Benton County January 1, 2024 through December 31, 2024 2024-002 The County did not have adequate internal controls for ensuring compliance 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 the 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: Yes, Finding 2023-003 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 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 and make necessary improvements in water, sewer and broadband infrastructure. During fiscal year 2024, the County spent $5,114,123 of program funds and passed through $1,776,151 of its funds to three subrecipients to administer COVID-19 assistance programs to small business within the County and to 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 monitor its subrecipients’ activities. This includes ensuring subrecipients receive a federal single audit when required, following up and ensuring subrecipients take timely and appropriate action on all audit findings, and issuing a management decision as required. Description of Condition The County did not have adequate internal controls for ensuring compliance with subrecipient monitoring requirements. The County did not monitor two of its subrecipients to ensure they received a federal single audit when required. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition The County’s Finance Manager retired and the Department staff responsible for managing the federal program did not know if the Finance Manager checked whether subrecipients received a single audit when required. The Department staff did not know they needed to monitor subrecipients’ single audits. Effect of Condition The County did not verify whether two subrecipients received a single audit when required. Without this verification, the County cannot ensure it is properly monitoring its subrecipients and that the subrecipients complied with federal program requirements. Recommendation We recommend the County establish internal controls to verify that subrecipients receive a federal single audit when required, ensure the subrecipient takes timely and appropriate action on all audit findings, and issue a management decision as required. County’s Response The County will begin formally monitoring the requirements applicable to our federal subrecipients to ensure compliance with federal single audit requirements. We will be following up with all subrecipients to confirm that they have obtained a federal single audit when required and have addressed any related audit findings. Benton County has experienced staffing changes, and responsibility for subrecipient monitoring will be incorporated into our federal grant procedures moving forward. The County takes the State Auditor’s recommendations seriously, and we remain committed to strengthening our internal controls and improving our processes each year. 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.