Audit 355902

Procurement Policies and Procedures Federal Agency: U.S. Department of Treasury Federal Program Name: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: ISA-ARPA-ADWR-123022-01 - 2023 Pass-Through Agency: State of Arizona Governor’s Office Pass-Through Number(s): ERMT-20-002 Award Period: January 1, 2023 through January 1, 2026 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Under the U.S. Code of Federal Regulations Title 2, Part 200, Uniform Administrative requires certain elements to be part of the District’s procurement standards. The general procurement standards require the District to have and use documented procurement procedures that conform to the procurement standards identified in § 200.317 through 200.327 of the Uniform Guidance. The details of this requirements can be found in Title 2, Part 200, CFR Section 318(a). Condition: During our testing, we noted the District did not have adequate internal controls designed to ensure procurement procedures that conform to Uniform Guidance were followed, or designed to ensure vendors were not suspended or debarred. Questioned costs: None Context: During our testing, it was noted that the District was not following their federal procurement policy #2023-05 to ensure compliance with CFR, Subtitle A Chapter II, Part 200, Subparts D and E when entering into vendor contracts. Also noted the District was not reviewing vendors prior to entering into a contract to ensure the vendor was not on the suspended or debarred vendor list maintained by the General Services Administration. Cause: The District does not have effective internal controls in place to ensure compliance with the Uniform Guidance procurement rules and procedures. Effect: The lack of internal controls over the provisions of procurement, suspension, and debarment compliance requirements provides an opportunity for noncompliance. Repeat Finding: Repeat of prior year finding 2022-001. Recommendation: We recommend the District design controls to ensure an adequate review process is in place to review potential contractors to determine compliance with the Uniform Guidance procurement rules and procedures. Views of responsible officials and planned corrective actions: Management concurs with the finding, and as reported in the corrective action plan, District policies will be updated and approved to conform to federal guidance.

Schedule of Expenditures of Federal Awards Federal Agency: U.S. Department of Treasury Federal Program Name: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: ISA-ARPA-ADWR-123022-01 - 2023 Pass-Through Agency: State of Arizona Governor’s Office Pass-Through Number(s): ERMT-20-002 Award Period: January 1, 2023 through January 1, 2026 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Under the U.S. Code of Federal Regulations Title 2, Part 200, Subpart F, Uniform Administrative requires certain auditee responsibilities identified in § 200.508 including the appropriate preparation of financial statements, including the schedule of expenditures of federal awards in accordance with § 200.510. Condition: The District's SEFA was overstated and revised by a known amount of $117,462 comprised of invoices incurred prior to the ARPA act that should not have been submitted under their ARPA grant allocation. Questioned costs: None Context: During our reconciliation of the schedule of expenditures of federal awards (SEFA) to the District's general ledger and invoice listings, it was determined various invoices for inventory/supplies purchases made prior to the ARPA act beginning period of July 1, 2021 were submitted for reimbursement under their ARPA allocation and were presented on the SEFA. The total overstatement and revision of the SEFA was $117,462. Cause: The District does not have effective internal controls in place to ensure compliance with the Uniform Guidance. Effect: The lack of internal controls over the provisions of allowable costs and period of performance compliance requirements provides an opportunity for noncompliance. Repeat Finding: No. Recommendation: We recommend the District design controls to ensure an adequate review process over the invoices recorded and presented on the schedule of expenditures of federal awards to determine compliance with the Uniform Guidance. Views of responsible officials and planned corrective actions: Management concurs with the finding, and as reported in the corrective action plan, District policies will be updated and approved to conform to federal guidance.

Procurement Policies and Procedures Federal Agency: U.S. Department of Treasury Federal Program Name: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: ISA-ARPA-ADWR-123022-01 - 2023 Pass-Through Agency: State of Arizona Governor’s Office Pass-Through Number(s): ERMT-20-002 Award Period: January 1, 2023 through January 1, 2026 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Under the U.S. Code of Federal Regulations Title 2, Part 200, Uniform Administrative requires certain elements to be part of the District’s procurement standards. The general procurement standards require the District to have and use documented procurement procedures that conform to the procurement standards identified in § 200.317 through 200.327 of the Uniform Guidance. The details of this requirements can be found in Title 2, Part 200, CFR Section 318(a). Condition: During our testing, we noted the District did not have adequate internal controls designed to ensure procurement procedures that conform to Uniform Guidance were followed, or designed to ensure vendors were not suspended or debarred. Questioned costs: None Context: During our testing, it was noted that the District was not following their federal procurement policy #2023-05 to ensure compliance with CFR, Subtitle A Chapter II, Part 200, Subparts D and E when entering into vendor contracts. Also noted the District was not reviewing vendors prior to entering into a contract to ensure the vendor was not on the suspended or debarred vendor list maintained by the General Services Administration. Cause: The District does not have effective internal controls in place to ensure compliance with the Uniform Guidance procurement rules and procedures. Effect: The lack of internal controls over the provisions of procurement, suspension, and debarment compliance requirements provides an opportunity for noncompliance. Repeat Finding: Repeat of prior year finding 2022-001. Recommendation: We recommend the District design controls to ensure an adequate review process is in place to review potential contractors to determine compliance with the Uniform Guidance procurement rules and procedures. Views of responsible officials and planned corrective actions: Management concurs with the finding, and as reported in the corrective action plan, District policies will be updated and approved to conform to federal guidance.

Schedule of Expenditures of Federal Awards Federal Agency: U.S. Department of Treasury Federal Program Name: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: ISA-ARPA-ADWR-123022-01 - 2023 Pass-Through Agency: State of Arizona Governor’s Office Pass-Through Number(s): ERMT-20-002 Award Period: January 1, 2023 through January 1, 2026 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Under the U.S. Code of Federal Regulations Title 2, Part 200, Subpart F, Uniform Administrative requires certain auditee responsibilities identified in § 200.508 including the appropriate preparation of financial statements, including the schedule of expenditures of federal awards in accordance with § 200.510. Condition: The District's SEFA was overstated and revised by a known amount of $117,462 comprised of invoices incurred prior to the ARPA act that should not have been submitted under their ARPA grant allocation. Questioned costs: None Context: During our reconciliation of the schedule of expenditures of federal awards (SEFA) to the District's general ledger and invoice listings, it was determined various invoices for inventory/supplies purchases made prior to the ARPA act beginning period of July 1, 2021 were submitted for reimbursement under their ARPA allocation and were presented on the SEFA. The total overstatement and revision of the SEFA was $117,462. Cause: The District does not have effective internal controls in place to ensure compliance with the Uniform Guidance. Effect: The lack of internal controls over the provisions of allowable costs and period of performance compliance requirements provides an opportunity for noncompliance. Repeat Finding: No. Recommendation: We recommend the District design controls to ensure an adequate review process over the invoices recorded and presented on the schedule of expenditures of federal awards to determine compliance with the Uniform Guidance. Views of responsible officials and planned corrective actions: Management concurs with the finding, and as reported in the corrective action plan, District policies will be updated and approved to conform to federal guidance.