The Lawrence County Fiscal Court Did Not Establish And Maintain Effective Internal Controls Over Compliance With Coronavirus State and Local Fiscal Recovery Fund (SLFRF) Requirements Federal Program: Assistance Listing #: 21.027 COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Award Number and Year: 2022 Name of Federal Agency: U.S. Department of the Treasury Compliance Requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Reporting Type of Finding: Significant Deficiency Amount of Questioned Costs: $0 COVID Related: Yes The Lawrence County Fiscal Court transferred federal funds from the ARPA fund to the general, jail, road, LGEA, and E-911 funds without first ensuring sufficient supporting documentation of allowable expenditures during the same period as the funds were reported as expended on the Schedule of Expenditures of Federal Awards (SEFA). The county was awarded $2,975,148 in American Rescue Plan Act (ARPA) funds, receiving the first payment of $1,487,618 into the ARPA fund in May 2021, and their second payment of $1,487,530 in June 2022.The fiscal court?s transfers in total from the ARPA fund to each fund are provided below: ? General - $714,640 ? Road - $250,000 ? Jail - $40,000 ? LGEA - $25,000 ? E-911 - $10,000 ? Payroll - $217,739 These transfers from the ARPA fund were considered ?lost revenue? according to their fiscal court meeting minutes. At the time of these transfers, and until auditors inquired about the supporting documentation, the county did not maintain a list of expenditures that reconciled to the transfer total. After this inquiry, the county gathered documentation and provided auditors a reconciliation of expenditures of eligible costs that supported the amount transferred into the general fund. An effective internal control system was not in place in Lawrence County to ensure compliance with requirements related to the administration of ARPA funds and the Allowable Costs/Cost Principles compliance requirements. The lack of internal controls was a systemic issue throughout the period. Failure to establish and maintain effective internal controls over compliance with federal program requirements could subject the county to the risk of reporting ineligible expenditures on the SEFA and using grant funds for unallowable purposes. 2 CFR 200.303 states in part, ?[t]he non-Federal entity must: (a) 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.? 2 CFR ?200.302(b) states, ?[t]he financial management system of each non-Federal entity must provide for the following ?: (2) [a]ccurate, current and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set for in ?200.328 and 200.329.? In addition, 2 CFR ?200.502(a) states, ?[t]he determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs.? Therefore, the county should only include expenditures on the Schedule of Expenditures of Federal Awards (SEFA) for which there is sufficient supporting documentation. We recommend the county establish and maintain internal controls over compliance for all federal program expenditures to ensure accurate use and reporting of federal awards, including maintaining sufficient supporting documentation of expenditures that reconciles to any transfer from a federal program fund into other county funds.
The Lawrence County Fiscal Court Failed To Implement Effective Internal Controls Over Federally Reimbursed Expenditures And Circumvented Internal Controls By Performing A Split Purchase Federal Program: Assistance Listing #: 21.027 COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Award Number and Year - 2022 Name of Federal Agency: U.S. Department of the Treasury Compliance Requirements; Procurement, Suspension, and Debarment Type of Finding: Material Weakness and Noncompliance Amount of Questioned Costs: $64,999 Opinion Modification: Yes, Qualified COVID Related: Yes The Lawrence County Fiscal Court paid $29,999 to a vendor for inflatables and associated items for the Lawrence County Cove project. This vendor was paid an additional $5,000 on the same day for other items applicable to the cove project for a total of $34,999. In addition, the fiscal court also made a payment of $30,000 to another vendor for the renting of equipment which is also a violation of the ethics code as discussed in finding 2022-002 and 2022-005. There was a total of $64,999 in purchases with federal funds that were not advertised or opened for bid in accordance with KRS 424.260. Additionally, vendors were not checked to see if they were debarred or suspended. The fiscal court circumvented internal controls by making split payments to the vendor for less than $30,000. The county issued separate payments to the vendor so that bidding would not be required. The county also failed to advertise or open a bid for the inflatables cove project and the rental of the dozer. The county failed to follow proper procurement procedures which results in a noncompliance with state laws and federal regulations and is at risk for extensive federal oversight and repayment of questioned costs. The version of KRS 424.260(1) in effect at the time of the subject expenditures stated, ?[e]xcept where a statute specifically fixes a larger sum as the minimum for a requirement of advertisement for bids, no city, county, or district, or board or commission of a city or county, or sheriff or county clerk, may make a contract, lease, or other agreement for: (a) Materials; (b) Supplies, except perishable foods such as meat, poultry, fish, egg products, fresh vegetables, and fresh fruits; (c) Equipment; or (d) Contractual services other than professional; involving an expenditure of more than thirty thousand dollars ($30,000) without first making newspaper advertisement for bids.? 2 CFR ?200.318(a) requires, ?[t]he non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in ? 200.317 through 200.327.? We recommend all expenditures of $30,000 or more be bid in accordance with KRS 424.260(1). Purchases should not be split in order to avoid bid requirements. The fiscal court and management should also abide by the requirements of 2 CFR ?200.318(a) by adhering to their own policies and procedures for procurement of projects.
