Audit 728

Franklin County January 1, 2022 through December 31, 2022 2022-001 The County’s internal controls were inadequate for ensuring compliance with federal suspension and debarment and 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 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: 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 premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected, and make necessary investments in water, sewer or broadband infrastructure. In 2022, the County spent $3,339,687 in program funds for the provision of government services and to mitigate the pandemic’s effects on public health. Federal regulations require recipients to establish and follow 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 grant recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the County enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors have not been suspended, debarred or otherwise excluded. The County may accomplish this verification by collecting 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 perform this verification before entering into the contract or before charging costs to a federal award, and it must maintain documentation demonstrating compliance with this federal requirement. Reporting Counties with a population below 250,000 residents that are allocated more than $10 million in SLFRF funds are required to submit a Project and Expenditure Report 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: 1. Obligations and expenditures • Current period obligation • Cumulative obligation • Current period expenditure • Cumulative expenditure Description of Condition Suspension and Debarment Our audit found the County’s internal controls were inadequate for ensuring staff verified the suspension and debarment status of contractors for purchases exceeding $25,000, paid all or in part with federal funds. Specifically, the County did not verify 10 contractors were not suspended or debarred from participating in federal programs before entering into contracts with them or before charging costs to the federal award. The County paid these contractors $1,554,614 in 2022. Reporting Although the County had a process to ensure the report was submitted, its controls were inadequate for ensuring key line items were accurate. The County reported inaccurate key line items in each of the current and cumulative obligation and expenditure fields on the quarterly Project and Expenditure Reports submitted in 2022. Specifically, the County reported the total cumulative expenditures in quarter four as $1,085,225; however, the County spent $3,422,930 in cumulative expenditures. We consider these internal control deficiencies to be material weaknesses, which led to material noncompliance. Cause of Condition Suspension and Debarment County staff were aware of the requirement to verify the suspension and debarment status for vendors, but did not know the requirement applied to contractors procured by the Washington State Department of Enterprise Services. Reporting Guidance and training for the required reporting was still evolving at the time the County submitted the reports. Based on the training they took, the staff responsible for completing the report thought those fields were not required when expenditures were classified under the revenue replacement eligible-use category. Effect of Condition Suspension and Debarment The County did not obtain a written certification, insert a clause into the contract, or check SAM.gov to verify the contractor was not suspended or debarred before entering into the contract. Without this verification, the County increases its risk of awarding federal funds to parties that are excluded from participating in federal programs. Any payments the County made to an ineligible party would be unallowable, and the federal grantor 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. Recommendation We recommend the County strengthen internal controls to ensure all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs. We also recommend the County improve controls to ensure it meets federal reporting requirements and files accurate reports. This includes ensuring all current period and cumulative obligations and expenditures are reported on the quarterly Project and Expenditure Reports. County’s Response The county agrees with the State Auditor's Office finding on the SLFRF grant. The county takes this finding seriously and is taking steps to prevent it from happening again. Specifically, the county will: • Add language to contracts requiring vendors to certify that they are not suspended or debarred and/or conduct suspension and debarment checks online via SAM.gov and print the documentation. • Ensure that quarterly reporting is done timely and accurately. • Increase communication between the County Auditor's Office accounting department and the Commissioners' Office to ensure that all grant requirements are met. The county appreciates the State Auditor's Office's time and effort, and values the audit process as an opportunity to improve its controls and processes. Auditor’s Remarks We thank the County’s commitment to resolve this finding and thank the County for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular 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 Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, Section B, page 17, provides the reporting requirements for the Project and Expenditure Report. 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.

Franklin County January 1, 2022 through December 31, 2022 2022-001 The County’s internal controls were inadequate for ensuring compliance with federal suspension and debarment and 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 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: 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 premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected, and make necessary investments in water, sewer or broadband infrastructure. In 2022, the County spent $3,339,687 in program funds for the provision of government services and to mitigate the pandemic’s effects on public health. Federal regulations require recipients to establish and follow 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 grant recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the County enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors have not been suspended, debarred or otherwise excluded. The County may accomplish this verification by collecting 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 perform this verification before entering into the contract or before charging costs to a federal award, and it must maintain documentation demonstrating compliance with this federal requirement. Reporting Counties with a population below 250,000 residents that are allocated more than $10 million in SLFRF funds are required to submit a Project and Expenditure Report 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: 1. Obligations and expenditures • Current period obligation • Cumulative obligation • Current period expenditure • Cumulative expenditure Description of Condition Suspension and Debarment Our audit found the County’s internal controls were inadequate for ensuring staff verified the suspension and debarment status of contractors for purchases exceeding $25,000, paid all or in part with federal funds. Specifically, the County did not verify 10 contractors were not suspended or debarred from participating in federal programs before entering into contracts with them or before charging costs to the federal award. The County paid these contractors $1,554,614 in 2022. Reporting Although the County had a process to ensure the report was submitted, its controls were inadequate for ensuring key line items were accurate. The County reported inaccurate key line items in each of the current and cumulative obligation and expenditure fields on the quarterly Project and Expenditure Reports submitted in 2022. Specifically, the County reported the total cumulative expenditures in quarter four as $1,085,225; however, the County spent $3,422,930 in cumulative expenditures. We consider these internal control deficiencies to be material weaknesses, which led to material noncompliance. Cause of Condition Suspension and Debarment County staff were aware of the requirement to verify the suspension and debarment status for vendors, but did not know the requirement applied to contractors procured by the Washington State Department of Enterprise Services. Reporting Guidance and training for the required reporting was still evolving at the time the County submitted the reports. Based on the training they took, the staff responsible for completing the report thought those fields were not required when expenditures were classified under the revenue replacement eligible-use category. Effect of Condition Suspension and Debarment The County did not obtain a written certification, insert a clause into the contract, or check SAM.gov to verify the contractor was not suspended or debarred before entering into the contract. Without this verification, the County increases its risk of awarding federal funds to parties that are excluded from participating in federal programs. Any payments the County made to an ineligible party would be unallowable, and the federal grantor 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. Recommendation We recommend the County strengthen internal controls to ensure all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs. We also recommend the County improve controls to ensure it meets federal reporting requirements and files accurate reports. This includes ensuring all current period and cumulative obligations and expenditures are reported on the quarterly Project and Expenditure Reports. County’s Response The county agrees with the State Auditor's Office finding on the SLFRF grant. The county takes this finding seriously and is taking steps to prevent it from happening again. Specifically, the county will: • Add language to contracts requiring vendors to certify that they are not suspended or debarred and/or conduct suspension and debarment checks online via SAM.gov and print the documentation. • Ensure that quarterly reporting is done timely and accurately. • Increase communication between the County Auditor's Office accounting department and the Commissioners' Office to ensure that all grant requirements are met. The county appreciates the State Auditor's Office's time and effort, and values the audit process as an opportunity to improve its controls and processes. Auditor’s Remarks We thank the County’s commitment to resolve this finding and thank the County for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular 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 Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, Section B, page 17, provides the reporting requirements for the Project and Expenditure Report. 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.