Audit 11191

Description of Condition The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected, and make necessary investments in water, sewer, or broadband infrastructure. In 2022, the County spent $1,481,455 in program funds. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the County enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors have not been suspended, debarred or otherwise excluded. The County may accomplish this verification by collecting a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The County must perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Our audit found the County’s controls were ineffective for ensuring that it verified the suspension and debarment status of contractors receiving $25,000 or more, all or in part with federal funds. The County did not obtain a written certification, include a clause in the contract, or search for exclusion records in SAM.gov to verify that one contractor subject to this requirement was not suspended or debarred before entering into the contract or charging costs to the federal award. The County paid this contractor $33,832 in fiscal year 2022. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition County staff responsible for the purchase was not aware of the federal requirements for suspension and debarment. Also, the County does not have a formal, centralized process to ensure a contractor’s suspension and debarment status is verified before entering into a covered transaction. Effect of Condition Without this verification, the County increases its risk of providing federal funds to contractors that are excluded from participating in federal programs. Any payments made to an ineligible party would be unallowable, and the federal grantor could potentially recover them. We subsequently verified the contractor was not suspended and debarred, so we are not questioning costs. Recommendation We recommend the County establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs. County’s Response Although the County’s procurement policy addresses suspension and debarment requirements, staff handling the State and Local Fiscal Recovery Funds program did not have a thorough understanding of federal procurement requirements. The County will ensure that staff responsible for federal programs are trained on suspension and debarment requirements, and have a thorough understanding of the County’s procurement policy. Auditor’s Remarks We appreciate the County's commitment to resolving the issues noted and will follow up during the 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 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.

Description of Condition The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected, and make necessary investments in water, sewer, or broadband infrastructure. In 2022, the County spent $1,481,455 in program funds. Federal regulations authorize recipients to award SLFRF funds to people or entities who experienced the negative economic or health-related effects of the pandemic. However, these regulations restrict recipients from using program funds to pay principal or interest on outstanding debt because debt service costs do not constitute the provision of services to constituents. Our audit found the County’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and allowable costs requirements. However, we found the County awarded program funds to another local government to pay for its debt service costs, which is not an allowable expense. Cause of Condition County staff were not aware program funds could not be used for debt service costs. Effect of Condition and Questioned Costs The County provided $30,000 in program funds to another local government, which used $25,259 of it to pay debt service costs. This does not constitute an authorized use of program funds, so 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 the County has not complied with grant regulations and/or when it does not have adequate documentation to support expenditures. Recommendation We recommend the County only spend program funds on eligible costs. County’s Response The County will establish procedures to verify eligibility of program costs by requiring proof of eligibility be attached to grant fund expense vouchers when submitted to the auditor’s office for processing. Auditor’s Remarks We appreciate the County's commitment to resolving the issues noted and will follow up during the 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 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 31 CFR Part 35, Pandemic Relief Programs, section 35.6, establishes eligible uses.

Description of Condition The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected, and make necessary investments in water, sewer, or broadband infrastructure. In 2022, the County spent $1,481,455 in program funds. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the County enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors have not been suspended, debarred or otherwise excluded. The County may accomplish this verification by collecting a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The County must perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Our audit found the County’s controls were ineffective for ensuring that it verified the suspension and debarment status of contractors receiving $25,000 or more, all or in part with federal funds. The County did not obtain a written certification, include a clause in the contract, or search for exclusion records in SAM.gov to verify that one contractor subject to this requirement was not suspended or debarred before entering into the contract or charging costs to the federal award. The County paid this contractor $33,832 in fiscal year 2022. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition County staff responsible for the purchase was not aware of the federal requirements for suspension and debarment. Also, the County does not have a formal, centralized process to ensure a contractor’s suspension and debarment status is verified before entering into a covered transaction. Effect of Condition Without this verification, the County increases its risk of providing federal funds to contractors that are excluded from participating in federal programs. Any payments made to an ineligible party would be unallowable, and the federal grantor could potentially recover them. We subsequently verified the contractor was not suspended and debarred, so we are not questioning costs. Recommendation We recommend the County establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs. County’s Response Although the County’s procurement policy addresses suspension and debarment requirements, staff handling the State and Local Fiscal Recovery Funds program did not have a thorough understanding of federal procurement requirements. The County will ensure that staff responsible for federal programs are trained on suspension and debarment requirements, and have a thorough understanding of the County’s procurement policy. Auditor’s Remarks We appreciate the County's commitment to resolving the issues noted and will follow up during the 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 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.

Description of Condition The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected, and make necessary investments in water, sewer, or broadband infrastructure. In 2022, the County spent $1,481,455 in program funds. Federal regulations authorize recipients to award SLFRF funds to people or entities who experienced the negative economic or health-related effects of the pandemic. However, these regulations restrict recipients from using program funds to pay principal or interest on outstanding debt because debt service costs do not constitute the provision of services to constituents. Our audit found the County’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and allowable costs requirements. However, we found the County awarded program funds to another local government to pay for its debt service costs, which is not an allowable expense. Cause of Condition County staff were not aware program funds could not be used for debt service costs. Effect of Condition and Questioned Costs The County provided $30,000 in program funds to another local government, which used $25,259 of it to pay debt service costs. This does not constitute an authorized use of program funds, so 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 the County has not complied with grant regulations and/or when it does not have adequate documentation to support expenditures. Recommendation We recommend the County only spend program funds on eligible costs. County’s Response The County will establish procedures to verify eligibility of program costs by requiring proof of eligibility be attached to grant fund expense vouchers when submitted to the auditor’s office for processing. Auditor’s Remarks We appreciate the County's commitment to resolving the issues noted and will follow up during the 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 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 31 CFR Part 35, Pandemic Relief Programs, section 35.6, establishes eligible uses.