Condition: During our review and reconciliation of the Schedule of Expenditures of Federal Awards (SEFA) as initially prepared by the County, we identified federal programs that were not listed accurately which resulted in federal expenditures being overstated stated by $2,412,977.
• Expenditures reported on the SEFA for ALN 16.607 - Bulletproof Vest Partnership Program were $36,810. Actual federal expenditures obtained from the County’s records confirm $0 expended for a variance of $36,810.
• Expenditures reported on the SEFA for ALN 21.019 - Coronavirus Relief Fund were $2,376,264. Actual federal expenditures obtained from the County’s records confirm $0 expended for a variance of $2,376,264.
Expenditures reported on the SEFA for ALN 97.042 - Emergency Management Performance Grants were $24,864. Actual federal expenditures obtained from the County’s records confirm $24,961 expended for a variance of ($97).
Additionally, the County failed to present $500,000 in subrecipient expenditures on the SEFA for ALN 21.027 - Coronavirus State and Local Fiscal Recovery Funds.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure accurate reporting of expenditures for all federal awards.
Effect of Condition: This condition resulted in inaccurate recording of the federal expenditures on the SEFA.
Recommendation: OSAI recommends county officials and department heads gain an understanding of federal programs awarded to Rogers County. Internal control procedures should be designed and implemented to ensure accurate reporting of expenditures on the SEFA and to ensure compliance with federal requirements. The Board of County Commissioners (BOCC) should review and approve the SEFA in an open meeting.
Management Response:
Board of County Commissioners: The Board of County Commissioners is responsible for the overall fiscal concerns of the county. See OKLA. STAT. Title 19, § 345. The Board of County Commissioners, with the cooperation and participation of all elected officials, reviews, develops and implements policies and procedures to create a strong internal control environment. Additionally, the Board of County Commissioners conducts meetings with all elected officials and officers responsible for the receipt and/or expenditure of county funds. These meetings address fiscal matters, including but not limited to, policy discussions and implementation, financial reports, budget oversight, SEFA reporting, and legal compliance.
Policies and procedures, combined with fiscal oversight meetings, are intended to: 1) prevent or detect material misstatements in the financial statements; 2) prevent or detect fraud within the county; 3) increase communication between the Board of County Commissioners and those elected officials and officers responsible for the receipt and/or expenditure of public funds; 4) provide oversight over the fiscal concerns of the county; 5) identify and address risks related to financial reporting; 6) ensure the accuracy of Rogers County’s financial statements, Estimate of Needs, and the SEFA; and 7) ensure compliance with all applicable federal and state laws, regulations, and/or codes.
The Board of County Commissioners, with the cooperation of all elected officials and officers responsible for the receipt or expenditure of federal funds, will evaluate the processes and procedures currently in place to ensure the accuracy of SEFA reporting and detect potential inaccuracies and/or misstatements.
Criteria: 2 CFR § 200.303(a) Internal Controls reads as follows:
The non-Federal entity must:
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 the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
2 CFR § 200.508(b) Auditee responsibilities reads as follows:
The auditee must:
Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with §200.510 Financial statements.
2 CFR § 200.510(b) Financial statements reads, in part, as follows:
Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended as determined in accordance with §200.502 Basis for determining Federal awards expended.
Further, GAO Standards – Section 2 – Objectives of an Entity - OV2.23 states in part:
Compliance Objectives
Management conducts activities in accordance with applicable laws and regulations. As part of specifying compliance objectives, the entity determines which laws and regulations apply to the entity. Management is expected to set objectives that incorporate these requirements.
Condition: Through the process of gaining an understanding of the County’s internal control structure for federal programs, it was noted that county-wide internal controls regarding Control Environment, Risk Assessment, Information and Communication, and Monitoring have not been designed.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure the County complies with grant requirements.
Effect of Condition: This condition could result in noncompliance with grant requirements and could result in the loss of federal funds for the County.
Recommendation: OSAI recommends that the County design and implement a system of internal controls to ensure compliance with grant requirements.
