Audit 387300

2024-004 Procurement and Suspension and Debarment Prior Year Finding Number: N/A Year of Finding Origination: 2024 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Significant Deficiency and Other Matter Federal Agency: U.S. Department of Transportation Program: 20.205 Highway Planning and Construction Award Number and Year: 1057187; 2024 Pass-Through Agency: Minnesota Department of Transportation Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The Minnesota Department of Transportation State Aid Manual provides guidance and responsibilities for project sponsors. In addition to acting as the fiscal agent, the sponsor is taking on responsibility that the project will be completed in accordance with all of the federal and state rules and regulations that apply. Title 2 U.S. Code of Federal Regulations § 200.318(i) states that the County must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Federal requirements prohibit non-federal entities from contracting with or making subawards under covered transactions to parties that are suspended or debarred. Title 2 U.S. Code of Federal Regulations § 180.300 describes a required verification process. Prior to entering into the transaction, one of the following must be performed: (1) checking SAM.gov exclusions, (2) collecting a certification, or (3) adding a clause or condition to the covered transaction with the contracting party. Condition: Faribault County acted as the sponsor for a project for a local city and the Minnesota Department of Transportation. The County did not develop controls over the sponsored project to ensure compliance for procurement. This included: • The County did not maintain records to support the history of procurement. • The County did not maintain documentation that the requirements for suspension or debarment were met by (a) checking SAM.gov exclusions, (b) collecting a certification from the vendor, or (c) verifying a clause or condition was included in the contract. Questioned Costs: None. Context: In June 2024, the County approved a resolution to act as a sponsoring agent for a city project. The project expenditures were $61,458 with payments made to the city for reimbursement. Effect: Without controls in place over the sponsored project, there is an increased risk of noncompliance with applicable laws, rules, and regulations. Cause: The County was unaware of the responsibilities of a project sponsor. Recommendation: We recommend the County implement controls to ensure projects the County sponsors are completed in accordance with all the federal and state rules and regulations that apply. View of Responsible Official: Acknowledge

2024-005 Suspension and Debarment Prior Year Finding Number: 2023-007 Year of Finding Origination: 2023 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of the Treasury Program: 21.027 COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Award Number and Year: Federal Direct; 2022 Pass-Through Agency: N/A – Direct Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must maintain internal control over federal programs that provides reasonable assurance that the auditee is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Federal requirements prohibit non-federal entities from contracting with or making subawards under covered transactions to parties that are suspended or debarred. Title 2 U.S. Code of Federal Regulations § 180.300 describes a required verification process. Prior to entering into the transaction, one of the following must be performed: (1) checking SAM.gov exclusions, (2) collecting a certification, or (3) adding a clause or condition to the covered transaction. The County’s procurement policy requires SAM.gov search results to be documented prior to entering into a covered transaction. Condition: The County did not have documentation to support that verification for suspension or debarred vendors was performed by County staff prior to entering into the covered transactions. Questioned Costs: None. Context: None of the vendors tested were listed as suspended or debarred on SAM.gov at the time of the audit. There were two covered transactions during 2024. Effect: Failure to verify vendors are not suspended, debarred, or otherwise excluded prior to entering into a covered transaction may result in the County entering into a transaction with a vendor that is not authorized to provide goods and services under the grant. Cause: The County informed us that documentation of SAM.gov searches for covered transactions could not be located due to staffing changes. In addition, staff were unaware of the requirements. Recommendation: We recommend the County maintain documentation to demonstrate that vendors were not suspended, debarred, or otherwise excluded from conducting business with the County; the County should complete this documentation prior to entering into a covered transaction. View of Responsible Official: Acknowledge

2024-006 Reporting Prior Year Finding Number: 2023-006 Year of Finding Origination: 2023 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of the Treasury Program: 21.027 COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Award Number and Year: Federal Direct; 2022 Pass-Through Agency: N/A – Direct Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must maintain internal control over federal programs that provides reasonable assurance that the auditee is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. The U.S. Department of the Treasury requires submission of an annual Project and Expenditure Report for Coronavirus State and Local Fiscal Recovery Funds (SLFRF) that includes current period expenditures. Condition: The County overstated current period obligations and expenditures reported on the annual Project and Expenditure Report submitted to the U.S. Department of the Treasury by $997,578 and $1,149,654, respectively, due to not updating projects reported in prior annual reports. Additionally, cumulative expenditures were understated by $49,837, due to not including all applicable expenditures. Also, the County did not submit the annual Project and Expenditure Report by the federal deadline of April 30, 2025. Questioned Costs: None. Context: The County opted to spend the SLFRF award under the Revenue Replacement category, which allows spending on broader types of government services. The annual Project and Expenditure Report required to be submitted to the U.S. Department of the Treasury by April 30 of each year for the reporting period ending March 31 was submitted June 6, 2025. Effect: The County is not in compliance with federal reporting requirements. Cause: The County indicated difficulty tracking project expenditures due to staff turnover. Recommendation: We recommend the County review the U.S. Department of the Treasury’s guidance and form instructions to ensure accurate reporting of SLFRF activity. We also recommend the County submit future Project and Expenditure Reports by the federal deadline. View of Responsible Official: Acknowledge