Audit 321057

Clallam County January 1, 2023 through December 31, 2023 2023-001 The County did not have adequate internal controls 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 Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Health Care Authority, Washington State Department of Commerce Pass-through Award/Contract Number: SLFRF0002, SLRFP002 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 2023, the County spent $2,083,387 in program funds to respond to the public health emergency and address the negative economic impacts the emergency caused. This included providing assistance to households, small businesses, nonprofits, and impacted industries. Federal regulations require recipients to establish and maintain 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 that the contractors are not suspended, debarred or otherwise excluded. The County may verify this by obtaining 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 verify this before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Our audit found the County did not have adequate controls to independently verify one contractor it paid more than $25,000 in federal funds was not suspended or debarred from participating in federal programs. The County paid the contractor with its direct award funding. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition County staff responsible for this purchase relied on agreements the contractor entered with other organizations to verify its suspension and debarment status. The staff involved in this purchase were unaware of federal rules requiring the County to perform its own verification of suspension and debarment status when making a purchase more than $25,000. Effect of Condition The County did not obtain a written certification from the contractor, insert a clause into its contract or check for exclusion records at SAM.gov to verify one contractor it paid $31,239 was not suspended or debarred before contracting. Without adequate internal controls, the County cannot ensure the contractor it paid with federal funds was eligible to participate in federal programs. Any program funds the County used to pay contractors that were suspended or debarred would be unallowable, and the awarding agency could potentially recover them. Because we subsequently verified the vendor was not suspended or debarred, we are not questioning costs. Recommendation We recommend the County strengthen internal controls to ensure all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before contracting with or purchasing from them. County’s Response The County in its administration of its Coronavirus State and Local Fiscal Recovery Funds has historically complied with the federal suspension and debarment requirements principally through (1) ensuring each of its direct award and subrecipient contracts contain a clause or condition in the award contracts that states the contractor or subrecipient is not suspended or debarred, (2) requesting a certification to that effect, or (3) checking the SAM system to insure the contractor was not debarred or suspended. In this situation, the County procured IT equipment needed to improve the County's capability to conduct virtual meetings from a vendor under a "piggy-back" agreement under which debarment and suspension verification had been completed by another state agency. This vendor was also well known to the County as it had previously been utilized in procuring equipment with funding under the CARES Act. Staff managing this vendor relationship were unaware that reliance on prior debarment and suspension verification performed by another agency was not appropriate. In addition, due to significant turnover occurring in our SLFRF grant administration team occurring in late 2022 and early 2023, the single invoice triggering this finding--while properly documented with appropriate supporting documentation and approvals from staff managing the vendor relationship--was not reviewed by the SLFRF grant administration team to insure it was properly accompanied by a documented verification of debarment/suspension prior to its payment. As noted by the SAO in its audit finding, the vendor in question was not debarred or suspended from receiving federal monies, and no questioning of costs is involved. While the County has spent almost all of its SLFRF funds to-date under agreements containing certification language addressing debarment or suspension where required, the County recognizes that in this single situation involving the procurement of goods totaling $31,239 that its internal controls did not function properly to detect that proper debarment or suspension verification had occurred. We view this very much as an isolated incident, particularly given that over $9.8 million of the $15.02 million of SLFRF direct funds awarded to the County have been expended by the County through the end of 2023 in accordance with federal guidance and requirements regarding these funds under a program whose guidance rules have been subject to constant change since the American Rescue Plan Act was first signed. Regardless of the isolated nature of this incident, the County's management remains committed to insure this situation does not reoccur going forward, and as a result has or will be implementing the following corrective actions: • To the very limited extent disbarment/suspension language does not appear in contracts for goods or services being funding through County SLFRF funds, expenditures for all projects involving purchases of goods and services will first have to be approved and reviewed by the County's SLFRF grant administration staff who will verify disbarment/suspension status prior to the entering into contracts or the disbursement of SLFRF funds. • In the cases of piggy-back agreements, SLFRF grant administration staff will verify disbarment/suspension requirements have been met prior to payments for goods or services being approved that are funded with SLFRF funds; and • Appropriate messaging has been and will continue to be communicated to all SLFRF funded project owners and staff, reiterating requirements that all federal procurement policies must be adhered to for all County purchases of goods and services involving SLFRF funds, including that debarment and suspension verification has been completed and documented, and that such documentation must be forwarded to SLFRF grant administration staff before any disbursements of SLFRF funds will be made. We thank the SAO staff for identifying this issue and bringing it to our attention. Auditor’s Remarks We thank the County for its cooperation and assistance throughout the audit and acknowledge its commitment to resolve this finding. We will review the status of the County’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 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.