Management Response:
Board of County Commissioners: The Board of County Commissioners is responsible for the overall fiscal concerns of the county. See OKLA. STAT. Title 19, § 345. The Board of County Commissioners, with the cooperation and participation of all elected officials, reviews, develops and implements policies and procedures to create a strong internal control environment. The Board of County Commissioners will work with all elected officials, the third-party administrator, and federal, state and local partners to develop policies, procedures, and internal controls designed to accurately track grants, including the application process, verification, oversight, and reporting of grant requirements. These policies and procedures will be designed to identify requirements for recipients and sub-recipients of grants, ensure accurate equipment and real property management, procurement, recipient and subrecipient monitoring and reporting. Further, policies will ensure a proper understanding of all grant requirements and compliance of the same. To assist in this process, the Board of County Commissioners engaged a third-party administrator to oversee the grant process, including application, eligibility, review, requirements, contracting, recipient tracking and oversight, and documentation and reporting. The Board of County Commissioners will work with the third-party administrator to ensure proper grant administration.
Criteria: The GAO Standards – Section 1 – Fundamental Concepts of Internal Control – OV1.01 states in part:
Definition of Internal Control
Internal control is a process effected by an entity’s oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved.
Additionally, GAO Standards – Section 2 – Establishing an Effective Internal Control System – OV2.04 states in part:
Components, Principles, and Attributes
Control Environment - The foundation for an internal control system. It provides the discipline and structure to help an entity achieve its objectives.
Risk Assessment - Assesses the risks facing the entity as it seeks to achieve its objectives. This assessment provides the basis for developing appropriate risk responses.
Information and Communication - The quality information management and personnel communicate and use to support the internal control system.
Monitoring - Activities management establishes and operates to assess the quality of performance over time and promptly resolve the findings of audits and other reviews.
Condition: During the process of documenting the County’s internal controls regarding federal disbursements, we noted that Rogers County has not established procedures to ensure compliance with the following compliance requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance; Procurement and Suspension and Debarment; Reporting; and Subrecipient Monitoring.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements.
Effect of Condition: This condition could result in noncompliance with grant requirements and could lead to a loss of federal funds to the County.
Recommendation: OSAI recommends that the County gain an understanding of requirements for this program and implement a system of internal control procedures to ensure compliance with grant requirements.
Management Response:
Board of County Commissioners: The Board of County Commissioners is responsible for the overall fiscal concerns of the county. See OKLA. STAT. Title 19, § 345. The Board of County Commissioners, with the cooperation and participation of all elected officials, reviews, develops and implements policies and procedures to create a strong internal control environment. The Board of County Commissioners will work with all elected officials, the third-party administrator, and federal, state and local partners to develop policies, procedures, and internal controls designed to accurately track grants, including the application process, verification, oversight, and reporting of grant requirements. These policies and procedures will be designed to identify requirements for recipients and sub-recipients of grants, ensure accurate equipment and real property management, procurement, recipient and subrecipient monitoring and reporting. Further, policies will ensure a proper understanding of all grant requirements and compliance of the same. To assist in this process, the Board of County Commissioners engaged a third-party administrator to oversee the grant process, including application, eligibility, review, requirements, contracting, recipient tracking and oversight, and documentation and reporting. The Board of County Commissioners will work with the third-party administrator to ensure proper grant administration.
Criteria: OMB 2 CFR 200, Subpart D. 200.303(a) reads as follows:
Subpart D-Post Federal Award Requirements
§ 200.303 Internal Controls
The non-Federal entity must:
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 the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Further, accountability and stewardship should be overall goals in management’s accounting of federal funds. Internal controls should be designed to monitor compliance with laws and regulations pertaining to grant contracts.
Coronavirus State and Local Fiscal Recovery Funds, the following noncompliance with the Activities Allowed or Unallowed and Allowable Costs/Cost Principles were noted:
• The County failed to properly document the expenditure for one (1) of the two (2) federal expenditures totaling $500,000. They did not execute a contract or award documents, and the invoice was not itemized. This expenditure had a questioned cost of $500,000.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements.
Effect of Condition: This condition resulted in noncompliance with federal grant requirements and could result in a loss of federal funds.
Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements.
