was done because, due to its limited resources, the Town?s internal personnel did not possess all of the skills and competencies necessary to prepare the schedule of expenditures of federal awards in accordance with the highly technical requirements for compliance. While GHN has been requested to prepare the schedule of expenditures of federal awards, GHN cannot be considered to be part of the Town?s internal controls ? specifically, GHN cannot be a part of the financial reporting internal control that address the preparation of an accurate schedule of expenditures of federal awards. This is considered to be a material weakness in the Town?s system of internal control. Statement of Cause The Town?s lack of controls over financial reporting is primarily driven by the Town?s limited resources. The Town?s internal personnel did not possess all of the skills and competencies necessary to prepare the schedule of expenditures of federal awards in accordance with the highly technical requirements for compliance. Statement of Effect or Potential Effect This material weakness in the Town?s internal control could result in a compliance issue associated with the preparation of the schedule of expenditures of federal awards. Section III- Federal Award Findings and Questioned Costs (Continued) 2021-005 Lack of Controls Over Financial Reporting (Concluded) Questioned Costs No questioned costs were identified in association with this finding. Perspective Information As this finding is associated with the general structure and nature of the Town, it is considered to be a systemic issue. Identification of Repeat Findings This finding was not identified in prior years. Recommendation To remedy the control deficiency related to the preparation of the schedule of expenditures of federal awards, the Town would need to ensure that sufficient personnel are in place and that they have the appropriate knowledge and tools (i.e., current accounting literature, current disclosure checklist, etc.) to be an effective element of the internal control process over financial reporting. It is understood that this may not be feasible because of the Town?s size and limited resources. Management may make a conscious decision to accept the risk in this control deficiency because of cost or other considerations. Views of Responsible Officials and Corrective Action Plan The Town of Woodsboro, Texas does not have the finances to hire a municipality accountant and understands the risks in this control deficiency.

Section III- Federal Award Findings and Questioned Costs (Continued) 2021-006 Lack of Segregation of Duties Major Programs U.S. Department of Homeland Security Federal Emergency Management Agency Public Assistance Program Pass-through: Texas Division of Emergency Management Homeland Security Grants Disaster Recovery CFDA: 97.036 U.S. Department of Housing and Urban Development Office of Community Planning and Development Pass-through: Texas General Land Office Disaster Recovery Program Infrastructure Project CFDA: 14.228 Criteria The Town is expected to maintain sufficient internal controls as to be able to prevent or detect material instances of non-compliance. The following finding represents a material weakness in the Town?s internal control. Statement of Condition In the course of performing the financial statement audit it was determined that the Town has a lack of segregation of duties. This is considered to be a material weakness in the Town?s system of internal control. As compliance with the requirements of FEMA Public Assistance Disaster Recovery (FEMA PA) Grant and the COVID-19 Coronavirus assistance requires effective controls and oversight around preparing and maintaining the Town?s financial records, this control deficiency impacts the control structure around the FEMA PA grant and the COVID-19 Coronavirus assistance. It was found that the Town does not have sufficient staff that is appropriately cross-trained and experienced to ensure the necessary oversight procedures and separation of key duties. Statement of Cause The Town?s lack of segregation of duties is primarily driven by the Town?s limited resources. The Town has a limited staff that is insufficiently cross-trained to provide the necessary segregation of duties to ensure proper financial reporting and compliance with related grant requirements. Statement of Effect or Potential Effect This material weakness in the Town?s internal control could result in a compliance issue associated with financial reporting to not be identified or corrected before the Town has fallen out of compliance with the requirements of the FEMA PA Grant. Questioned Costs No questioned costs were identified in association with this finding. Perspective Information As this finding is associated with the general structure and nature of the Town, it is considered to be a systemic issue. TOWN OF WOODSBORO, TEXAS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) For the Year Ended July 31, 2021 Section III- Federal Award Findings and Questioned Costs (Continued) 2021-006 Lack of Segregation of Duties (Concluded) Identification of Repeat Findings This finding was not identified in prior years. Recommendation To remedy the control deficiency related to the segregation of duties, the Town would need to ensure that sufficient personnel are in place and that they have the appropriate knowledge and tools to be able to effectively separate key steps of high risk procedures, and provide sufficient oversight to assist with the identification of errors or possible fraud. Views of Responsible Officials and Corrective Action Plan The Town of Woodsboro, Texas procures a grant firm to facilitate with all grant procedures. The Town relies on grant writers to comply with all grant requirements due to the Town?s limited staff and their knowledge of grant financial reporting and compliance.

Section III- Federal Award Findings and Questioned Costs (Concluded) Significant Deficiency in Internal Control over Major Federal Programs 2021-007 Period of Performance Noncompliance Major Program U.S. Department of Homeland Security Federal Emergency Management Agency Public Assistance Program Pass-through: Texas Division of Emergency Management Homeland Security Grants Disaster Recovery CFDA: 97.036 Criteria The Town is expected to complete projects during a program-specified timeframe. If the Town is unable to complete the project by the end of the specified period of performance, the Town is to request a time extension. The following finding represents a significant deficiency in the Town?s internal control over compliance. Statement of Condition In the course of performing the audit of the FEMA-PA grant, it was determined that when projects were not completed by either the end of the initial period of performance or by the latest approved time extension, additional time extensions had not been requested. This is considered to be a significant deficiency in the Town?s system of internal control. Statement of Cause The Town is inefficiently monitoring the progress of each project. The Town has a limited staff that is insufficiently cross-trained to provide the necessary duties to ensure proper compliance with related grant requirements. Statement of Effect or Potential Effect This significant deficiency in the Town?s internal control over compliance results in a compliance issue associated with the period of performance requirements of the FEMA-PA. Questioned Costs No questioned costs were identified in association with this finding. Perspective Information This finding is considered to be a systemic issue. Identification of Repeat Findings This finding was not identified in prior years. Recommendation To remedy the control deficiency related to the period of performance compliance requirement, the Town would need to request time extensions on a timely basis. Views of Responsible Officials and Corrective Action Plan The Town of Woodsboro, Texas procures a grant firm to facilitate with all grant procedures. The Town relies on grant writers keep the Town in compliance with all grant performance requirements of the FEMA-PA grant due to the Town?s limited staff and their knowledge of grant financial reporting and compliance.