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 - State and Local Fiscal Recovery Funds
Federal Grantor Name: U.S. Department of 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
Description of Condition
The County participates in the Coronavirus State and Local Fiscal Recovery Funds (SLFRF). The purpose of the SLFRF 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 fiscal year 2023, the County spent $20,329,937 to administer the program.
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 and 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 from participating in federal programs. 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 must maintain documentation demonstrating compliance with this federal requirement.
Cause of Condition
County staff have controls to include the suspension and debarment clause language within contracts. For situations without formal contracts, the grant administrator or decentralized department must check SAM.gov. The County did not enter into a contract for this contractor and the Health department did not verify status on SAM.gov.
The Health Department staff responsible did not realize that these purchases were subject to suspension and debarment. In addition, the County did not expect total costs to exceed $25,000 and did not have a process to alert it to perform the verification when the combined purchase totals approached or exceeded $25,000.
Effect of Condition
The County did not obtain written certifications from the contractors, insert a clause into the contract or check for exclusion records at SAM.gov to verify one contractor it paid $39,330 using federal funds 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 contractors were 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
Whatcom County’s primary internal control over federal grant compliance is the requirement that grant administrators to attend federal grant training. Whatcom County will evaluate the feasibility of adding an additional internal control of checking for debarment when a vendor is set in our accounting system and there after checking for debarment every calendar year before purchase orders are issued.
Auditor’s Remarks
We appreciate the steps the College is taking to resolve 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.
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 - State and Local Fiscal Recovery Funds
Federal Grantor Name: U.S. Department of 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
Description of Condition
The County participates in the Coronavirus State and Local Fiscal Recovery Funds (SLFRF). The purpose of the SLFRF 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 fiscal year 2023, the County spent $20,329,937 to administer the program.
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 and 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 from participating in federal programs. 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 must maintain documentation demonstrating compliance with this federal requirement.
Cause of Condition
County staff have controls to include the suspension and debarment clause language within contracts. For situations without formal contracts, the grant administrator or decentralized department must check SAM.gov. The County did not enter into a contract for this contractor and the Health department did not verify status on SAM.gov.
The Health Department staff responsible did not realize that these purchases were subject to suspension and debarment. In addition, the County did not expect total costs to exceed $25,000 and did not have a process to alert it to perform the verification when the combined purchase totals approached or exceeded $25,000.
Effect of Condition
The County did not obtain written certifications from the contractors, insert a clause into the contract or check for exclusion records at SAM.gov to verify one contractor it paid $39,330 using federal funds 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 contractors were 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
Whatcom County’s primary internal control over federal grant compliance is the requirement that grant administrators to attend federal grant training. Whatcom County will evaluate the feasibility of adding an additional internal control of checking for debarment when a vendor is set in our accounting system and there after checking for debarment every calendar year before purchase orders are issued.
Auditor’s Remarks
We appreciate the steps the College is taking to resolve 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.