Audit 294443

Finding 2021-011- Noncompliance with Activities Allowed or Unallowed and Allowable Costs/Cost Principles Requirements - Coronavirus Relief Fund PASS-THROUGH GRANTOR: Oklahoma Office of Management Enterprise Services FEDERAL AGENCY: U.S. Department of the Treasury ASSISTANCE LISTING: 21.019 FEDERAL PROGRAM NAME: Coronavirus Relief Fund FEDERAL AW ARD NUMBER: SA-0098 FEDERAL AW ARD YEAR: 2021 CONTROL CATEGORY: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Period of Performance QUESTIONED COSTS: $260,134 Condition: During our test of thirty-seven (37) disbursements and 100% of the payroll disbursements that were submitted for Coronavirus Relief Fund reimbursements, the following was noted: • One (1) payment was overstated by $50 when submitted to the U.S. Department of Treasury. • Payroll expenses totaling $260,084 was determined to be ineligible due to expenses incurred outside the eligibility period. Cause of Condition: Policies and procedures have not been designed and implemented to ensure compliance with federal award requirements. Effect of Condition: This condition resulted in noncompliance with grant requirements. Recommendation: OSAI recommends that the County designs and implements policies and procedures to ensure compliance with applicable grant requirements. Management Response: Chairman of the Board of County Commissioners: The Cleveland County Board of County Commissioners (BOCC) will implement policies and procedures to ensure compliance with applicable grant requirements. Specifically, the BOCC will ensure grant funds are expended on allowed costs as set forth by the grant. Criteria: GAO Standards - Section 2 - Establishing an Effective Internal Control System - OV2.23 states in part: Objectives of an Entity- Compliance Objectives Management conducts activities in accordance with applicable laws and regulations. As part of specifying compliance objectives, the entity determines which laws and regulations apply to the entity. Management is expected to set objectives that incorporate these requirements. Federal Register, Vol. 86, No.IO also states in part: The CARES Act provides that payments from the Fund may only be used to cover costs that- 1. are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID--19).

Finding 2021-010 - Noncompliance with Reporting Requirement - Emergency Rental Assistance Program FEDERAL AGENCY: U.S. Department of the Treasury ASSISTANCE LISTING: 21.023 FEDERAL PROGRAM NAME: Emergency Rental Assistance Program FEDERAL AW ARD NUMBER: ERA0174 FEDERAL AW ARD YEAR: 2021 CONTROL CATEGORY: Reporting QUESTIONED COSTS: $0 Condition: While performing a test over the reporting requirement, we noted the following: • First Quarter Interim report (Awarded date- March 2021) was not submitted. • Second Quarter report (April 2021 - June 2021) was submitted after the deadline. Cause of Condition: Policies and procedures have not been designed and implemented to ensure the County is in compliance with federal laws and regulations and grant agreements. Effect of Condition: This condition resulted in noncompliance with grant requirements. Recommendation: OSAI recommends the County comply with federal laws and regulations and grant agreements by submitting required reports to the U.S. Department of the Treasury timely. Management Response: Chairman of the Board of County Commissioners: The Cleveland County Board of County Commissioners (BOCC) will implement policies and procedures to ensure compliance with applicable grant requirements. Specifically, the BOCC will ensure compliance with submission of timely reports required as a grant recipient. Criteria: GAO Standards - Section 2 - Establishing an Effective Internal Control System - OV2.23 states in part: Objectives of an Entity- Compliance Objectives Management conducts activities in accordance with applicable laws and regulations. As part of specifying compliance objectives, the entity determines which laws and regulations apply to the entity. Management is expected to set objectives that incorporate these requirements. Per Reporting Guidance Version 2.1, Section II: Reporting Periods and Submission Deadlines: State, Local, and Territorial Emergency Rental Assistance (ERA) Recipients are required to submit both Monthly and Quarterly Reports. Recipients must provide all required reports on each ERAl and ERA2 award separately without commingling funds, data, or records.

