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 the Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Commerce Pass-through Award/Contract Number: 24-4619D-115 A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2023-002 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. In 2024, the County spent $4,326,411 in program funds for these activities. The County also spent $675,428 from an award passed through the Washington State Department of Commerce for emergency housing. 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. 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 and services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors were not suspended or 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 it must keep documentation demonstrating compliance with this federal requirement. Description of Condition Although the County has a process to verify the suspension and debarment status for contractors it pays more than $25,000, our audit found the County did not follow this process and did not verify one of six contractors 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 The County experienced turnover among key staff, and current staff could not locate documentation to demonstrate compliance with federal suspension and debarment requirements. Effect of Condition The County 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 one contractor it paid $25,702 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the County increases its risk of awarding federal funds to a contractor that is excluding 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. The County subsequently verified the contractor was 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 We appreciate the State Auditor’s (SAO) review of the Schedule of Expenditures of Federal Awards. The following is the County’s Corrective Action: • In 2025, the County revised its purchasing policy to include an attestation form allowing vendors to certify that they are not suspended or debarred. • Staff will be trained on how to perform and document suspension and debarment checks in SAM.gov. • The County is developing a process to conduct suspension and debarment checks when a vendor is first created and annually thereafter for all active vendors. • Compliance with these procedures will be a joint effort between the Budget Office, Auditor’s Financial Services Office, and responsible offices and departments. Mason County believes that enhanced training, consistent documentation, and proactive vendor verification will prevent recurrence of this issue and strengthen accountability across all departments. Auditor’s Remarks We thank the County for its cooperation and assistance during the audit and acknowledge its commitment to resolve this finding. We will review the corrective action taken 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 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.