The Lawrence County Fiscal Court Did Not Abide By 2 CFR 200.318(c)(1) Federal Program: Assistance Listing #: 21.027 COVID-19- Coronavirus State and Local Fiscal Recovery Funds and 97.036 Disaster Grants Public Assistance Award Number and Year: 2022 Name of Federal Agency and Pass-Through Agency (if applicable): U.S. Department of the Treasury and U.S Department of Disaster Emergency Management passed through Kentucky Department of Military Affairs Compliance Requirements: Activities Allowed/Allowable Costs Type of Finding: Material Weakness and Noncompliance Amount of Questioned Costs: ALN 21.027 $4,160 (excludes $30,000 included in Finding 2022-004) and ALN 97.036 $92,984 Opinion Modification: Yes, Qualified COVID Related: Yes- ALN 21.027 During testing of ALN 97.036 and ALN 21.027, it was discovered that the Lawrence County Fiscal Court did not have internal controls over disbursements of federal funds. Federal funds were disbursed to a vendor of which the Judge/Executive?s son-in-law is a member and the judge?s brother who is the road foreman for premium pay and as a FEMA applicant agent. Provided below are the totals spent for each assistance listing number: ? ALN 97.036 Vendor Total - $78,961 ? ALN 97.036 Road Foreman Total - $14,023 ? ALN 21.027 Vendor Total - $30,000 (See finding 2022-004) ? ALN 21.027 Road Foreman Total - $4,160 The fiscal court disbursed federal funds to parties with a known relation to the Lawrence County Judge/Executive. The fiscal court is noncompliant with the 2 CFR 200.318(c)(1) and the Lawrence County Ethics Code and is at risk for extensive federal oversight and repayment of questioned costs. 2 CFR 200.318(c)(1) states, ?[t]he Non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. No employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest. Such a conflict of interest would arise when the employee, officer, or agent, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in or a tangible personal benefit from a firm considered for a contract. The officers, employees, and agents of the non-Federal entity may neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts. However, non-Federal entities may set standards for situations in which the financial interest is not substantial, or the gift is an unsolicited item of nominal value. The standards of conduct must provide for disciplinary actions to be applied for violations of such standards by officers, employees, or agents of the non-Federal entity.? County Ethics Code - Section III Standards of Conduct states, ?C. No county government officer or employee shall act his official capacity in any manner where he a member of his immediate family. or a business organization in which he has an Interest. has a direct or indirect financial or personal Involvement that might reasonably be expected to Impair his objectivity or independence of Judgment.? We recommend the fiscal court adhere to the requirements set by federal standards. The fiscal court should refrain from using vendors and employees that could potentially create conflicts of interest when using federal funds. If the fiscal court does choose to involve related parties, it is imperative that the ethics commissions thoroughly review and assess these transactions to ensure transparency and ethical compliance. This finding will be referred to Lawrence County Ethics Commission.
