Benton County January 1, 2023 through December 31, 2023 2023-002 The County did not have adequate internal controls and did not comply with eligibility requirements. Assistance Listing Number and Title: 21.023 – COVID – 19 Emergency Rental Assistance Program Federal Grantor Name: U.S Department of Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Commerce Pass-through Award/Contract Number: 21-4618C-102 Known Questioned Cost Amount: $5,669 Prior Year Audit Finding: N/A Background Congress passed the American Rescue Plan Act of 2021 which provided $21.6 billion in additional funding for Emergency Rental Assistance (ERA) programs. These funds were provided directly states, U.S. territories, local governments and Indian tribes to assist eligible households through existing or newly created rental assistance programs. The purpose of the ERA program is to provide direct payments to eligible entities that award financial assistance to eligible households as well as provide housing stability services. ERA grantees may provide assistance to eligible households directly or to landlords and utility providers on behalf of eligible households. During fiscal year 2023, the County received an award from the Department of Commerce to provide financial assistance to eligible households, including payment of rent, utilities and other housing stability services. During fiscal year 2023, the County spent $2,909,316 of this award. Federal regulations require recipients to establish, document and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. To comply with eligibility requirements, the County must calculate the maximum rent payment. Payments can be up to 150% of Fair Market Rent (FMR) and must be less than total amount due. In cases where the household does not have source documentation of the rental payment amount and relies on a written self-declaration from the household, the monthly maximum amount of assistance must be 100% of the greater of the FMR or the Small Area Fair Market Rent for the area in which an applicant resides. Description of Condition Our audit found that the County’s internal controls were inadequate for ensuring applicants who were eligible for rental assistance received the proper amount of financial assistance. Specifically, the County used the 150% rate instead of 100% rate when calculating the maximum rent payment for applicants who self-declared income. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition The County was not aware that program requirements only allow applicants to receive benefits of 100% of the FMR when applicants provide a self-declaration of income instead of 150% of the FMR. Effect of Condition and Questioned Costs We used statistical sampling to select and test 28 applicants out of a total population of 409 applicants. In our sample, three applicants provided a self-declaration of income and received 150% of the FMR, but should have only received 100% of the FMR. As a result, the County overcharged the grant by $5,670. Based on the projection of our sample, we identified an additional $82,811 in estimated overpayments. Recommendation We recommend the County strengthen its internal controls to ensure it properly reviews all applicants receiving federal funds to ensure recipients receive only amounts for which they are eligible. County’s Response Benton County acknowledges the audit finding related to the Emergency Rental Assistance (ERA) program and agrees that a control deficiency resulted in certain payments exceeding allowable limits. This condition occurred during a period of rapidly evolving program requirements. As a result, prior guidance allowing up to 150% of Fair Market Rent (FMR) was applied in instances where applicants self-certified income, when the requirement should have been limited to 100% of FMR. Upon identification of this issue, the County reviewed applicable guidance, confirmed the correct requirements, and assessed impacted cases. 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 take 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. 2023 Office of Management and Budget 2 CFR Part 200, Appendix XI Compliance Supplement: Self-attestation Alone – In order to provide assistance rapidly during the public health emergency related to COVID-19, the grantee may rely on a self-attestation of household income, financial hardship, and/or risk of homelessness and housing instability without further verification if the applicant confirms in their application or other document that they are unable to provide documentation, provided the other requirements detailed in Treasury guidance are satisfied. If an applicant is able to provide satisfactory evidence of residence but is unable to present adequate documentation of the amount of the rental obligation, grantees may accept a written attestation from the applicant to support the payment of assistance up to a monthly maximum of 100 percent of the greater of the Fair Market Rent or the Small Area Fair Market Rent for the area in which the applicant resides, as most recently determined by HUD and made available at https://www.huduser.gov/portal/datasets/fmr.html;
Benton County January 1, 2023 through December 31, 2023 2023-003 The County’s internal controls were inadequate and it did not comply with federal subrecipient monitoring requirements. Assistance Listing Number and Title: 21.027, COVID – 19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S Department of Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Commerce Pass-through Award/Contract Number: 21-4619C-102 and 24-4619D-101 Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2022-002 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program provides direct payment to states, U.S. territories, tribal governments, metropolitan cities, counties and (through states) non-entitlement units of local government. The purpose of the SLFRF program is to respond 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 collection and make necessary improvements in water, sewer and broadband infrastructure. In 2023, the County spent $8,256,094 of program funds and passed through $4,001,142 of its funds to three subrecipients to administer COVID-19 assistance programs to small businesses within the County, provide financial assistance to eligible households, including payment of rent, utilities and other housing stability services, and fund infrastructure projects. 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. Whenever the County passes on federal funding to subrecipients, federal regulations require the County to evaluate each subrecipient’s risk of noncompliance with federal requirements to determine the appropriate level of monitoring and to monitor its subrecipients to ensure they comply with the terms and conditions of the federal award. For awards dependent on participant eligibility, monitoring would include verifying subrecipients only provided assistance to participants who met program eligibility requirements. Description of Condition The County did not have adequate internal controls to comply with subrecipient monitoring requirements. Although the County performed a risk assessment, it did not monitor activities for one of its subrecipients to ensure the subrecipient administered the subaward in compliance with the subaward’s terms and conditions. Additionally, the County did not monitor to ensure the subrecipient received a federal single audit when required. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition County department staff responsible for managing the federal program did not know they needed to monitor the subrecipient’s activities to ensure the subrecipient only provided assistance to eligible businesses. Instead, County staff relied on a report from the subrecipient of small businesses who received assistance. Further, County staff did not know they needed to monitor the subrecipient to ensure the subrecipient received a single audit if required. Effect of Condition The County did not monitor subrecipient activities for one subrecipient totaling $1,811,817 whose costs it charged to the direct award from U.S. Department of Treasury. Without adequate monitoring, the County is unable to provide reasonable assurance that the subrecipient complied with the subaward’s terms and conditions. Without adequate monitoring, there is a risk that the subrecipient may spend funds for unallowable purposes. Since the County did not monitor the subrecipient, it was unable to confirm only eligible small businesses received assistance. The County also did not verify whether the subrecipient received a single audit when required to ensure the subrecipient complied with federal program requirements. Recommendation We recommend the County establish internal controls to monitor subrecipients to ensure subrecipients spend program funds for allowable purposes and verify that subrecipients receive a federal single audit when required. County’s Response The County is committed to strengthening its internal controls, ensuring consistent subrecipient monitoring, and maintaining full compliance with federal requirements. We appreciate the Auditor’s recommendations and have taken steps to address the identified deficiencies. 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 take 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 200, Uniform Guidance, section 332, Requirements for passthrough entities, establishes subrecipient monitoring requirements for pass through entities.