MASON COUNTY TRANSPORTATION AUTHORITYLocal Government

Mason Transit Authority January 1, 2022 through December 31, 2022 2022-002 The Authority charged costs to the program that were not allowable. Assistance Listing Number and Title: 20.509 Formula Grants for Rural Areas and Tribal Transit Program 20.509 COVID-19 Formula Grants for Rural Areas and Tribal Transit Program Federal Grantor Name: Federal Transit Administration Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Transportation Pass-through Award/Contract Number: PTD0270, PTD0269, PTD0268, PTD0192 Known Questioned Cost Amount: $59,664 Prior Year Audit Finding: N/A Background During fiscal year 2022, the Authority spent $1,453,330 in federal funds from the Formula Grants for Rural Areas and Tribal Transit program. The program’s purpose is to initiate, improve or continue public transportation service in rural areas by providing financial assistance for operating, planning and administrative expenses, and the acquisition, construction and improvement of facilities and equipment. The Authority used these funds to support its operations and maintenance of its vehicle and bus fleet. Federal regulations establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and recipients must support them with proper documentation that demonstrates costs are allowable. Description of Condition Although the Authority’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and cost requirements, the Authority incorrectly reported $59,664 of unallowable capital outlay expenses as eligible expenses on the reimbursement requests. Cause of Condition Authority staff incorrectly coded the expenses, and therefore included the expenses among the list of eligible costs in the supporting documentation they used to compile the reimbursement requests. Additionally, staff did not have adequate monitoring to detect the error before submitting the reimbursement requests to the awarding agency. Effect of Condition and Questioned Costs The Authority claimed unallowable capital costs of $59,664, including $54,239 for payments to contractors and $5,424 of related indirect costs. We are questioning these costs. Federal regulations require the State Auditor’s Office to report known questioned costs that are greater than $25,000 for each type of compliance requirement. We question costs when we find a government has not complied with grant regulations or does not have adequate documentation to support expenditures. Recommendation We recommend the Authority work with the awarding agency to determine audit resolution of the unallowable costs. We further recommend the Authority ensure all costs it charges to federal programs are allowable and comply with cost principles. Authority’s Response Management has reviewed procurement policies with all staff that have purchasing responsibilities. Finance staff understand and have had training on how to properly code and enter procurements in our finance software so that only those that are to be grant funded are marked as such. MTA worked with WSDOT staff to find a solution for repaying the incorrectly applied grant funds. Auditor’s Remarks We thank the Authority for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the Authority’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the cost principles for how direct and indirect costs should be charged to federal programs. The Washington State Department of Transportation Consolidated Grant Guidebook, Guidelines for Operating, Planning and Mobility Management Projects establishes requirements for identifying eligible services and eligible direct expenses.

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