Clallam County January 1, 2023 through December 31, 2023 2023-001 The County did not have adequate internal controls 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 Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Health Care Authority, Washington State Department of Commerce Pass-through Award/Contract Number: SLFRF0002, SLRFP002 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 2023, the County spent $2,083,387 in program funds to respond to the public health emergency and address the negative economic impacts the emergency caused. This included providing assistance to households, small businesses, nonprofits, and impacted industries. Federal regulations require recipients to establish and maintain 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 that the contractors are not suspended, debarred or otherwise excluded. The County may verify this by obtaining 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 verify this before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Our audit found the County did not have adequate controls to independently verify one contractor it paid more than $25,000 in federal funds was not suspended or debarred from participating in federal programs. The County paid the contractor with its direct award funding. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition County staff responsible for this purchase relied on agreements the contractor entered with other organizations to verify its suspension and debarment status. The staff involved in this purchase were unaware of federal rules requiring the County to perform its own verification of suspension and debarment status when making a purchase more than $25,000. Effect of Condition The County did not obtain a written certification from the contractor, insert a clause into its contract or check for exclusion records at SAM.gov to verify one contractor it paid $31,239 was not suspended or debarred before contracting. Without adequate internal controls, the County cannot ensure the contractor it paid with federal funds was eligible to participate in federal programs. Any program funds the County used to pay contractors that were suspended or debarred would be unallowable, and the awarding agency could potentially recover them. Because we subsequently verified the vendor was not suspended or debarred, we are not questioning costs. Recommendation We recommend the County strengthen internal controls to ensure all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before contracting with or purchasing from them. County’s Response The County in its administration of its Coronavirus State and Local Fiscal Recovery Funds has historically complied with the federal suspension and debarment requirements principally through (1) ensuring each of its direct award and subrecipient contracts contain a clause or condition in the award contracts that states the contractor or subrecipient is not suspended or debarred, (2) requesting a certification to that effect, or (3) checking the SAM system to insure the contractor was not debarred or suspended. In this situation, the County procured IT equipment needed to improve the County's capability to conduct virtual meetings from a vendor under a "piggy-back" agreement under which debarment and suspension verification had been completed by another state agency. This vendor was also well known to the County as it had previously been utilized in procuring equipment with funding under the CARES Act. Staff managing this vendor relationship were unaware that reliance on prior debarment and suspension verification performed by another agency was not appropriate. In addition, due to significant turnover occurring in our SLFRF grant administration team occurring in late 2022 and early 2023, the single invoice triggering this finding--while properly documented with appropriate supporting documentation and approvals from staff managing the vendor relationship--was not reviewed by the SLFRF grant administration team to insure it was properly accompanied by a documented verification of debarment/suspension prior to its payment. As noted by the SAO in its audit finding, the vendor in question was not debarred or suspended from receiving federal monies, and no questioning of costs is involved. While the County has spent almost all of its SLFRF funds to-date under agreements containing certification language addressing debarment or suspension where required, the County recognizes that in this single situation involving the procurement of goods totaling $31,239 that its internal controls did not function properly to detect that proper debarment or suspension verification had occurred. We view this very much as an isolated incident, particularly given that over $9.8 million of the $15.02 million of SLFRF direct funds awarded to the County have been expended by the County through the end of 2023 in accordance with federal guidance and requirements regarding these funds under a program whose guidance rules have been subject to constant change since the American Rescue Plan Act was first signed. Regardless of the isolated nature of this incident, the County's management remains committed to insure this situation does not reoccur going forward, and as a result has or will be implementing the following corrective actions: • To the very limited extent disbarment/suspension language does not appear in contracts for goods or services being funding through County SLFRF funds, expenditures