Finding 2021-013 - Lack of Internal Controls and Noncompliance with Subrecipient Monitoring - Emergency Rental Assistance Program FEDERAL AGENCY: U.S. Department of the Treasury ASSISTANCE LISTING: 21.023 FEDERAL PROGRAM NAME: Emergency Rental Assistance Program FEDERAL AW ARD NUMBER: ERA0174 FEDERAL AW ARD YEAR: 2021 CONTROL CATEGORY: Subrecipient Monitoring QUESTIONED COSTS: $124,300 Condition: While documenting controls over Subrecipient Monitoring and administrative expenditures for the Emergency Rental Assistance Program (ERA) program, we noted the following: • The County was unable to provide supporting documents for the administrative costs of the consultant for this grant totaling $24,300. • The County was unable to provide supporting documentation of the subrecipient's administrative expenditures totaling $100,000. Cause of Condition: Policies and procedures have not been designed and implemented to ensure the County is complying with federal laws and regulations, and grant agreements. Also, adequate Subrecipient Monitoring policies and procedures have not been established by the County prior to entering into agreements with subrecipients. Effect of Condition: This condition resulted in noncompliance with grant requirements. Also, the subrecipient may not be in compliance with the award terms and there is an increased risk of mismanagement and fraud by the subgrantees. Recommendation: OSAI recommends the County design and implement internal controls to ensure that it administers current and future ERA grants in accordance with applicable federal laws and grant requirements, including ensuring that grant subrecipients are properly informed of federal requirements related to allowable costs. Subrecipients are reimbursed for administrative costs based on supporting documentation for actual costs incurred rather than making advance payments for a set percentage of advanced program funds. Management Response: Chairman of the Board of County Commissioners: The County has met with the Oklahoma State Auditor & Inspector's office in reference to Finding 2021-013 Lack oflnternal Controls and Noncompliance with Subrecipient Monitoring - Emergency Rental Assistance Program. We agree with the auditor's recommendation and will take the following corrective actions: 1. Design and implement internal controls to ensure compliance with all applicable federal laws, regulations, and grant requirements for current and future ERA grants. This will include: a) Amend written policies and procedures to better include Subrecipient Monitoring, including requirements for sub-recipients to provide supporting documents for actual administrative expenditures incurred rather than receiving advance payments. b) Providing annual training to staff on the new sub-recipient monitoring policies and procedures. c) Implementing a documentation and review process to ensure sub-recipients are properly informed of federal requirements related to allowable costs and that expenditures are supported before payment. 2. Strengthen sub-recipient agreements to include clear requirements around supporting documents for administrative costs. 3. Increase monitoring of sub-recipients through periodic desk audits and site visits to review expenditures and supporting documentation. The County takes these findings seriously and will implement robust internal controls and Subrecipient Monitoring procedures to ensure full compliance with federal grant requirements and prevent any future noncompliance or questioned costs. We appreciate the auditor identifying these issues so they can be properly addressed and corrected. Please let us know if any additional information or documentation is needed regarding the corrective actions. Criteria: GAO Standards - Section 2 - Establishing an Effective Internal Control System - OV2.23 states in part: Objectives of an Entity- Compliance Objectives Management conducts activities in accordance with applicable laws and regulations. As part of specifying compliance objectives, the entity determines which laws and regulations apply to the entity. Management is expected to set objectives that incorporate these requirements. 2 CFR § 200.332 (d) Requirements for pass-through entities states in part: All pass-through entities must: ( d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) Reviewing financial and performance reports required by the pass-through entity. (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the passthrough entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. The Consolidated Appropriations Act§ 501 Emergency Rental Assistance (c) Use of Funds - (5) Administrative Costs states in part, (A) IN GENERAL. -Not more than 10 percent of the amount paid to an eligible grantee under this section may be used for administrative costs attributable to providing financial assistance and housing stability services under paragraphs (2) and (3), respectively, including for data collection and reporting requirements related to such funds. (B) NO OTHER ADMINISTRATIVE COSTS. -Amounts paid under this section shall not be used for any administrative costs other than to the extent allowed under subparagraph (A). The US Department of Treasury Emergency Rental Assistance (ERA) FAQ #29 What are the applicable limitations on administrative expenses, states in part, "Under ERAl, not more than 10 percent of the amount paid to a grantee may be used for administrative costs attributable to providing financial assistance and housing stability services to eligible households. Under ERA2, not more than 15 percent of the amount paid to a grantee may be used for administrative costs attributable to providing financial assistance, housing stability services, and other affordable rental housing and eviction prevention activities."

