2022-002 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: N/A
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 $834,112 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 or charging all or part of the costs of the contract to a federal award and must keep documentation demonstrating compliance with this federal requirement.
Description of Condition
Our audit found the County’s controls were ineffective for ensuring that it verified the suspension and debarment status of contractors paid $25,000 or more, 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 four contractors subject to this requirement were not suspended or debarred before entering into the contract or charging costs to the federal award. The County paid these contractors $775,044 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 purchases were not aware of the federal requirements for suspension and debarment, so they did not have a process to ensure they verified each contractor’s suspension and debarment status before entering into covered transactions.
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 contractors were 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. We also recommend the County maintain documentation demonstrating compliance with this requirement.
County’s Response
Chelan County agrees with the recommendation stated above. All Grant Managers have been briefed on the requirement to check that funds recipients are not on the Federal suspension and debarment list. The Auditor’s office will monitor all managers to ensure this requirement is completed. Increasing the number of participants in the review process should prevent the repeat of the above-mentioned material weaknesses.
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.
2022-002 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: N/A
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 $834,112 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 or charging all or part of the costs of the contract to a federal award and must keep documentation demonstrating compliance with this federal requirement.
Description of Condition
Our audit found the County’s controls were ineffective for ensuring that it verified the suspension and debarment status of contractors paid $25,000 or more, 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 four contractors subject to this requirement were not suspended or debarred before entering into the contract or charging costs to the federal award. The County paid these contractors $775,044 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 purchases were not aware of the federal requirements for suspension and debarment, so they did not have a process to ensure they verified each contractor’s suspension and debarment status before entering into covered transactions.
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 contractors were 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. We also recommend the County maintain documentation demonstrating compliance with this requirement.
County’s Response
Chelan County agrees with the recommendation stated above. All Grant Managers have been briefed on the requirement to check that funds recipients are not on the Federal suspension and debarment list. The Auditor’s office will monitor all managers to ensure this requirement is completed. Increasing the number of participants in the review process should prevent the repeat of the above-mentioned material weaknesses.
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.