Management Response:
Board of County Commissioners: The Board of County Commissioners is responsible for the overall fiscal concerns of the county. See OKLA. STAT. Title 19, § 345. The Board of County Commissioners, with the cooperation and participation of all elected officials, reviews, develops and implements policies and procedures to create a strong internal control environment. The Board of County Commissioners will work with all elected officials, the third-party administrator, and federal, state and local partners to develop policies, procedures, and internal controls designed to accurately track grants, including the application process, verification, oversight, and reporting of grant requirements. These policies and procedures will be designed to identify requirements for recipients and sub-recipients of grants, ensure accurate equipment and real property management, procurement, recipient and subrecipient monitoring and reporting. Further, policies will ensure a proper understanding of all grant requirements and compliance of the same. To assist in this process, the Board of County Commissioners engaged a third-party administrator to oversee the grant process, including application, eligibility, review, requirements, contracting, recipient tracking and oversight, and documentation and reporting. The Board of County Commissioners will work with the third-party administrator to ensure proper grant administration.
Criteria: 2 CFR § 200.403 - Factors affecting allowability costs states in relevant part,
Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards:
(f) not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period.
(g) Be adequately documented.
Condition: During the test of 100% of expenditures, two (2) expenditures totaling $570,080, for the Coronavirus State and Local Fiscal Recovery Funds, the following noncompliance with the Procurement and Suspension and Debarment compliance requirement was noted:
• The County failed to properly document the expenditure for one (1) of the two (2) federal expenditures totaling $500,000. They did not execute a contract or award documents, and the invoice was not itemized. This expenditure had a questioned cost of $500,000.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements.
Effect of Condition: This condition resulted in noncompliance with federal grant requirements and could result in a loss of federal funds.
Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements.
Management Response:
Board of County Commissioners: The Board of County Commissioners is responsible for the overall fiscal concerns of the county. See OKLA. STAT. Title 19, § 345. The Board of County Commissioners, with the cooperation and participation of all elected officials, reviews, develops and implements policies and procedures to create a strong internal control environment. The Board of County Commissioners will work with all elected officials, the third-party administrator, and federal, state and local partners to develop policies, procedures, and internal controls designed to accurately track grants, including the application process, verification, oversight, and reporting of grant requirements. These policies and procedures will be designed to identify requirements for recipients and sub-recipients of grants, ensure accurate equipment and real property management, procurement, recipient and subrecipient monitoring and reporting. Further, policies will ensure a proper understanding of all grant requirements and compliance of the same. To assist in this process, the Board of County Commissioners engaged a third-party administrator to oversee the grant process, including application, eligibility, review, requirements, contracting, recipient tracking and oversight, and documentation and reporting. The Board of County Commissioners will work with the third-party administrator to ensure proper grant administration.
Criteria: 2 CFR § 200.303(a) Internal Controls reads as follows:
The non-Federal entity must:
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 the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
2 CFR § 200.320 Internal Controls reads as follows:
There are three types of procurement methods described in this section: informal procurement methods (for micro-purchases and simplified acquisitions); formal procurement methods (through sealed bids or proposals); and noncompetitive procurement methods. For any of these methods, the recipient or subrecipient must maintain and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319.
Condition: During the test of 100% of expenditures, two (2) expenditures totaling $570,080, for the Coronavirus State and Local Fiscal Recovery Funds, the following noncompliance with the Reporting compliance requirement was noted:
• The interim and the 3rd quarter reports were not submitted.
• The 2nd quarter report was not timely submitted.
• The County improperly reported a vendor as a subrecipient instead of as a vendor relationship.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are properly reported in accordance with federal compliance requirements.
Effect of Condition: This condition resulted in noncompliance with federal grant guidelines.
Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements.
Management Response:
Board of County Commissioners: The Board of County Commissioners is responsible for the overall fiscal concerns of the county. See OKLA. STAT. Title 19, § 345. The Board of County Commissioners, with the cooperation and participation of all elected officials, reviews, develops and implements policies and procedures to create a strong internal control environment. The Board of County Commissioners will work with all elected officials, the third-party administrator, and federal, state and local partners to develop policies, procedures, and internal controls designed to accurately track grants, including the application process, verification, oversight, and reporting of grant requirements. These policies and procedures will be designed to identify requirements for recipients and sub-recipients of grants, ensure accurate equipment and real property management, procurement, recipient and subrecipient monitoring and reporting. Further, policies will ensure a proper understanding of all grant requirements and compliance of the same. To assist in this process, the Board of County Commissioners engaged a third-party administrator to oversee the grant process, including application, eligibility, review, requirements, contracting, recipient tracking and oversight, and documentation and reporting. The Board of County Commissioners will work with the third-party administrator to ensure proper grant administration.
