Audit 382113

Finding Number 2023-001: Internal Control over Compliance Significant Deficiency Federal Grantor: U.S. Department of Treasury Federal Program: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass Through Entity: County of Santa Cruz Criteria: According to 2 CFR 200.303 (Uniform Guidance) – Internal Controls, non-federal entities that receive federal awards are required to establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and award terms. Additionally, these entities must adhere to the procurement standards outlined in 2 CFR sections 200.318 through 200.327 and use their own documented procurement procedures that reflect all applicable federal, state, and local laws and regulations. Condition: The Organization does not have a written procurement policy. Cause: Internal controls were not functioning as intended because management was unaware of the procurement compliance requirements specified in the federal Uniform Guidance. This is the Organization’s first experience with receiving federal funding. Effect: In the absence of effective internal controls, there is an increased risk that material noncompliance may occur and go undetected. Furthermore, procurement practices may fail to align with federal guidelines. Questioned Costs: None Repeat Finding: No Recommendation: We recommend that management develop and implement a formal, written procurement policy. Additionally, management should review Uniform Guidance 2 CFR sections 200.318 through 200.327 to ensure the Organization’s procurement policy fully incorporates all federal compliance requirements. Views of Responsible Official: We agree with the auditors’ recommendation. See comments at finding 2023-001.