SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Spokane Conservation District January 1, 2024 through December 31, 2024 2024-001 The District did not have adequate internal controls and did not comply with federal reporting, suspension and debarment requirements. Assistance Listing Number and Title: 10.727 Inflation Reduction Act Urban & Community Forestry Program Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: 24-DG-11062765-154 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background During fiscal year 2024, the District spent $690,786 in federal funds from the Inflation Reduction Act Urban & Community Forestry Program. Of this amount, it passed $149,765 through to two subrecipients. The objective of this program is to plan for, establish, manage and protect trees, forests, green spaces and related natural resources in and near cities and towns. Federal regulations require recipients to establish, document and maintain effective internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Reporting The Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients that make first-tier subawards of $30,000 or more to report them in the FFATA Subaward Reporting System (FSRS). The District must report subawards by the end of the month following the month in which it made the subawards. Suspension and debarment Federal requirements prohibit recipients from contracting with, purchasing from and making subawards to parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts or purchases goods and services that it expects to equal or exceed $25,000, and for all subawards regardless of award amount, paid all or in part with federal funds, it must verify the contractors and subrecipients are not suspended, debarred or otherwise excluded from participating in federal programs. The District may verify this by obtaining a written certification from the contractor and subrecipient, adding a clause or condition into the contract that states the contractor or subrecipient 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 District must verify this before entering into the contract and before making subawards, and must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Reporting The District’s internal controls were ineffective for ensuring it submitted FFATA reports for its subawards on time as federal regulations require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Suspension and debarment Although the District has a process to verify the suspension and debarment status for contractors and subrecipients, our audit found the District did not follow this process. The District did not verify one contractor out of three contractors and subrecipients we tested was not suspended or debarred before purchasing from them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Reporting District staff were unaware of the federal FFATA reporting requirements for the program until the time of audit. Suspension and debarment District staff said they were aware of the requirements, but could not locate documentation to show they verified the contractor’s suspension and debarment status. Effect of Condition Reporting Failing to submit the required reports diminishes the federal government's ability to ensure accountability and transparency of federal spending. The table below summarizes the discrepancies we identified. Because the District did not submit the reports until our audit in September 2025, we did not audit the accuracy and completeness of them. Suspension and debarment The District did not obtain a written certification from the contractor, insert a clause into the contract or check for exclusion records at SAM.gov to verify the contractor it paid $335,385 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the District increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments the District made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. The District subsequently verified the contractor was not suspended or debarred. Therefore, we are not questioning costs. Recommendation Reporting We recommend the District strengthen its internal controls to ensure it prepares and submits complete and accurate FFATA reports for all applicable subawards by the due date, as federal regulations require. Suspension and debarment We recommend the District 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 retain documentation demonstrating compliance with this requirement. District’s Response We concur that the FFATA Subaward Reporting System (FSRS) reporting was not completed within the required timeframe. Upon identification of the reporting gap, the required subaward reporting was completed. We also concur that documentation was not retained for the suspension/debarment check for one contractor. The contractor was verified as not suspended or debarred; however, the documentation was not included in the project file. To strengthen internal controls and prevent future occurrences, the District is implementing the following corrective actions: • Policy & Procedure Updates: Updating federal grant management and procurement procedures to formalize FFATA reporting timelines, suspension/debarment documentation requirements, and staff responsibilities. • Centralized Tracking: Establishing a centralized tracking process for all applicable subawards, including FSRS reporting deadlines. • Documentation Standards: Requiring and documenting suspension/debarment checks at the time of procurement or subaward execution, consistent with 2 CFR 200.214 and related requirements. • Training: Incorporating suspension and debarment requirements into annual contract and procurement training. • Periodic Internal Review: Implementing internal reviews of a sample of federally funded contract files to verify that reporting and eligibility documentation are timely and complete. The framework will be in place by December 31, 2025. Auditor’s Remarks We appreciate the District’s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the status of the District’s corrective action during our next 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 170, Reporting Subaward and Executive Compensation Information, establishes the Federal Funding Accountability and Transparency Act (FFATA) requirements of reporting the subaward information through the FFATA Subaward Reporting System (FSRS). 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.