Audit 371608

FY End
2025-02-28
Total Expended
$2.10M
Findings
3
Programs
2
Organization: Village of Farwell (MI)
Year: 2025 Accepted: 2025-10-31
Auditor: H&S COMPANIES PC

Organization Exclusion Status:

Checking exclusion status...

Findings

ID Ref Severity Repeat Requirement
1161677 2025-003 Material Weakness Yes BI
1161678 2025-004 Material Weakness Yes I
1161679 2025-003 Material Weakness Yes BI

Programs

ALN Program Spent Major Findings
10.760 WATER AND WASTE DISPOSAL SYSTEMS FOR RURAL COMMUNITIES $2.05M Yes 2
21.027 CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS $41,578 Yes 1

Contacts

Name Title Type
N5MUNGNTC2Y6 Ross Wilson Auditee
9895889926 Corinna Hervey Auditor
No contacts on file

Notes to SEFA

The accompanying schedule of federal awards (the "Schedule") includes the federal grant activity of the Village of Farwell (the "Village") under programs of the federal government for the year ended February 28, 2025. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the schedule presents only a selected portion of the operations of the Village, it is not intended to and does not present the financial position, changes in position or cash flows of the Village. Expenditures reported on the Schedule are reported on the accrual basis of accounting, which is described in Note 1 to the Village's financial statements. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursemetn. Pass-through entity identifying numbers are presented were available. Federal expenditures form the Schedule reconcile to federal grant revenues in the February 28, 2025 basic financial statements.
For purposes of charging indirect costs to federal awards, the Village has not elected to use the de minimis cost rates as permitted by 200.414 of the Uniform Guidance.

Finding Details

2025-004 Lack of Documentation for SAM.gov Exclusion Checks. Type: Material Weakness. Condition: The Village did not retain documentation to support that exclusion checks were performed on SAM.gov for vendors and subrecipients associated with the Water and Waste Disposal Systems For Rural Communities program. As a result, there is no evidence that the entity verified whether these parties were suspended or debarred prior to entering covered transactions. Criteria: Per 2 CFR 180.300 and 200.214 of the Uniform Guidance, non-federal entities must verify that contractors and subrecipients are not suspended or debarred before awarding federal funds. Acceptable methods include: - Checking the SAM.gov exclusion list, - Collecting a certification from the entity, - Including a clause in the contract or agreement. - Documentation of the verification process must be retained to demonstrate compliance. Cause: The entity did not have a formal process in place to ensure that SAM.gov checks were performed and documented prior to awarding federal funds. Effect: Without documented verification, there is a risk that federal funds could be awarded to ineligible parties, potentially resulting in noncompliance with federal regulations and exposure to questioned costs or future audit findings. Questioned Costs: n/a. Recommendation: We recommend that the Village implement and enforce procedures to: - Perform SAM.gov exclusion checks prior to awarding federal funds, - Retain screenshots or other documentation as evidence of the checks, - Train relevant staff on compliance requirements under Uniform Guidance. Views of Responsible Officials: Management concurs with the auditor’s finding regarding the lack of verification against the System for Award Management (SAM.gov) prior to entering into agreements with subrecipients and contractors under federal awards. We acknowledge that conducting these checks is a critical control to ensure compliance with federal regulations and to prevent engagement with suspended or debarred entities. The omission was due to a gap in our internal procedures, and we are taking immediate corrective action. Management is implementing a formal policy requiring SAM.gov verification for all applicable transactions, and staff will be trained on the updated procedures. We are also exploring automated solutions to ensure consistent documentation and compliance moving forward. We appreciate the auditor’s observation and remain committed to strengthening our internal controls and ensuring full compliance with Uniform Guidance requirements.
2025-003 - Lack of Written Federal Program Policies. Type: Material Weakness. Condition: The Village does not have documented policies and procedures specific to the administration of the Water and Waste Disposal for Rural Communities program. This includes the absence of written guidance on key compliance areas such as procurement, subrecipient monitoring, allowable costs, and reporting requirements under Uniform Guidance. Criteria: Per 2 CFR 200.303 and 200.331 of the Uniform Guidance, non-federal entities are required to establish and maintain effective internal controls and written policies to ensure compliance with federal statutes, regulations, and the terms and conditions of federal awards. These policies should be tailored to the specific requirements of each federal program. Cause: The entity has not developed formal written policies and procedures for the Water and Waste Disposal for Rural Communities program, possibly due to reliance on informal practices or general administrative policies that do not address federal-specific requirements. Effect: Without documented policies, there is an increased risk of noncompliance with federal requirements, inconsistent program administration, and lack of accountability. This may result in questioned costs, audit findings, or potential repayment of federal funds. Questioned Costs: n/a. Recommendation: We recommend that the Village develop and implement written policies and procedures specific to the Water and Waste Disposal Systems for Rural communities program. These should include: - Procurement standards in accordance with 2 CFR 200.318 – 200.327. - Subrecipient monitoring protocols. - Guidelines for allowable costs and cost principles. - Reporting and recordkeeping requirements. - Internal control procedures to ensure compliance. Training should also be provided to staff responsible for administering the program to ensure consistent application of these policies. Views of Responsible Officials: Management acknowledges the auditor’s finding regarding the absence of formally documented federal program policies. We recognize the importance of maintaining written procedures to ensure consistent compliance with Uniform Guidance requirements and to strengthen internal controls over federal awards. While informal practices have historically guided our federal program administration, we agree that formalizing these policies will enhance transparency, accountability, and operational efficiency. Management is currently in the process of developing written policies covering key areas such as procurement, allowable costs, subrecipient monitoring, and cash management. We anticipate completing this documentation and implementing the policies by February 28, 2026. We are committed to continuous improvement and appreciate the auditor’s recommendations as part of our efforts to maintain strong compliance and stewardship of federal funds.