Audit 382719

Finding 2021-001 – Lack of County-Wide Internal Controls Over Major Federal Program – Coronavirus Relief Fund PASS-THROUGH GRANTOR: Oklahoma Office of Management and Enterprise Services FEDERAL AGENCY: U.S. Department of the Treasury ASSISTANCE LISTING: 21.019 FEDERAL PROGRAM NAME: Coronavirus Relief Fund FEDERAL AWARD NUMBER: SA-0135 FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles, Period of Performance QUESTIONED COSTS: $-0- Condition: Through the process of gaining an understanding of the County’s internal control structure for federal programs, it was noted that county-wide internal controls regarding Control Environment, Risk Assessment, Information and Communication, and Monitoring have not been designed. Cause of Condition: Policies and procedures have not been designed and implemented to ensure the County complies with grant requirements. Effect of Condition: Without an adequate system of county-wide controls, there is greater risk of a breakdown in control activities which could result in unrecorded transactions, undetected errors, misappropriation of funds, and noncompliance with federal grant requirements. Recommendation: OSAI recommends the County implement a system of internal controls to ensure compliance with grant requirements. Management Response: Chairman Board of County Commissioners: The BOCC will ensure that internal controls are developed and that procedures are adopted and implemented to help ensure compliance with Federal Grant requirements. County Clerk: As a county, we will work diligently to ensure that proper internal controls are implemented and followed for each grant recipient for compliance. County Treasurer: As County Treasurer, I will work with other county offices diligently to insure proper internal controls are implemented. Criteria: The United States Government Accountability Office’s Standards for Internal Control in the Federal Government (2014 version) aided in guiding our assessments and conclusion. Although this publication (GAO Standards) addresses controls in the federal government, this criterion can be treated as best practices and may be applied as a framework for an internal control system for state, local, and quasigovernmental entities. The GAO Standards – Section 1 – Fundamental Concepts of Internal Controls – OV1.01 states in part: Definition of Internal Controls Internal control is a process effected by an entity’s oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. Additionally, GAO Standards – Section 2 – Establishing an Effective Internal Control System – OV2.04 states in part: Components, Principles, and Attributes Control Environment – The foundation for an internal control system. It provides the discipline and structure to help an entity achieve its objectives. Risk Assessment – Assesses the risks facing the entity as it seeks to achieve its objectives. This assessment provides the basis for developing appropriate risk responses. Information and Communication – The quality information management and personnel communicate and use to support the internal control system. Monitoring – Activities management establishes and operates to assess the quality of performance over time and promptly resolve the findings of audits and other reviews.

Finding 2021-002 – Lack of Internal Controls Over Major Federal Program – Coronavirus Relief Fund PASS-THROUGH GRANTOR: Oklahoma Office of Management and Enterprise Services FEDERAL AGENCY: U.S. Department of the Treasury ASSISTANCE LISTING: 21.019 FEDERAL PROGRAM NAME: Coronavirus Relief Fund FEDERAL AWARD NUMBER: SA-0135 FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles, Period of Performance QUESTIONED COSTS: $-0- Condition: During the process of documenting the County’s internal controls regarding federal disbursements for Coronavirus Relief fund, we noted that Pittsburg County has not established procedures to ensure compliance with the following compliance requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; and Period of Performance. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition could result in noncompliance to grant requirements and loss of federal funds to the County. Recommendation: OSAI recommends the County gain an understanding of requirements for these programs and implement internal control procedures to ensure compliance with requirements. Management Response: Chairman Board of County Commissioners: The BOCC will develop internal control procedures to help ensure that Federal Grant funding is monitored more closely and that expenditures are verified to be in compliance with grant requirements. County Clerk: The county will develop internal controls for compliance on all federal grants to verify that all expenditures are valid per grant documentation. County Treasurer: As County Treasurer, I will help develop internal controls for compliance on all federal grants. Criteria: The GAO Standards – Section 1 – Fundamental Concepts of Internal Controls – OV1.01 states in part: Definition of Internal Controls Internal control is a process effected by an entity’s oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. 2 CFR § 200.303 Internal Controls (a) reads as follows: The non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards forInternal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Finding 2021-003 – Noncompliance Over Allowable Costs/Cost Principles - Coronavirus Relief Fund PASS THROUGH GRANTOR: Oklahoma Office of Management and Enterprise Services FEDERAL AGENCY: U.S. Department of Treasury ASSISTANCE LISTING: 21.019 FEDERAL PROGRAM NAME: Coronavirus Relief Fund FEDERAL AWARD NUMBER: SA-0135 FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Allowable Costs/Cost Principles QUESTIONED COSTS: $51,385 Condition: After performing expenditure testwork on 100% of the program, disbursements totaling $51,385 were not expended in accordance with the Allowable Costs/Cost Principles compliance requirements due to ineligible costs. • Reimbursed payroll expenditures totaling $51,385 were previously reimbursed by another federal grant. Cause of Condition: Policies and procedures have not been designed and implemented to ensure compliance with federal award requirements. Effect of Condition: These conditions resulted in noncompliance with grant requirements. The County runs the risk of misappropriation of funds which could hinder the County from receiving future federal funding. Further, this could result in the repayment of funds. Recommendation: OSAI recommends the County design and implement policies and procedures to ensure compliance with applicable grant requirements. Management Response: Chairman Board of County Commissioners: The BOCC will be more diligent in their overview of grant applications to ensure that all federal grant application requests are not reimbursable through any other federal grant program. County Clerk: The County will develop internal controls to oversee compliance of federal grants to verify that all expenditures are valid per federal grant documents. County Treasurer: As County Treasurer, I will help develop internal controls for compliance on all federal grants. Criteria: 2 CFR § 200.303(a) Internal Controls reads as follows: The non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Department of the Treasury Federal Register, Vol. 86, No. 10 states in part, “Fund payments may not be used for expenses that have been or will be reimbursed by another federal program.” Additionally, guidance provided in the Subrecipient Agreement - Federal Funding Certification executed 05/26/20 between Pittsburg County and the State of Oklahoma states in part, 5. Funds provided as a direct payment from the State of Oklahoma pursuant to this certification must adhere to official federal guidance issued or to be issued on what constitutes a necessary expenditure. Any funds expended by a political subdivision or its grantee(s) in any manner that does not adhere to official federal guidance or in violation of this certification shall be returned to the State of Oklahoma Coronavirus Relief Fund. 6. Any local government entity receiving funds pursuant to this certification shall retain documentation of all uses of the funds… 10. I acknowledge and certify that Recipient has not received, and will not apply for, federal funds from any other source, to reimburse it for the expenditures for which funds are sought pursuant hereto.