The County did not have adequate internal controls for ensuring compliance with federal suspension and debarment requirements, and it did not comply with federal reporting 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: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A 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, and provide emergency relief from natural disasters or their negative economic impacts. In 2024, the County spent $5,035,140 in program funds. 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. Suspension and debarment Federal requirements prohibit recipients from contracting with parties suspended or debarred from doing business with the federal government. Whenever the County enters into contracts paid all or in part with federal funds, it must verify the contractors are not suspended, 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 must maintain documentation demonstrating compliance with this federal requirement. Reporting Counties with a population less than 250,000 residents that are allocated more than $10 million in SLFRF funding are required to submit a Project and Expenditure Report on financial data, projects funded, expenditures, and contracts and subawards more than $50,000. This report is due by January 31, 2022, and then 30 days after the end of each quarter thereafter. The U.S. Department of the Treasury identified the following key line item as containing critical information: Obligations and expenditures • Current period obligation • Cumulative obligation • Current period expenditure • Cumulative expenditure Description of Condition Suspension and debarment Our audit found the County did not have internal controls to verify one contractor that it paid more than $25,000 in federal funds was not suspended or debarred from participating in federal programs. We consider this deficiency in internal controls to be a significant deficiency. Reporting Although the County had a process to ensure reports were submitted, its controls were inadequate for ensuring key line items were accurate. The County’s reports of expenditures to date and obligations were not supported by its general ledger or supporting award documentation, which showed the Project and Expenditure Reports to be underreported or overreported for three quarters tested in fiscal year 2024. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Suspension and debarment The County provided the funds to the district court department, which was not aware they needed to check for suspension and debarment for the contractor. Reporting The County had turnover in the grants manager position during the course of the Coronavirus State and Local Fiscal Recovery funding period, which resulted in documentation and tracking of expenditures inconsistencies. Effect of Condition Suspension and debarment 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 the contractor it paid $360,665 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the County increases its risk of awarding federal funds to contractors that are excluded 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. Reporting The U.S. Department of the Treasury uses the reports for oversight purposes, and any inaccurate information limits its ability to ensure transparency of program spending and fulfill its legal obligations. Failing to submit accurate reports diminishes the federal government’s ability to ensure accountability and transparency of federal spending. The table below summarizes the discrepancies we identified. Line item Quarter 1, 2024 overreported (underreported) Quarter 2, 2024 overreported (underreported) Quarter 3, 2024 overreported (underreported) Current period obligations ($80,230) ($288,509) $949,970 Current period expenditures $20,040 ($136,239) $293,045 Cumulative obligations $2,000,169 $3,972,409 $2,849,262 Cumulative expenditures ($18,596) $833,963 $44,984 Recommendation Suspension and debarment 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. Reporting We recommend the County review Treasury’s reporting guidance including the Compliance and Reporting Guidance and the Project and Expenditure Report User Guide, as well as the reporting webinars available on Treasury’s State and Local Fiscal Recovery Funds website, for all reporting requirements. We also recommend the County maintain quarterly records that trace the Project and Expenditure Reports to underlying documentation to ensure a clear audit trail and thoroughly review these reports for completeness and accuracy before submitting them to Treasury. County’s Response The County would like to thank SAO & Staff for its audit of Grant County, with every audit we are becoming better. The County has established processes to verify that contractors are not suspended or debarred; however, due to significant turnover in key positions across multiple departments, we were unable to demonstrate that these verifications were completed during the audit period. We are committed to strengthening our internal controls and ensuring full compliance with all federal requirements. To address the issues identified, the County is updating relevant policies, standardizing documentation practices, and providing additional training to staff responsible for these compliance activities. These steps will help ensure consistent adherence to requirements and reduce the risk of gaps during periods of staffing transition. Auditor’s Remarks We thank the County for its cooperation and assistance during the audit and acknowledge its commitment to improve the condition described. We will review the status of this issue 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. U.S. Department of the Treasury’s Compliance and Reporting Guidance State and Local Fiscal Recovery Funds, Part 2: Reporting Guidance, provides the reporting requirements for the Project and Expenditure Report. U.S. Department of the Treasury’s Project and Expenditure Report User Guide State and Local Fiscal Recovery Funds, a supplement to the Compliance and Reporting Guidance, provides detailed reporting guidance, instructions, and FAQ’s for award recipients in using Treasury’s Portal for submitting the Project and Expenditure Reports. 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.