for all projects involving purchases of goods and services will first have to be approved and reviewed by the County's SLFRF grant administration staff who will verify disbarment/suspension status prior to the entering into contracts or the disbursement of SLFRF funds. • In the cases of piggy-back agreements, SLFRF grant administration staff will verify disbarment/suspension requirements have been met prior to payments for goods or services being approved that are funded with SLFRF funds; and • Appropriate messaging has been and will continue to be communicated to all SLFRF funded project owners and staff, reiterating requirements that all federal procurement policies must be adhered to for all County purchases of goods and services involving SLFRF funds, including that debarment and suspension verification has been completed and documented, and that such documentation must be forwarded to SLFRF grant administration staff before any disbursements of SLFRF funds will be made. We thank the SAO staff for identifying this issue and bringing it to our attention. Auditor’s Remarks We thank the County for its cooperation and assistance throughout the audit and acknowledge its commitment to resolve this finding. We will review the status of the County’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 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.

Clallam County January 1, 2023 through December 31, 2023 2023-001 The County did not have adequate internal controls 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 Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Health Care Authority, Washington State Department of Commerce Pass-through Award/Contract Number: SLFRF0002, SLRFP002 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 2023, the County spent $2,083,387 in program funds to respond to the public health emergency and address the negative economic impacts the emergency caused. This included providing assistance to households, small businesses, nonprofits, and impacted industries. Federal regulations require recipients to establish and maintain 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 that the contractors are not suspended, debarred or otherwise excluded. The County may verify this by obtaining 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 verify this before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Our audit found the County did not have adequate controls to independently verify one contractor it paid more than $25,000 in federal funds was not suspended or debarred from participating in federal programs. The County paid the contractor with its direct award funding. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition County staff responsible for this purchase relied on agreements the contractor entered with other organizations to verify its suspension and debarment status. The staff involved in this purchase were unaware of federal rules requiring the County to perform its own verification of suspension and debarment status when making a purchase more than $25,000. Effect of Condition The County did not obtain a written certification from the contractor, insert a clause into its contract or check for exclusion records at SAM.gov to verify one contractor it paid $31,239 was not suspended or debarred before contracting. Without adequate internal controls, the County cannot ensure the contractor it paid with federal funds was eligible to participate in federal programs. Any program funds the County used to pay contractors that were suspended or debarred would be unallowable, and the awarding agency could potentially recover them. Because we subsequently verified the vendor was not suspended or debarred, we are not questioning costs. Recommendation We recommend the County strengthen internal controls to ensure all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before contracting with or purchasing from them. County’s Response The County in its administration of its Coronavirus State and Local Fiscal Recovery Funds has historically complied with the federal suspension and debarment requirements principally through (1) ensuring each of its direct award and subrecipient contracts contain a clause or condition in the award contracts that states the contractor or subrecipient is not suspended or debarred, (2) requesting a certification to that effect, or (3) checking the SAM system to insure the contractor was not debarred or suspended. In this situation, the County procured IT equipment needed to improve the County's capability to conduct virtual meetings from a vendor under a "piggy-back" agreement under which debarment and suspension verification had been completed by another state agency. This vendor was also well known to the County as it had previously been utilized in procuring equipment with funding under the CARES Act. Staff managing this vendor relationship were unaware that reliance on prior debarment and suspension verification performed by another agency was not appropriate. In addition, due to significant turnover occurring in our SLFRF grant administration team occurring in late 2022 and early 2023, the single invoice triggering this finding--while properly documented with appropriate supporting documentation and approvals from staff managing the vendor relationship--was not reviewed by the SLFRF grant administration team to insure it was properly accompanied by a documented verification of debarment/suspension prior to its payment. As