Audit 360756

2024-003: Preparation of Schedule of Expenditures of Federal Awards (SEFA) Finding Type: Material Weakness in Internal Controls and Noncompliance (Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Reporting) Federal Program: U.S. Department of Treasury – Local Assistance and Tribal Consistency Fund (AL #21.032) Criteria: The Code of Federal Regulations (CFR) Section 200.303(b) requires non-Federal entities to establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and terms and conditions of the Federal award. CFR Section 200.502(a) states that the determination of when a Federal award is expended should be based on when the activity related to the Federal award occurs. Generally, the activity pertains to events that require the non-Federal entity to comply with Federal statutes, regulations, and the terms and conditions of Federal awards, such as expenditure/expense transactions associated with grant awards. The County reports expenditures on the SEFA when the expenditure has been incurred, or on the accrual basis of accounting, in accordance with generally accepted accounting principles. CFR Section 200.510(b) requires the auditee to prepare a SEFA for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with CFR Section 200.502(a), as stated above, and must reconcile amounts reported in the SEFA to the amounts reported in the auditee’s financial statements. Condition: The SEFA was not appropriately reconciled to federal grant revenues and expenditures recorded in the financial statements. Changes were made during the closing process and during the completion of the single audit to properly report expenditures on the SEFA. Closing procedures should be in place to reconcile grant expenditures incurred at year-end, confirm the amount as eligible with the grantor, claim the grant revenues on a timely basis, reconcile the claim to the general ledger, and ensure the expenditures that will be claimed under federal awards are properly reported on the SEFA and audited financial statements prior to the start of the single audit. If expenditures reported on the SEFA are misstated, the County could fail to have a program appropriately identified as a major program and tested as a major program during the single audit. Failure to have a program audited during the single audit would result in noncompliance with Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Cause: Closing procedures were not in place and management did not effectively communicate with County departments responsible for administering federal awards to identify all federal grant related activity. Effect: County personnel were unable to provide a complete SEFA in the appropriate format prior to the start of the annual financial statement audit and were uncertain if a single audit was required. The SEFA required material adjustments to include all federal expenditures prior to the beginning of the single audit. Questioned Costs: No costs have been questioned as a result of this finding. Recommendation: We recommend that management meet with department heads throughout the year and during the closing process to identify all expenditures under federal awards. Training should be provided to all staff to make sure they are aware of the importance of accurately reconciling and claiming grant expenditures on a timely basis and providing the information to management for inclusion on the SEFA. Views of Responsible Officials: The County will work to improve closing processes and communications with various departments to ensure the SEFA is complete and accurate.

2024-004: Written Policies Required by the Uniform Guidance Finding Type: Material Weakness in Internal Controls and Noncompliance (Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Reporting) Federal Program: U.S. Department of Treasury – Local Assistance and Tribal Consistency Fund (AL #21.032) Criteria: The County does not have written policies and procedures to implement the requirements of 2 CFR section 200 for the administration of federal awards. The Uniform Guidance requires a non-federal entity that has expended federal awards for a grant on or after December 26, 2014 to have written policies pertaining to: 1) advance payments and reimbursements (financial management); 2) determination of allowable costs; 3) compensation (personnel and benefits policies); 4) travel costs; and 5) procurement procedures. 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal controls over the federal awards that provide assurance that the entity is managing the federal awards in compliance with federal statutes, regulations, and the conditions of the federal award. Condition: The County does not have processes or written policies in place to conform to all of the requirements in the Uniform Guidance. Cause: The County has not reviewed and updated its policies and procedures for continued changes in grants and the Uniform Guidance. Effect: As a result of this condition, the County did not fully comply with the Uniform Guidance. Questioned Costs: No costs have been questioned as a result of this finding. Recommendation: We recommend that the County adopt formal written policies covering these areas as soon as practical. Views of Responsible Officials: The County will work to update policies and procedures and to formalize responsibilities.