The Lawrence County Fiscal Court Did Not Abide By 2 CFR 200.318(c)(1) Federal Program: Assistance Listing #: 21.027 COVID-19- Coronavirus State and Local Fiscal Recovery Funds and 97.036 Disaster Grants Public Assistance Award Number and Year: 2022 Name of Federal Agency and Pass-Through Agency (if applicable): U.S. Department of the Treasury and U.S Department of Disaster Emergency Management passed through Kentucky Department of Military Affairs Compliance Requirements: Activities Allowed/Allowable Costs Type of Finding: Material Weakness and Noncompliance Amount of Questioned Costs: ALN 21.027 $4,160 (excludes $30,000 included in Finding 2022-004) and ALN 97.036 $92,984 Opinion Modification: Yes, Qualified COVID Related: Yes- ALN 21.027 During testing of ALN 97.036 and ALN 21.027, it was discovered that the Lawrence County Fiscal Court did not have internal controls over disbursements of federal funds. Federal funds were disbursed to a vendor of which the Judge/Executive?s son-in-law is a member and the judge?s brother who is the road foreman for premium pay and as a FEMA applicant agent. Provided below are the totals spent for each assistance listing number: ? ALN 97.036 Vendor Total - $78,961 ? ALN 97.036 Road Foreman Total - $14,023 ? ALN 21.027 Vendor Total - $30,000 (See finding 2022-004) ? ALN 21.027 Road Foreman Total - $4,160 The fiscal court disbursed federal funds to parties with a known relation to the Lawrence County Judge/Executive. The fiscal court is noncompliant with the 2 CFR 200.318(c)(1) and the Lawrence County Ethics Code and is at risk for extensive federal oversight and repayment of questioned costs. 2 CFR 200.318(c)(1) states, ?[t]he Non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. No employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest. Such a conflict of interest would arise when the employee, officer, or agent, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in or a tangible personal benefit from a firm considered for a contract. The officers, employees, and agents of the non-Federal entity may neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts. However, non-Federal entities may set standards for situations in which the financial interest is not substantial, or the gift is an unsolicited item of nominal value. The standards of conduct must provide for disciplinary actions to be applied for violations of such standards by officers, employees, or agents of the non-Federal entity.? County Ethics Code - Section III Standards of Conduct states, ?C. No county government officer or employee shall act his official capacity in any manner where he a member of his immediate family. or a business organization in which he has an Interest. has a direct or indirect financial or personal Involvement that might reasonably be expected to Impair his objectivity or independence of Judgment.? We recommend the fiscal court adhere to the requirements set by federal standards. The fiscal court should refrain from using vendors and employees that could potentially create conflicts of interest when using federal funds. If the fiscal court does choose to involve related parties, it is imperative that the ethics commissions thoroughly review and assess these transactions to ensure transparency and ethical compliance. This finding will be referred to Lawrence County Ethics Commission.
The Lawrence County Fiscal Court Did Not Establish And Maintain Effective Internal Controls Over Compliance With Coronavirus State and Local Fiscal Recovery Fund (SLFRF) Requirements Federal Program: Assistance Listing #: 21.027 COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Award Number and Year: 2022 Name of Federal Agency: U.S. Department of the Treasury Compliance Requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Reporting Type of Finding: Significant Deficiency Amount of Questioned Costs: $0 COVID Related: Yes The Lawrence County Fiscal Court transferred federal funds from the ARPA fund to the general, jail, road, LGEA, and E-911 funds without first ensuring sufficient supporting documentation of allowable expenditures during the same period as the funds were reported as expended on the Schedule of Expenditures of Federal Awards (SEFA). The county was awarded $2,975,148 in American Rescue Plan Act (ARPA) funds, receiving the first payment of $1,487,618 into the ARPA fund in May 2021, and their second payment of $1,487,530 in June 2022.The fiscal court?s transfers in total from the ARPA fund to each fund are provided below: ? General - $714,640 ? Road - $250,000 ? Jail - $40,000 ? LGEA - $25,000 ? E-911 - $10,000 ? Payroll - $217,739 These transfers from the ARPA fund were considered ?lost revenue? according to their fiscal court meeting minutes. At the time of these transfers, and until auditors inquired about the supporting documentation, the county did not maintain a list of expenditures that reconciled to the transfer total. After this inquiry, the county gathered documentation and provided auditors a reconciliation of expenditures of eligible costs that supported the amount transferred into the general fund. An effective internal control system was not in place in Lawrence County to ensure compliance with requirements related to the administration of ARPA funds and the Allowable Costs/Cost Principles compliance requirements. The lack of internal controls was a systemic issue throughout the period. Failure to establish and maintain effective internal controls over compliance with federal program requirements could subject the county to the risk of reporting ineligible expenditures on the SEFA and using grant funds for unallowable purposes. 2 CFR 200.303 states in part, ?[t]he non-Federal entity must: (a) 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.? 2 CFR ?200.302(b) states, ?[t]he financial management system of each non-Federal entity must provide for the following ?: (2) [a]ccurate, current and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set for in ?200.328 and 200.329.? In addition, 2 CFR ?200.502(a) states, ?[t]he determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs.? Therefore, the county should only include expenditures on the Schedule of Expenditures of Federal Awards (SEFA) for which there is sufficient supporting documentation. We recommend the county establish and maintain internal controls over compliance for all federal program expenditures to ensure accurate use and reporting of federal awards, including maintaining sufficient supporting documentation of expenditures that reconciles to any transfer from a federal program fund into other county funds.