noted by the SAO in its audit finding, the vendor in question was not debarred or suspended from receiving federal monies, and no questioning of costs is involved. While the County has spent almost all of its SLFRF funds to-date under agreements containing certification language addressing debarment or suspension where required, the County recognizes that in this single situation involving the procurement of goods totaling $31,239 that its internal controls did not function properly to detect that proper debarment or suspension verification had occurred. We view this very much as an isolated incident, particularly given that over $9.8 million of the $15.02 million of SLFRF direct funds awarded to the County have been expended by the County through the end of 2023 in accordance with federal guidance and requirements regarding these funds under a program whose guidance rules have been subject to constant change since the American Rescue Plan Act was first signed. Regardless of the isolated nature of this incident, the County's management remains committed to insure this situation does not reoccur going forward, and as a result has or will be implementing the following corrective actions: • To the very limited extent disbarment/suspension language does not appear in contracts for goods or services being funding through County SLFRF funds, expenditures for all projects involving purchases of goods and services will first have to be approved and reviewed by the County's SLFRF grant administration staff who will verify disbarment/suspension status prior to the entering into contracts or the disbursement of SLFRF funds. • In the cases of piggy-back agreements, SLFRF grant administration staff will verify disbarment/suspension requirements have been met prior to payments for goods or services being approved that are funded with SLFRF funds; and • Appropriate messaging has been and will continue to be communicated to all SLFRF funded project owners and staff, reiterating requirements that all federal procurement policies must be adhered to for all County purchases of goods and services involving SLFRF funds, including that debarment and suspension verification has been completed and documented, and that such documentation must be forwarded to SLFRF grant administration staff before any disbursements of SLFRF funds will be made. We thank the SAO staff for identifying this issue and bringing it to our attention. Auditor’s Remarks We thank the County for its cooperation and assistance throughout the audit and acknowledge its commitment to resolve this finding. We will review the status of the County’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 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.

Clallam County January 1, 2023 through December 31, 2023 2023-001 The County did not have adequate internal controls 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 Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Health Care Authority, Washington State Department of Commerce Pass-through Award/Contract Number: SLFRF0002, SLRFP002 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 2023, the County spent $2,083,387 in program funds to respond to the public health emergency and address the negative economic impacts the emergency caused. This included providing assistance to households, small businesses, nonprofits, and impacted industries. Federal regulations require recipients to establish and maintain 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 that the contractors are not suspended, debarred or otherwise excluded. The County may verify this by obtaining 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 verify this before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Our audit found the County did not have adequate controls to independently verify one contractor it paid more than $25,000 in federal funds was not suspended or debarred from participating in federal programs. The County paid the contractor with its direct award funding. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition County staff responsible for this purchase relied on agreements the contractor entered with other organizations to verify its suspension and debarment status. The staff involved in this purchase were unaware of federal rules requiring the County to perform its own verification of suspension and debarment status when making a purchase more than $25,000. Effect of Condition The County did not obtain a written certification from the contractor, insert a clause into its contract or check for exclusion records at SAM.gov to verify one contractor it paid $31,239 was not suspended or debarred before contracting. Without adequate internal controls, the County cannot ensure the contractor it paid with federal funds was eligible to participate in federal programs. Any program funds the County used to pay contractors that were suspended or debarred would be unallowable, and the awarding agency could potentially recover them. Because we subsequently verified the vendor was not suspended or debarred, we are not questioning costs. Recommendation We recommend the County strengthen internal controls to ensure all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before contracting with or purchasing from them. County’s Response The County in its administration of its Coronavirus State and Local Fiscal Recovery Funds has historically complied with the federal suspension and debarment requirements