Finding 2021-011- Noncompliance with Activities Allowed or Unallowed and Allowable Costs/Cost Principles Requirements - Coronavirus Relief Fund PASS-THROUGH GRANTOR: Oklahoma Office of Management Enterprise Services FEDERAL AGENCY: U.S. Department of the Treasury ASSISTANCE LISTING: 21.019 FEDERAL PROGRAM NAME: Coronavirus Relief Fund FEDERAL AW ARD NUMBER: SA-0098 FEDERAL AW ARD YEAR: 2021 CONTROL CATEGORY: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Period of Performance QUESTIONED COSTS: $260,134 Condition: During our test of thirty-seven (37) disbursements and 100% of the payroll disbursements that were submitted for Coronavirus Relief Fund reimbursements, the following was noted: • One (1) payment was overstated by $50 when submitted to the U.S. Department of Treasury. • Payroll expenses totaling $260,084 was determined to be ineligible due to expenses incurred outside the eligibility period. Cause of Condition: Policies and procedures have not been designed and implemented to ensure compliance with federal award requirements. Effect of Condition: This condition resulted in noncompliance with grant requirements. Recommendation: OSAI recommends that the County designs and implements policies and procedures to ensure compliance with applicable grant requirements. Management Response: Chairman of the Board of County Commissioners: The Cleveland County Board of County Commissioners (BOCC) will implement policies and procedures to ensure compliance with applicable grant requirements. Specifically, the BOCC will ensure grant funds are expended on allowed costs as set forth by the grant. Criteria: GAO Standards - Section 2 - Establishing an Effective Internal Control System - OV2.23 states in part: Objectives of an Entity- Compliance Objectives Management conducts activities in accordance with applicable laws and regulations. As part of specifying compliance objectives, the entity determines which laws and regulations apply to the entity. Management is expected to set objectives that incorporate these requirements. Federal Register, Vol. 86, No.IO also states in part: The CARES Act provides that payments from the Fund may only be used to cover costs that- 1. are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID--19).

Finding 2021-010 - Noncompliance with Reporting Requirement - Emergency Rental Assistance Program FEDERAL AGENCY: U.S. Department of the Treasury ASSISTANCE LISTING: 21.023 FEDERAL PROGRAM NAME: Emergency Rental Assistance Program FEDERAL AW ARD NUMBER: ERA0174 FEDERAL AW ARD YEAR: 2021 CONTROL CATEGORY: Reporting QUESTIONED COSTS: $0 Condition: While performing a test over the reporting requirement, we noted the following: • First Quarter Interim report (Awarded date- March 2021) was not submitted. • Second Quarter report (April 2021 - June 2021) was submitted after the deadline. Cause of Condition: Policies and procedures have not been designed and implemented to ensure the County is in compliance with federal laws and regulations and grant agreements. Effect of Condition: This condition resulted in noncompliance with grant requirements. Recommendation: OSAI recommends the County comply with federal laws and regulations and grant agreements by submitting required reports to the U.S. Department of the Treasury timely. Management Response: Chairman of the Board of County Commissioners: The Cleveland County Board of County Commissioners (BOCC) will implement policies and procedures to ensure compliance with applicable grant requirements. Specifically, the BOCC will ensure compliance with submission of timely reports required as a grant recipient. Criteria: GAO Standards - Section 2 - Establishing an Effective Internal Control System - OV2.23 states in part: Objectives of an Entity- Compliance Objectives Management conducts activities in accordance with applicable laws and regulations. As part of specifying compliance objectives, the entity determines which laws and regulations apply to the entity. Management is expected to set objectives that incorporate these requirements. Per Reporting Guidance Version 2.1, Section II: Reporting Periods and Submission Deadlines: State, Local, and Territorial Emergency Rental Assistance (ERA) Recipients are required to submit both Monthly and Quarterly Reports. Recipients must provide all required reports on each ERAl and ERA2 award separately without commingling funds, data, or records.