The Lawrence County Fiscal Court Failed To Implement Effective Internal Controls Over Federally Reimbursed Expenditures And Circumvented Internal Controls By Performing A Split Purchase Federal Program: Assistance Listing #: 21.027 COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Award Number and Year - 2022 Name of Federal Agency: U.S. Department of the Treasury Compliance Requirements; Procurement, Suspension, and Debarment Type of Finding: Material Weakness and Noncompliance Amount of Questioned Costs: $64,999 Opinion Modification: Yes, Qualified COVID Related: Yes The Lawrence County Fiscal Court paid $29,999 to a vendor for inflatables and associated items for the Lawrence County Cove project. This vendor was paid an additional $5,000 on the same day for other items applicable to the cove project for a total of $34,999. In addition, the fiscal court also made a payment of $30,000 to another vendor for the renting of equipment which is also a violation of the ethics code as discussed in finding 2022-002 and 2022-005. There was a total of $64,999 in purchases with federal funds that were not advertised or opened for bid in accordance with KRS 424.260. Additionally, vendors were not checked to see if they were debarred or suspended. The fiscal court circumvented internal controls by making split payments to the vendor for less than $30,000. The county issued separate payments to the vendor so that bidding would not be required. The county also failed to advertise or open a bid for the inflatables cove project and the rental of the dozer. The county failed to follow proper procurement procedures which results in a noncompliance with state laws and federal regulations and is at risk for extensive federal oversight and repayment of questioned costs. The version of KRS 424.260(1) in effect at the time of the subject expenditures stated, ?[e]xcept where a statute specifically fixes a larger sum as the minimum for a requirement of advertisement for bids, no city, county, or district, or board or commission of a city or county, or sheriff or county clerk, may make a contract, lease, or other agreement for: (a) Materials; (b) Supplies, except perishable foods such as meat, poultry, fish, egg products, fresh vegetables, and fresh fruits; (c) Equipment; or (d) Contractual services other than professional; involving an expenditure of more than thirty thousand dollars ($30,000) without first making newspaper advertisement for bids.? 2 CFR ?200.318(a) requires, ?[t]he non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in ? 200.317 through 200.327.? We recommend all expenditures of $30,000 or more be bid in accordance with KRS 424.260(1). Purchases should not be split in order to avoid bid requirements. The fiscal court and management should also abide by the requirements of 2 CFR ?200.318(a) by adhering to their own policies and procedures for procurement of projects.
The Lawrence County Fiscal Court Did Not Abide By 2 CFR 200.318(c)(1) Federal Program: Assistance Listing #: 21.027 COVID-19- Coronavirus State and Local Fiscal Recovery Funds and 97.036 Disaster Grants Public Assistance Award Number and Year: 2022 Name of Federal Agency and Pass-Through Agency (if applicable): U.S. Department of the Treasury and U.S Department of Disaster Emergency Management passed through Kentucky Department of Military Affairs Compliance Requirements: Activities Allowed/Allowable Costs Type of Finding: Material Weakness and Noncompliance Amount of Questioned Costs: ALN 21.027 $4,160 (excludes $30,000 included in Finding 2022-004) and ALN 97.036 $92,984 Opinion Modification: Yes, Qualified COVID Related: Yes- ALN 21.027 During testing of ALN 97.036 and ALN 21.027, it was discovered that the Lawrence County Fiscal Court did not have internal controls over disbursements of federal funds. Federal funds were disbursed to a vendor of which the Judge/Executive?s son-in-law is a member and the judge?s brother who is the road foreman for premium pay and as a FEMA applicant agent. Provided below are the totals spent for each assistance listing number: ? ALN 97.036 Vendor Total - $78,961 ? ALN 97.036 Road Foreman Total - $14,023 ? ALN 21.027 Vendor Total - $30,000 (See finding 2022-004) ? ALN 21.027 Road Foreman Total - $4,160 The fiscal court disbursed federal funds to parties with a known relation to the Lawrence County Judge/Executive. The fiscal court is noncompliant with the 2 CFR 200.318(c)(1) and the Lawrence County Ethics Code and is at risk for extensive federal oversight and repayment of questioned costs. 2 CFR 200.318(c)(1) states, ?