principally through (1) ensuring each of its direct award and subrecipient contracts contain a clause or condition in the award contracts that states the contractor or subrecipient is not suspended or debarred, (2) requesting a certification to that effect, or (3) checking the SAM system to insure the contractor was not debarred or suspended. In this situation, the County procured IT equipment needed to improve the County's capability to conduct virtual meetings from a vendor under a "piggy-back" agreement under which debarment and suspension verification had been completed by another state agency. This vendor was also well known to the County as it had previously been utilized in procuring equipment with funding under the CARES Act. Staff managing this vendor relationship were unaware that reliance on prior debarment and suspension verification performed by another agency was not appropriate. In addition, due to significant turnover occurring in our SLFRF grant administration team occurring in late 2022 and early 2023, the single invoice triggering this finding--while properly documented with appropriate supporting documentation and approvals from staff managing the vendor relationship--was not reviewed by the SLFRF grant administration team to insure it was properly accompanied by a documented verification of debarment/suspension prior to its payment. As noted by the SAO in its audit finding, the vendor in question was not debarred or suspended from receiving federal monies, and no questioning of costs is involved. While the County has spent almost all of its SLFRF funds to-date under agreements containing certification language addressing debarment or suspension where required, the County recognizes that in this single situation involving the procurement of goods totaling $31,239 that its internal controls did not function properly to detect that proper debarment or suspension verification had occurred. We view this very much as an isolated incident, particularly given that over $9.8 million of the $15.02 million of SLFRF direct funds awarded to the County have been expended by the County through the end of 2023 in accordance with federal guidance and requirements regarding these funds under a program whose guidance rules have been subject to constant change since the American Rescue Plan Act was first signed. Regardless of the isolated nature of this incident, the County's management remains committed to insure this situation does not reoccur going forward, and as a result has or will be implementing the following corrective actions: • To the very limited extent disbarment/suspension language does not appear in contracts for goods or services being funding through County SLFRF funds, expenditures for all projects involving purchases of goods and services will first have to be approved and reviewed by the County's SLFRF grant administration staff who will verify disbarment/suspension status prior to the entering into contracts or the disbursement of SLFRF funds. • In the cases of piggy-back agreements, SLFRF grant administration staff will verify disbarment/suspension requirements have been met prior to payments for goods or services being approved that are funded with SLFRF funds; and • Appropriate messaging has been and will continue to be communicated to all SLFRF funded project owners and staff, reiterating requirements that all federal procurement policies must be adhered to for all County purchases of goods and services involving SLFRF funds, including that debarment and suspension verification has been completed and documented, and that such documentation must be forwarded to SLFRF grant administration staff before any disbursements of SLFRF funds will be made. We thank the SAO staff for identifying this issue and bringing it to our attention. Auditor’s Remarks We thank the County for its cooperation and assistance throughout the audit and acknowledge its commitment to resolve this finding. We will review the status of the County’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 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.

Clallam County January 1, 2023 through December 31, 2023 2023-001 The County did not have adequate internal controls 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 Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Health Care Authority, Washington State Department of Commerce Pass-through Award/Contract Number: SLFRF0002, SLRFP002 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 2023, the County spent $2,083,387 in program funds to respond to the public health emergency and address the negative economic impacts the emergency caused. This included providing assistance to households, small businesses, nonprofits, and impacted industries. Federal regulations require recipients to establish and maintain 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 that the contractors are not suspended, debarred or otherwise excluded. The County may verify this by obtaining 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 verify this before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Our audit found the County did not have adequate controls to independently verify one contractor it paid more than $25,000 in federal funds was not suspended or debarred from participating in federal programs. The County paid the contractor with its direct award funding. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition County staff responsible for this purchase relied on agreements the contractor entered with other organizations to verify its suspension and debarment status. The staff involved in this purchase were unaware of federal rules requiring the County to perform its own verification of suspension and debarment status when making a purchase more than $25,000. Effect of Condition The County did not obtain a written certification from the contractor, insert a clause into its contract or check for exclusion records at SAM.gov to verify one contractor it paid $31,239 was not suspended or debarred before contracting. Without adequate internal controls, the County cannot ensure the contractor it paid with federal funds was eligible to participate in federal programs. Any program funds the County used to pay contractors that were suspended or debarred would be unallowable, and the awarding agency could potentially recover them. Because we subsequently verified the vendor was not suspended or debarred, we are not questioning costs. Recommendation We recommend the County strengthen internal controls to ensure all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before contracting with or purchasing from them. County’s Response The County in its administration of its Coronavirus State and Local Fiscal Recovery Funds has historically complied with the federal suspension and debarment requirements principally through (1) ensuring each of its direct award and subrecipient contracts contain a clause or condition in the award contracts that states the contractor or subrecipient is not suspended or debarred, (2) requesting a certification to that effect, or (3) checking the SAM system to insure the contractor was not debarred or suspended. In this situation, the County procured IT equipment needed to improve the County's capability to conduct virtual meetings from a vendor under a "piggy-back" agreement under which debarment and suspension verification had been completed by another state agency. This vendor was also well known to the County as it had previously been utilized in procuring equipment with funding under the CARES Act. Staff managing this vendor relationship were unaware that reliance on prior debarment and suspension verification performed by another agency was not appropriate. In addition, due to significant turnover occurring in our SLFRF grant administration team occurring in late 2022 and early 2023, the single invoice triggering this finding--while properly documented with appropriate supporting documentation and approvals from staff managing the vendor relationship--was not reviewed by the SLFRF grant administration team to insure it was properly accompanied by a documented verification of debarment/suspension prior to its payment. As noted by the SAO in its audit finding, the vendor in question was not debarred or suspended from receiving federal monies, and no questioning of costs is involved. While the County has spent almost all of its SLFRF funds to-date under agreements containing certification language addressing debarment or suspension where required, the County recognizes that in this single situation involving the procurement of goods totaling $31,239 that its internal controls did not function properly to detect that proper debarment or suspension verification had occurred. We view this very much as an isolated incident, particularly given that over $9.8 million of the $15.02 million of SLFRF direct funds awarded to the County have been expended by the County through the end of 2023 in accordance with federal guidance and requirements regarding these funds under a program whose guidance rules have been subject to constant change since the American Rescue Plan Act was first signed. Regardless of the isolated nature of this incident, the County's management remains committed to insure this situation does not reoccur going forward, and as a result has or will be implementing the following corrective actions: • To the very limited extent disbarment/suspension language does not appear in contracts for goods or services being funding through County SLFRF funds, expenditures for all projects involving purchases of goods and services will first have to be approved and reviewed by the County's SLFRF grant administration staff who will verify disbarment/suspension status prior to the entering into contracts or the disbursement of SLFRF funds. • In the cases of piggy-back agreements, SLFRF grant administration staff will verify disbarment/suspension requirements have been met prior to payments for goods or services being approved that are funded with SLFRF funds; and • Appropriate messaging has been and will continue to be communicated to all SLFRF funded project owners and staff, reiterating requirements that all federal procurement policies must be adhered to for all County purchases of goods and services involving SLFRF funds, including that debarment and suspension verification has been completed and documented, and that such documentation must be forwarded to SLFRF grant administration staff before any disbursements of SLFRF funds will be made. We thank the SAO staff for identifying this issue and bringing it to our attention. Auditor’s Remarks We thank the County for its cooperation and assistance throughout the audit and acknowledge its commitment to resolve this finding. We will review the status of the County’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 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.

