Walla Walla County January 1, 2024 through December 31, 2024 2024-001 The County did not have adequate internal controls and did not comply 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: N/A Pass-through Award/Contract Number: 1 N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The purpose of the Coronavirus State and Local Fiscal Recovery Funds program (SLFRF) is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide government services to the extent COVID-19 caused a reduction in revenues collected, make necessary investments in water, sewer or broadband infrastructure, provide emergency relief from natural disasters or their negative economic impacts, fund projects eligible under certain programs administered by the U.S. Department of Transportation through three pathways and fund projects eligible under the programs established in Title I of the Housing and Community Development Act of 1974. SLFRF also allowed for premium pay to essential workers for work they performed before April 10, 2023. During fiscal year 2024, the County spent about $2.45 million in federal funding under the SLFRF program. Federal regulations require recipients to establish, document 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 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. Description of Condition Our audit found the County did not have effective internal controls to verify all five contractors we tested that it paid more than $25,000 in federal funds were not suspended or debarred from participating in federal programs before entering into contracts with or purchasing from them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition County staff were not aware of the suspension and debarment requirement until receiving the fiscal year 2022 finding in June 2024. Additionally, staff did not dedicate sufficient time and resources to update procedures and did not verify the contractors’ status for contracts awarded or purchases made after this date. Effect of Condition The County did not obtain a written certification from the five contractors, insert a clause into the contracts or check for exclusion records at SAM.gov to verify contractors it paid $448,014 using federal funds were not suspended or debarred before contracting with or purchasing from them. Without adequate internal controls, the County increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments the County made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. We subsequently verified the contractors were not suspended or debarred. Therefore, we are not questioning costs. Recommendation We recommend the County strengthen its internal controls to verify 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 and maintain documentation demonstrating compliance with this requirement. County’s Response Walla Walla County employs a decentralized purchasing model. We have implemented training for departments using federally regulated funds to comply with suspension and debarment requirements. Internal controls and processes will be created and/or updated to comply with Federal Suspension and Debarment requirements and dispersed to all Departments of the County. The updated procurement policy as mentioned in the corrective action in the Management letter will outline how to handle and follow these requirements. The County will determine which allowable action to be taken in our Internal controls and procurement policy: 1) check SAM.GOV, 2) make sure the clause is in the contract, 3) sign a suspension and debarment certification. Documentation will be saved and dated to show this requirement was met before the contract has begun. Auditor’s Remarks We appreciate the County's commitment to resolving this finding. We will review the corrective action taken during our next regular 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.
Walla Walla County January 1, 2024 through December 31, 2024 2024-002 The County did not have adequate internal controls for ensuring compliance with federal activities allowed, allowable costs 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: N/A Pass-through Award/Contract Number: 2 N/A Known Questioned Cost Amount: $132,000 Prior Year Audit Finding: N/A Background The purpose of the Coronavirus State and Local Fiscal Recovery funds (SLFRF) is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide government services to the extent COVID-19 caused a reduction in revenues collected, make necessary investments in water, sewer or broadband infrastructure, provide emergency relief from natural disasters or their negative economic impacts, fund projects eligible under certain programs administered by the U.S. Department of Transportation through three pathways and fund projects eligible under the programs established in Title I of the Housing and Community Development Act of 1974. SLFRF also allowed for premium pay to essential workers for work performed prior to April 10, 2023. During fiscal year 2024, the County spent about $2.45 million in federal funding under the Coronavirus State and Local Fiscal Recovery Funds program. Federal regulations require recipients to establish, document and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal regulations also require recipients to charge only allowable activities and costs to the SLFRF program. Description of Condition Our audit found the County did not have adequate controls for ensuring activities and costs charged to the program were allowable. Specifically, the County paid employees premium pay for work performed in 2024 and charged these costs to the program, which was not allowed for work performed after April 10, 2023. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition County staff responsible for reviewing costs charged to the program were not aware that after April 10, 2023, premium pay expenditures were not allowable under the SLFRF program. Effect of Condition and Questioned Costs The County charged $132,000 of costs to the program for retention and bonus pay that were not allowable for fiscal year 2024. Therefore, we are questioning these costs. Federal regulations require the State Auditor’s Office to report known questioned costs that are more than $25,000 for each type of compliance requirement. We question costs when we find the County has not complied with grant regulations and/or when it does not have adequate documentation to support expenditures. Recommendation We recommend the County implement internal controls to ensure it charges only allowable activities and costs to federal programs. County’s Response Walla Walla County is taking significant steps to address the recent audit finding regarding inadequate internal controls for compliance with federal requirements. To rectify this issue, the county is committed to formulating a new policy specifically tailored to meet federal standards. This development process is already in motion, with the expected completion date set for December 2025. We believe that the new policy will significantly improve our internal controls and ensure full compliance with federal mandates. Additionally, we will seek training opportunities to increase the knowledge of all staff regarding federal programs and compliance requirements, ensuring adherence to these programs and grants Auditor’s Remarks We appreciate the County's commitment to resolving this finding. We will review the corrective action taken during our next regular 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 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the cost principles for how direct costs should be charged to federal programs. Treasury’s Coronavirus State and Local Fiscal Recovery Funds FAQ 4.11 explains why recipients are not allowed to use the premium pay eligible use category for work performed after the end of the National Emergency on April 10, 2023.