Criteria: Accountability and stewardship should be overall goals in management’s accounting of federal funds. Internal controls should be designed to monitor compliance with laws and regulations pertaining to grant contracts.
Title 2 CFR § 200.303(a) Internal Controls, reads as follows:
The non-federal entity must:
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 the terms and conditions of the federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework, “issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting) reads as follows:
All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlines in Part 2 of this guidance. Expenditures may be reported on a cash of accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1.
Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles.
In addition, where appropriate, your organization needs to establish internal controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting.
Further, 2 CFR 200.329-Monitoring and reporting Program Performance (c)(1) reads as follows:
(c)(1) The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar gays after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also §200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.
Condition: During the test of 100% of expenditures, two (2) expenditures totaling $570,080, for the Coronavirus State and Local Fiscal Recovery Funds, it was noted the County had one (1) subrecipient and the County did not have a subrecipient monitoring policy, and the County did not obtain subrecipient agreements comprising the following information:
• Subrecipient name.
• Subrecipient Authorized Representative and program contact information.
• Subrecipient Employee Identification Number (EIN) and DUNS number.
• Federal Award Identification Number (FAIN).
• Name of Federal Awarding Agency.
• Contact information for the official at the Federal Awarding Agency.
• Catalog of Assistance Listing (AL) number and name.
• Federal award date.
• Total amount of the federal award and indirect cost rate.
• Federal award project description.
• Start and end date of the agreement.
• Amount of federal funds budgeted for the agreement and indirect cost rate allowed.
• A statement that all activities must be in accordance with federal statutes, regulations, and terms and conditions of the federal award. The subrecipient should receive a copy of the award documents.
• A detailed description of any additional requirements you want the subrecipient to be responsible for such as performance and/or financial reports, attending meetings and/or trainings, etc.
• A statement about the monitoring activities, such as where/when they will take place; also include a statement indicating the subrecipient will collaborate on monitoring activities including providing requested financial documents.
• A statement indicating if any of the items in the agreement change during the period of performance, the agreement will be amended.
Provide close out terms and conditions.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with compliance requirements.
Effect of Condition: This condition resulted in noncompliance with federal grant guidelines.
Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements.
Management Response:
Board of County Commissioners: The Board of County Commissioners is responsible for the overall fiscal concerns of the county. See OKLA. STAT. Title 19, § 345. The Board of County Commissioners, with the cooperation and participation of all elected officials, reviews, develops and implements policies and procedures to create a strong internal control environment. The Board of County Commissioners will work with all elected officials, the third-party administrator, and federal, state and local partners to develop policies, procedures, and internal controls designed to accurately track grants, including the application process, verification, oversight, and reporting of grant requirements. These policies and procedures will be designed to identify requirements for recipients and sub-recipients of grants, ensure accurate equipment and real property management, procurement, recipient and subrecipient monitoring and reporting. Further, policies will ensure a proper understanding of all grant requirements and compliance of the same. To assist in this process, the Board of County Commissioners engaged a third-party administrator to oversee the grant process, including application, eligibility, review, requirements, contracting, recipient tracking and oversight, and documentation and reporting. The Board of County Commissioners will work with the third-party administrator to ensure proper grant administration.
Criteria: 2 CFR 200 §200.332 Requirement for Pass-Through Entities states in part:
All pass-through entities must:
(a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the federal award and subaward.
(2) All requirements imposed by the pass-through entity on the subrecipient so that the federal award is used in accordance with federal statutes, regulations and the terms and conditions of the federal award.
(5) A requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient’s records and financial statements as necessary for the pass-through entity to meet the requirements of this part.
(6) Appropriate terms and conditions concerning closeout of the subaward.