2024-003: Preparation of Schedule of Expenditures of Federal Awards (SEFA) Finding Type: Material Weakness in Internal Controls and Noncompliance (Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Reporting) Federal Program: U.S. Department of Treasury – Local Assistance and Tribal Consistency Fund (AL #21.032) Criteria: The Code of Federal Regulations (CFR) Section 200.303(b) requires non-Federal entities to establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and terms and conditions of the Federal award. CFR Section 200.502(a) states that the determination of when a Federal award is expended should be based on when the activity related to the Federal award occurs. Generally, the activity pertains to events that require the non-Federal entity to comply with Federal statutes, regulations, and the terms and conditions of Federal awards, such as expenditure/expense transactions associated with grant awards. The County reports expenditures on the SEFA when the expenditure has been incurred, or on the accrual basis of accounting, in accordance with generally accepted accounting principles. CFR Section 200.510(b) requires the auditee to prepare a SEFA for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with CFR Section 200.502(a), as stated above, and must reconcile amounts reported in the SEFA to the amounts reported in the auditee’s financial statements. Condition: The SEFA was not appropriately reconciled to federal grant revenues and expenditures recorded in the financial statements. Changes were made during the closing process and during the completion of the single audit to properly report expenditures on the SEFA. Closing procedures should be in place to reconcile grant expenditures incurred at year-end, confirm the amount as eligible with the grantor, claim the grant revenues on a timely basis, reconcile the claim to the general ledger, and ensure the expenditures that will be claimed under federal awards are properly reported on the SEFA and audited financial statements prior to the start of the single audit. If expenditures reported on the SEFA are misstated, the County could fail to have a program appropriately identified as a major program and tested as a major program during the single audit. Failure to have a program audited during the single audit would result in noncompliance with Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Cause: Closing procedures were not in place and management did not effectively communicate with County departments responsible for administering federal awards to identify all federal grant related activity. Effect: County personnel were unable to provide a complete SEFA in the appropriate format prior to the start of the annual financial statement audit and were uncertain if a single audit was required. The SEFA required material adjustments to include all federal expenditures prior to the beginning of the single audit. Questioned Costs: No costs have been questioned as a result of this finding. Recommendation: We recommend that management meet with department heads throughout the year and during the closing process to identify all expenditures under federal awards. Training should be provided to all staff to make sure they are aware of the importance of accurately reconciling and claiming grant expenditures on a timely basis and providing the information to management for inclusion on the SEFA. Views of Responsible Officials: The County will work to improve closing processes and communications with various departments to ensure the SEFA is complete and accurate.

2024-004: Written Policies Required by the Uniform Guidance Finding Type: Material Weakness in Internal Controls and Noncompliance (Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Reporting) Federal Program: U.S. Department of Treasury – Local Assistance and Tribal Consistency Fund (AL #21.032) Criteria: The County does not have written policies and procedures to implement the requirements of 2 CFR section 200 for the administration of federal awards. The Uniform Guidance requires a non-federal entity that has expended federal awards for a grant on or after December 26, 2014 to have written policies pertaining to: 1) advance payments and reimbursements (financial management); 2) determination of allowable costs; 3) compensation (personnel and benefits policies); 4) travel costs; and 5) procurement procedures. 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal controls over the federal awards that provide assurance that the entity is managing the federal awards in compliance with federal statutes, regulations, and the conditions of the federal award. Condition: The County does not have processes or written policies in place to conform to all of the requirements in the Uniform Guidance. Cause: The County has not reviewed and updated its policies and procedures for continued changes in grants and the Uniform Guidance. Effect: As a result of this condition, the County did not fully comply with the Uniform Guidance. Questioned Costs: No costs have been questioned as a result of this finding. Recommendation: We recommend that the County adopt formal written policies covering these areas as soon as practical. Views of Responsible Officials: The County will work to update policies and procedures and to formalize responsibilities.