Clallam County January 1, 2023 through December 31, 2023 2023-001 The County did not have adequate internal controls 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 Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Health Care Authority, Washington State Department of Commerce Pass-through Award/Contract Number: SLFRF0002, SLRFP002 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 2023, the County spent $2,083,387 in program funds to respond to the public health emergency and address the negative economic impacts the emergency caused. This included providing assistance to households, small businesses, nonprofits, and impacted industries. Federal regulations require recipients to establish and maintain 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 that the contractors are not suspended, debarred or otherwise excluded. The County may verify this by obtaining 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 verify this before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Our audit found the County did not have adequate controls to independently verify one contractor it paid more than $25,000 in federal funds was not suspended or debarred from participating in federal programs. The County paid the contractor with its direct award funding. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition County staff responsible for this purchase relied on agreements the contractor entered with other organizations to verify its suspension and debarment status. The staff involved in this purchase were unaware of federal rules requiring the County to perform its own verification of suspension and debarment status when making a purchase more than $25,000. Effect of Condition The County did not obtain a written certification from the contractor, insert a clause into its contract or check for exclusion records at SAM.gov to verify one contractor it paid $31,239 was not suspended or debarred before contracting. Without adequate internal controls, the County cannot ensure the contractor it paid with federal funds was eligible to participate in federal programs. Any program funds the County used to pay contractors that were suspended or debarred would be unallowable, and the awarding agency could potentially recover them. Because we subsequently verified the vendor was not suspended or debarred, we are not questioning costs. Recommendation We recommend the County strengthen internal controls to ensure all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before contracting with or purchasing from them. County’s Response The County in its administration of its Coronavirus State and Local Fiscal Recovery Funds has historically complied with the federal suspension and debarment requirements principally through (1) ensuring each of its direct award and subrecipient contracts contain a clause or condition in the award contracts that states the contractor or subrecipient is not suspended or debarred, (2) requesting a certification to that effect, or (3) checking the SAM system to insure the contractor was not debarred or suspended. In this situation, the County procured IT equipment needed to improve the County's capability to conduct virtual meetings from a vendor under a "piggy-back" agreement under which debarment and suspension verification had been completed by another state agency. This vendor was also well known to the County as it had previously been utilized in procuring equipment with funding under the CARES Act. Staff managing this vendor relationship were unaware that reliance on prior debarment and suspension verification performed by another agency was not appropriate. In addition, due to significant turnover occurring in our SLFRF grant administration team occurring in late 2022 and early 2023, the single invoice triggering this finding--while properly documented with appropriate supporting documentation and approvals from staff managing the vendor relationship--was not reviewed by the SLFRF grant administration team to insure it was properly accompanied by a documented verification of debarment/suspension prior to its payment. As noted by the SAO in its audit finding, the vendor in question was not debarred or suspended from receiving federal monies, and no questioning of costs is involved. While the County has spent almost all of its SLFRF funds to-date under agreements containing certification language addressing debarment or suspension where required, the County recognizes that in this single situation involving the procurement of goods totaling $31,239 that its internal controls did not function properly to detect that proper debarment or suspension verification had occurred. We view this very much as an isolated incident, particularly given that over $9.8 million of the $15.02 million of SLFRF direct funds awarded to the County have been expended by the County through the end of 2023 in accordance with federal guidance and requirements regarding these funds under a program whose guidance rules have been subject to constant change since the American Rescue Plan Act was first signed. Regardless of the isolated nature of this incident, the County's management remains committed to insure this situation does not reoccur going forward, and as a result has or will be implementing the following corrective actions: • To the very limited extent disbarment/suspension language does not appear in contracts for goods or services being funding through County SLFRF funds, expenditures for all projects involving purchases of goods and services will first have to be approved and reviewed by the County's SLFRF grant administration staff who will verify disbarment/suspension status prior to the entering into contracts or the disbursement of SLFRF funds. • In the cases of piggy-back agreements, SLFRF grant administration staff will verify disbarment/suspension requirements have been met prior to payments for goods or services being approved that are funded with SLFRF funds; and • Appropriate messaging has been and will continue to be communicated to all SLFRF funded project owners and staff, reiterating requirements that all federal procurement policies must be adhered to for all County purchases of goods and services involving SLFRF funds, including that debarment and suspension verification has been completed and documented, and that such documentation must be forwarded to SLFRF grant administration staff before any disbursements of SLFRF funds will be made. We thank the SAO staff for identifying this issue and bringing it to our attention. Auditor’s Remarks We thank the County for its cooperation and assistance throughout the audit and acknowledge its commitment to resolve this finding. We will review the status of the County’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 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.