Condition: During our review and reconciliation of the Schedule of Expenditures of Federal Awards (SEFA) as initially prepared by the County, we identified federal programs that were not listed accurately which resulted in federal expenditures being overstated stated by $2,412,977.
• Expenditures reported on the SEFA for ALN 16.607 - Bulletproof Vest Partnership Program were $36,810. Actual federal expenditures obtained from the County’s records confirm $0 expended for a variance of $36,810.
• Expenditures reported on the SEFA for ALN 21.019 - Coronavirus Relief Fund were $2,376,264. Actual federal expenditures obtained from the County’s records confirm $0 expended for a variance of $2,376,264.
Expenditures reported on the SEFA for ALN 97.042 - Emergency Management Performance Grants were $24,864. Actual federal expenditures obtained from the County’s records confirm $24,961 expended for a variance of ($97).
Additionally, the County failed to present $500,000 in subrecipient expenditures on the SEFA for ALN 21.027 - Coronavirus State and Local Fiscal Recovery Funds.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure accurate reporting of expenditures for all federal awards.
Effect of Condition: This condition resulted in inaccurate recording of the federal expenditures on the SEFA.
Recommendation: OSAI recommends county officials and department heads gain an understanding of federal programs awarded to Rogers County. Internal control procedures should be designed and implemented to ensure accurate reporting of expenditures on the SEFA and to ensure compliance with federal requirements. The Board of County Commissioners (BOCC) should review and approve the SEFA in an open meeting.
Management Response:
Board of County Commissioners: The Board of County Commissioners is responsible for the overall fiscal concerns of the county. See OKLA. STAT. Title 19, § 345. The Board of County Commissioners, with the cooperation and participation of all elected officials, reviews, develops and implements policies and procedures to create a strong internal control environment. Additionally, the Board of County Commissioners conducts meetings with all elected officials and officers responsible for the receipt and/or expenditure of county funds. These meetings address fiscal matters, including but not limited to, policy discussions and implementation, financial reports, budget oversight, SEFA reporting, and legal compliance.
Policies and procedures, combined with fiscal oversight meetings, are intended to: 1) prevent or detect material misstatements in the financial statements; 2) prevent or detect fraud within the county; 3) increase communication between the Board of County Commissioners and those elected officials and officers responsible for the receipt and/or expenditure of public funds; 4) provide oversight over the fiscal concerns of the county; 5) identify and address risks related to financial reporting; 6) ensure the accuracy of Rogers County’s financial statements, Estimate of Needs, and the SEFA; and 7) ensure compliance with all applicable federal and state laws, regulations, and/or codes.
The Board of County Commissioners, with the cooperation of all elected officials and officers responsible for the receipt or expenditure of federal funds, will evaluate the processes and procedures currently in place to ensure the accuracy of SEFA reporting and detect potential inaccuracies and/or misstatements.
Criteria: 2 CFR § 200.303(a) Internal Controls reads as follows:
The non-Federal entity must:
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 the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
2 CFR § 200.508(b) Auditee responsibilities reads as follows:
The auditee must:
Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with §200.510 Financial statements.
2 CFR § 200.510(b) Financial statements reads, in part, as follows:
Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended as determined in accordance with §200.502 Basis for determining Federal awards expended.
Further, GAO Standards – Section 2 – Objectives of an Entity - OV2.23 states in part:
Compliance Objectives
Management conducts activities in accordance with applicable laws and regulations. As part of specifying compliance objectives, the entity determines which laws and regulations apply to the entity. Management is expected to set objectives that incorporate these requirements.
Condition: Through the process of gaining an understanding of the County’s internal control structure for federal programs, it was noted that county-wide internal controls regarding Control Environment, Risk Assessment, Information and Communication, and Monitoring have not been designed.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure the County complies with grant requirements.
Effect of Condition: This condition could result in noncompliance with grant requirements and could result in the loss of federal funds for the County.
Recommendation: OSAI recommends that the County design and implement a system of internal controls to ensure compliance with grant requirements.
