2022-001 The County’s internal controls were inadequate for ensuring compliance with federal suspension and debarment requirements.
Assistance Listing Number and Title: 21.027, COVID 19 – Coronavirus State and Local Fiscal Recovery Funds
Federal Grantor Name: U.S. Department of the Treasury
Federal Award/Contract Number: N/A
Pass-through Entity Name: N/A
Pass-through Award/Contract
Number: N/A
Known Questioned Cost Amount: $0
Prior Year Audit Finding: Yes, Finding 2021-002
Background
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 $1,422,643 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.
Description of Condition
Our audit found the County’s controls were ineffective for ensuring staff verified the suspension and debarment status of contractors for purchases exceeding $25,000, paid all or in part with federal funds. Specifically, 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 nine contractors paid a total of $872,321 in 2022 were not suspended or debarred before entering into the contracts or charging costs to the federal award. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance.
Cause of Condition
County staff responsible for these purchases were not aware of the federal requirements for suspension and debarment. Staff learned about the requirements during the audit of fiscal year 2021, but the County had already entered into these covered transactions.
Effect of Condition
Without adequate internal controls over suspension and debarment requirements, the County increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments the County made to an ineligible party would be unallowable, and the awarding agency could potentially recover them.
We subsequently verified the contractors were not suspended or 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
The County has hired a Grants and Public Relations Specialist. This position provides technical assistance to county staff and outside contractors to ensure compliance with grant requirements.
Auditor’s Remarks
We appreciate the County’s commitment to resolving this issue. We will review the condition 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 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.
2022-001 The County’s internal controls were inadequate for ensuring compliance with federal suspension and debarment requirements.
Assistance Listing Number and Title: 21.027, COVID 19 – Coronavirus State and Local Fiscal Recovery Funds
Federal Grantor Name: U.S. Department of the Treasury
Federal Award/Contract Number: N/A
Pass-through Entity Name: N/A
Pass-through Award/Contract
Number: N/A
Known Questioned Cost Amount: $0
Prior Year Audit Finding: Yes, Finding 2021-002
Background
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 $1,422,643 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.
Description of Condition
Our audit found the County’s controls were ineffective for ensuring staff verified the suspension and debarment status of contractors for purchases exceeding $25,000, paid all or in part with federal funds. Specifically, 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 nine contractors paid a total of $872,321 in 2022 were not suspended or debarred before entering into the contracts or charging costs to the federal award. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance.
Cause of Condition
County staff responsible for these purchases were not aware of the federal requirements for suspension and debarment. Staff learned about the requirements during the audit of fiscal year 2021, but the County had already entered into these covered transactions.
Effect of Condition
Without adequate internal controls over suspension and debarment requirements, the County increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments the County made to an ineligible party would be unallowable, and the awarding agency could potentially recover them.
We subsequently verified the contractors were not suspended or 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
The County has hired a Grants and Public Relations Specialist. This position provides technical assistance to county staff and outside contractors to ensure compliance with grant requirements.
Auditor’s Remarks
We appreciate the County’s commitment to resolving this issue. We will review the condition 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 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.