Finding 2021-013 - Lack of Internal Controls and Noncompliance with Subrecipient Monitoring - Emergency Rental Assistance Program FEDERAL AGENCY: U.S. Department of the Treasury ASSISTANCE LISTING: 21.023 FEDERAL PROGRAM NAME: Emergency Rental Assistance Program FEDERAL AW ARD NUMBER: ERA0174 FEDERAL AW ARD YEAR: 2021 CONTROL CATEGORY: Subrecipient Monitoring QUESTIONED COSTS: $124,300 Condition: While documenting controls over Subrecipient Monitoring and administrative expenditures for the Emergency Rental Assistance Program (ERA) program, we noted the following: • The County was unable to provide supporting documents for the administrative costs of the consultant for this grant totaling $24,300. • The County was unable to provide supporting documentation of the subrecipient's administrative expenditures totaling $100,000. Cause of Condition: Policies and procedures have not been designed and implemented to ensure the County is complying with federal laws and regulations, and grant agreements. Also, adequate Subrecipient Monitoring policies and procedures have not been established by the County prior to entering into agreements with subrecipients. Effect of Condition: This condition resulted in noncompliance with grant requirements. Also, the subrecipient may not be in compliance with the award terms and there is an increased risk of mismanagement and fraud by the subgrantees. Recommendation: OSAI recommends the County design and implement internal controls to ensure that it administers current and future ERA grants in accordance with applicable federal laws and grant requirements, including ensuring that grant subrecipients are properly informed of federal requirements related to allowable costs. Subrecipients are reimbursed for administrative costs based on supporting documentation for actual costs incurred rather than making advance payments for a set percentage of advanced program funds. Management Response: Chairman of the Board of County Commissioners: The County has met with the Oklahoma State Auditor & Inspector's office in reference to Finding 2021-013 Lack oflnternal Controls and Noncompliance with Subrecipient Monitoring - Emergency Rental Assistance Program. We agree with the auditor's recommendation and will take the following corrective actions: 1. Design and implement internal controls to ensure compliance with all applicable federal laws, regulations, and grant requirements for current and future ERA grants. This will include: a) Amend written policies and procedures to better include Subrecipient Monitoring, including requirements for sub-recipients to provide supporting documents for actual administrative expenditures incurred rather than receiving advance payments. b) Providing annual training to staff on the new sub-recipient monitoring policies and procedures. c) Implementing a documentation and review process to ensure sub-recipients are properly informed of federal requirements related to allowable costs and that expenditures are supported before payment. 2. Strengthen sub-recipient agreements to include clear requirements around supporting documents for administrative costs. 3. Increase monitoring of sub-recipients through periodic desk audits and site visits to review expenditures and supporting documentation. The County takes these findings seriously and will implement robust internal controls and Subrecipient Monitoring procedures to ensure full compliance with federal grant requirements and prevent any future noncompliance or questioned costs. We appreciate the auditor identifying these issues so they can be properly addressed and corrected. Please let us know if any additional information or documentation is needed regarding the corrective actions. Criteria: GAO Standards - Section 2 - Establishing an Effective Internal Control System - OV2.23 states in part: Objectives of an Entity- Compliance Objectives Management conducts activities in accordance with applicable laws and regulations. As part of specifying compliance objectives, the entity determines which laws and regulations apply to the entity. Management is expected to set objectives that incorporate these requirements. 2 CFR § 200.332 (d) Requirements for pass-through entities states in part: All pass-through entities must: ( d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) Reviewing financial and performance reports required by the pass-through entity. (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the passthrough entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. The Consolidated Appropriations Act§ 501 Emergency Rental Assistance (c) Use of Funds - (5) Administrative Costs states in part, (A) IN GENERAL. -Not more than 10 percent of the amount paid to an eligible grantee under this section may be used for administrative costs attributable to providing financial assistance and housing stability services under paragraphs (2) and (3), respectively, including for data collection and reporting requirements related to such funds. (B) NO OTHER ADMINISTRATIVE COSTS. -Amounts paid under this section shall not be used for any administrative costs other than to the extent allowed under subparagraph (A). The US Department of Treasury Emergency Rental Assistance (ERA) FAQ #29 What are the applicable limitations on administrative expenses, states in part, "Under ERAl, not more than 10 percent of the amount paid to a grantee may be used for administrative costs attributable to providing financial assistance and housing stability services to eligible households. Under ERA2, not more than 15 percent of the amount paid to a grantee may be used for administrative costs attributable to providing financial assistance, housing stability services, and other affordable rental housing and eviction prevention activities."