Management Response:
Board of County Commissioners: The Board of County Commissioners is responsible for the overall fiscal concerns of the county. See OKLA. STAT. Title 19, § 345. The Board of County Commissioners, with the cooperation and participation of all elected officials, reviews, develops and implements policies and procedures to create a strong internal control environment. The Board of County Commissioners will work with all elected officials, the third-party administrator, and federal, state and local partners to develop policies, procedures, and internal controls designed to accurately track grants, including the application process, verification, oversight, and reporting of grant requirements. These policies and procedures will be designed to identify requirements for recipients and sub-recipients of grants, ensure accurate equipment and real property management, procurement, recipient and subrecipient monitoring and reporting. Further, policies will ensure a proper understanding of all grant requirements and compliance of the same. To assist in this process, the Board of County Commissioners engaged a third-party administrator to oversee the grant process, including application, eligibility, review, requirements, contracting, recipient tracking and oversight, and documentation and reporting. The Board of County Commissioners will work with the third-party administrator to ensure proper grant administration.
Criteria: The GAO Standards – Section 1 – Fundamental Concepts of Internal Control – OV1.01 states in part:
Definition of Internal Control
Internal control is a process effected by an entity’s oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved.
Additionally, GAO Standards – Section 2 – Establishing an Effective Internal Control System – OV2.04 states in part:
Components, Principles, and Attributes
Control Environment - The foundation for an internal control system. It provides the discipline and structure to help an entity achieve its objectives.
Risk Assessment - Assesses the risks facing the entity as it seeks to achieve its objectives. This assessment provides the basis for developing appropriate risk responses.
Information and Communication - The quality information management and personnel communicate and use to support the internal control system.
Monitoring - Activities management establishes and operates to assess the quality of performance over time and promptly resolve the findings of audits and other reviews.
Condition: During the process of documenting the County’s internal controls regarding federal disbursements, we noted that Rogers County has not established procedures to ensure compliance with the following compliance requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance; Procurement and Suspension and Debarment; Reporting; and Subrecipient Monitoring.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements.
Effect of Condition: This condition could result in noncompliance with grant requirements and could lead to a loss of federal funds to the County.
Recommendation: OSAI recommends that the County gain an understanding of requirements for this program and implement a system of internal control procedures to ensure compliance with grant requirements.
Management Response:
Board of County Commissioners: The Board of County Commissioners is responsible for the overall fiscal concerns of the county. See OKLA. STAT. Title 19, § 345. The Board of County Commissioners, with the cooperation and participation of all elected officials, reviews, develops and implements policies and procedures to create a strong internal control environment. The Board of County Commissioners will work with all elected officials, the third-party administrator, and federal, state and local partners to develop policies, procedures, and internal controls designed to accurately track grants, including the application process, verification, oversight, and reporting of grant requirements. These policies and procedures will be designed to identify requirements for recipients and sub-recipients of grants, ensure accurate equipment and real property management, procurement, recipient and subrecipient monitoring and reporting. Further, policies will ensure a proper understanding of all grant requirements and compliance of the same. To assist in this process, the Board of County Commissioners engaged a third-party administrator to oversee the grant process, including application, eligibility, review, requirements, contracting, recipient tracking and oversight, and documentation and reporting. The Board of County Commissioners will work with the third-party administrator to ensure proper grant administration.
Criteria: OMB 2 CFR 200, Subpart D. 200.303(a) reads as follows:
Subpart D-Post Federal Award Requirements
§ 200.303 Internal Controls
The non-Federal entity must:
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 the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Further, accountability and stewardship should be overall goals in management’s accounting of federal funds. Internal controls should be designed to monitor compliance with laws and regulations pertaining to grant contracts.
Coronavirus State and Local Fiscal Recovery Funds, the following noncompliance with the Activities Allowed or Unallowed and Allowable Costs/Cost Principles were noted:
• The County failed to properly document the expenditure for one (1) of the two (2) federal expenditures totaling $500,000. They did not execute a contract or award documents, and the invoice was not itemized. This expenditure had a questioned cost of $500,000.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements.
Effect of Condition: This condition resulted in noncompliance with federal grant requirements and could result in a loss of federal funds.
Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements.