[t]he Non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. No employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest. Such a conflict of interest would arise when the employee, officer, or agent, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in or a tangible personal benefit from a firm considered for a contract. The officers, employees, and agents of the non-Federal entity may neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts. However, non-Federal entities may set standards for situations in which the financial interest is not substantial, or the gift is an unsolicited item of nominal value. The standards of conduct must provide for disciplinary actions to be applied for violations of such standards by officers, employees, or agents of the non-Federal entity.? County Ethics Code - Section III Standards of Conduct states, ?C. No county government officer or employee shall act his official capacity in any manner where he a member of his immediate family. or a business organization in which he has an Interest. has a direct or indirect financial or personal Involvement that might reasonably be expected to Impair his objectivity or independence of Judgment.? We recommend the fiscal court adhere to the requirements set by federal standards. The fiscal court should refrain from using vendors and employees that could potentially create conflicts of interest when using federal funds. If the fiscal court does choose to involve related parties, it is imperative that the ethics commissions thoroughly review and assess these transactions to ensure transparency and ethical compliance. This finding will be referred to Lawrence County Ethics Commission.
The Lawrence County Fiscal Court Did Not Abide By 2 CFR 200.318(c)(1) Federal Program: Assistance Listing #: 21.027 COVID-19- Coronavirus State and Local Fiscal Recovery Funds and 97.036 Disaster Grants Public Assistance Award Number and Year: 2022 Name of Federal Agency and Pass-Through Agency (if applicable): U.S. Department of the Treasury and U.S Department of Disaster Emergency Management passed through Kentucky Department of Military Affairs Compliance Requirements: Activities Allowed/Allowable Costs Type of Finding: Material Weakness and Noncompliance Amount of Questioned Costs: ALN 21.027 $4,160 (excludes $30,000 included in Finding 2022-004) and ALN 97.036 $92,984 Opinion Modification: Yes, Qualified COVID Related: Yes- ALN 21.027 During testing of ALN 97.036 and ALN 21.027, it was discovered that the Lawrence County Fiscal Court did not have internal controls over disbursements of federal funds. Federal funds were disbursed to a vendor of which the Judge/Executive?s son-in-law is a member and the judge?s brother who is the road foreman for premium pay and as a FEMA applicant agent. Provided below are the totals spent for each assistance listing number: ? ALN 97.036 Vendor Total - $78,961 ? ALN 97.036 Road Foreman Total - $14,023 ? ALN 21.027 Vendor Total - $30,000 (See finding 2022-004) ? ALN 21.027 Road Foreman Total - $4,160 The fiscal court disbursed federal funds to parties with a known relation to the Lawrence County Judge/Executive. The fiscal court is noncompliant with the 2 CFR 200.318(c)(1) and the Lawrence County Ethics Code and is at risk for extensive federal oversight and repayment of questioned costs. 2 CFR 200.318(c)(1) states, ?[t]he Non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. No employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest. Such a conflict of interest would arise when the employee, officer, or agent, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in or a tangible personal benefit from a firm considered for a contract. The officers, employees, and agents of the non-Federal entity may neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts. However, non-Federal entities may set standards for situations in which the financial interest is not substantial, or the gift is an unsolicited item of nominal value. The standards of conduct must provide for disciplinary actions to be applied for violations of such standards by officers, employees, or agents of the non-Federal entity.? County Ethics Code - Section III Standards of Conduct states, ?C. No county government officer or employee shall act his official capacity in any manner where he a member of his immediate family. or a business organization in which he has an Interest. has a direct or indirect financial or personal Involvement that might reasonably be expected to Impair his objectivity or independence of Judgment.? We recommend the fiscal court adhere to the requirements set by federal standards. The fiscal court should refrain from using vendors and employees that could potentially create conflicts of interest when using federal funds. If the fiscal court does choose to involve related parties, it is imperative that the ethics commissions thoroughly review and assess these transactions to ensure transparency and ethical compliance. This finding will be referred to Lawrence County Ethics Commission.