Management Response:
Board of County Commissioners: The Board of County Commissioners is responsible for the overall fiscal concerns of the county. See OKLA. STAT. Title 19, § 345. The Board of County Commissioners, with the cooperation and participation of all elected officials, reviews, develops and implements policies and procedures to create a strong internal control environment. The Board of County Commissioners will work with all elected officials, the third-party administrator, and federal, state and local partners to develop policies, procedures, and internal controls designed to accurately track grants, including the application process, verification, oversight, and reporting of grant requirements. These policies and procedures will be designed to identify requirements for recipients and sub-recipients of grants, ensure accurate equipment and real property management, procurement, recipient and subrecipient monitoring and reporting. Further, policies will ensure a proper understanding of all grant requirements and compliance of the same. To assist in this process, the Board of County Commissioners engaged a third-party administrator to oversee the grant process, including application, eligibility, review, requirements, contracting, recipient tracking and oversight, and documentation and reporting. The Board of County Commissioners will work with the third-party administrator to ensure proper grant administration.
Criteria: 2 CFR § 200.403 - Factors affecting allowability costs states in relevant part,
Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards:
(f) not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period.
(g) Be adequately documented.
Condition: During the test of 100% of expenditures, two (2) expenditures totaling $570,080, for the Coronavirus State and Local Fiscal Recovery Funds, the following noncompliance with the Procurement and Suspension and Debarment compliance requirement was noted:
• The County failed to properly document the expenditure for one (1) of the two (2) federal expenditures totaling $500,000. They did not execute a contract or award documents, and the invoice was not itemized. This expenditure had a questioned cost of $500,000.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements.
Effect of Condition: This condition resulted in noncompliance with federal grant requirements and could result in a loss of federal funds.
Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements.
Management Response:
Board of County Commissioners: The Board of County Commissioners is responsible for the overall fiscal concerns of the county. See OKLA. STAT. Title 19, § 345. The Board of County Commissioners, with the cooperation and participation of all elected officials, reviews, develops and implements policies and procedures to create a strong internal control environment. The Board of County Commissioners will work with all elected officials, the third-party administrator, and federal, state and local partners to develop policies, procedures, and internal controls designed to accurately track grants, including the application process, verification, oversight, and reporting of grant requirements. These policies and procedures will be designed to identify requirements for recipients and sub-recipients of grants, ensure accurate equipment and real property management, procurement, recipient and subrecipient monitoring and reporting. Further, policies will ensure a proper understanding of all grant requirements and compliance of the same. To assist in this process, the Board of County Commissioners engaged a third-party administrator to oversee the grant process, including application, eligibility, review, requirements, contracting, recipient tracking and oversight, and documentation and reporting. The Board of County Commissioners will work with the third-party administrator to ensure proper grant administration.
Criteria: 2 CFR § 200.303(a) Internal Controls reads as follows:
The non-Federal entity must:
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 the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
2 CFR § 200.320 Internal Controls reads as follows:
There are three types of procurement methods described in this section: informal procurement methods (for micro-purchases and simplified acquisitions); formal procurement methods (through sealed bids or proposals); and noncompetitive procurement methods. For any of these methods, the recipient or subrecipient must maintain and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319.
Condition: During the test of 100% of expenditures, two (2) expenditures totaling $570,080, for the Coronavirus State and Local Fiscal Recovery Funds, the following noncompliance with the Reporting compliance requirement was noted:
• The interim and the 3rd quarter reports were not submitted.
• The 2nd quarter report was not timely submitted.
• The County improperly reported a vendor as a subrecipient instead of as a vendor relationship.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are properly reported in accordance with federal compliance requirements.
Effect of Condition: This condition resulted in noncompliance with federal grant guidelines.
Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements.
Management Response:
Board of County Commissioners: The Board of County Commissioners is responsible for the overall fiscal concerns of the county. See OKLA. STAT. Title 19, § 345. The Board of County Commissioners, with the cooperation and participation of all elected officials, reviews, develops and implements policies and procedures to create a strong internal control environment. The Board of County Commissioners will work with all elected officials, the third-party administrator, and federal, state and local partners to develop policies, procedures, and internal controls designed to accurately track grants, including the application process, verification, oversight, and reporting of grant requirements. These policies and procedures will be designed to identify requirements for recipients and sub-recipients of grants, ensure accurate equipment and real property management, procurement, recipient and subrecipient monitoring and reporting. Further, policies will ensure a proper understanding of all grant requirements and compliance of the same. To assist in this process, the Board of County Commissioners engaged a third-party administrator to oversee the grant process, including application, eligibility, review, requirements, contracting, recipient tracking and oversight, and documentation and reporting. The Board of County Commissioners will work with the third-party administrator to ensure proper grant administration.
Criteria: Accountability and stewardship should be overall goals in management’s accounting of federal funds. Internal controls should be designed to monitor compliance with laws and regulations pertaining to grant contracts.
Title 2 CFR § 200.303(a) Internal Controls, reads as follows:
The non-federal entity must:
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 the terms and conditions of the federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework, “issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting) reads as follows:
All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlines in Part 2 of this guidance. Expenditures may be reported on a cash of accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1.
Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles.
In addition, where appropriate, your organization needs to establish internal controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting.
Further, 2 CFR 200.329-Monitoring and reporting Program Performance (c)(1) reads as follows:
(c)(1) The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar gays after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also §200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.
Condition: During the test of 100% of expenditures, two (2) expenditures totaling $570,080, for the Coronavirus State and Local Fiscal Recovery Funds, it was noted the County had one (1) subrecipient and the County did not have a subrecipient monitoring policy, and the County did not obtain subrecipient agreements comprising the following information:
• Subrecipient name.
• Subrecipient Authorized Representative and program contact information.
• Subrecipient Employee Identification Number (EIN) and DUNS number.
• Federal Award Identification Number (FAIN).
• Name of Federal Awarding Agency.
• Contact information for the official at the Federal Awarding Agency.
• Catalog of Assistance Listing (AL) number and name.
• Federal award date.
• Total amount of the federal award and indirect cost rate.
• Federal award project description.
• Start and end date of the agreement.
• Amount of federal funds budgeted for the agreement and indirect cost rate allowed.
• A statement that all activities must be in accordance with federal statutes, regulations, and terms and conditions of the federal award. The subrecipient should receive a copy of the award documents.
• A detailed description of any additional requirements you want the subrecipient to be responsible for such as performance and/or financial reports, attending meetings and/or trainings, etc.
• A statement about the monitoring activities, such as where/when they will take place; also include a statement indicating the subrecipient will collaborate on monitoring activities including providing requested financial documents.
• A statement indicating if any of the items in the agreement change during the period of performance, the agreement will be amended.
Provide close out terms and conditions.
Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with compliance requirements.
Effect of Condition: This condition resulted in noncompliance with federal grant guidelines.
Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements.
Management Response:
Board of County Commissioners: The Board of County Commissioners is responsible for the overall fiscal concerns of the county. See OKLA. STAT. Title 19, § 345. The Board of County Commissioners, with the cooperation and participation of all elected officials, reviews, develops and implements policies and procedures to create a strong internal control environment. The Board of County Commissioners will work with all elected officials, the third-party administrator, and federal, state and local partners to develop policies, procedures, and internal controls designed to accurately track grants, including the application process, verification, oversight, and reporting of grant requirements. These policies and procedures will be designed to identify requirements for recipients and sub-recipients of grants, ensure accurate equipment and real property management, procurement, recipient and subrecipient monitoring and reporting. Further, policies will ensure a proper understanding of all grant requirements and compliance of the same. To assist in this process, the Board of County Commissioners engaged a third-party administrator to oversee the grant process, including application, eligibility, review, requirements, contracting, recipient tracking and oversight, and documentation and reporting. The Board of County Commissioners will work with the third-party administrator to ensure proper grant administration.
Criteria: 2 CFR 200 §200.332 Requirement for Pass-Through Entities states in part:
All pass-through entities must:
(a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the federal award and subaward.
(2) All requirements imposed by the pass-through entity on the subrecipient so that the federal award is used in accordance with federal statutes, regulations and the terms and conditions of the federal award.
(5) A requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient’s records and financial statements as necessary for the pass-through entity to meet the requirements of this part.
(6) Appropriate terms and conditions concerning closeout of the subaward.