Findings Citing § 200.201

Noncompliance with Contract Provisions for Non-Federal Entity Contracts Under Federal Awards and Material Weakness in Internal Control over Procurement and Suspension and Debarment Assistance Listing Number: 10.561 Name of Federal Program or Cluster: State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (SNAP Cluster) Name of Federal Agency: Department of Agriculture Name of Pass-Through Entities: State of Wisconsin Department of Health Services passed through Dane County Procurement and Suspension and Debarment 2 CFR§200.201(a) requires a pass-through entity must decide on the appropriate type of agreement for a Federal award (for example, a grant, cooperative agreements, subaward, or contract). 2 CFR§200.327 contract provisions requires the recipients or subrecipient contracts must contain the applicable provisions described in Appendix II of the Uniform Guidance. Appendix II Part 200-Contract Provisions for Non-Federal Entity Contracts Under Federal Awards requires all contracts made by the non-Federal entity under the Federal award must contain the provisions listed in the section as applicable. 2 CFR§200.303 requires the Organization to establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Organization did not create a written contract with one of its contractors that contains the required contractual provisions listed in the criteria. In addition, the Organization’s internal controls over procurement did not prevent or detect noncompliance with the applicable requirements.Cause: The Organization has policies and procedures related to procurement in its fiscal procedures manual. However, management did not monitor to ensure that the applicable policies and procedures were being followed. Failure to enter into the required contracts that contain the applicable contractual provisions could lead the Organization to inappropriately disburse Federal Award funds to contractors. We recommend that Organization management monitor compliance with procurement procedures to ensure that the required contracting is occurring. No WRTP has reviewed the organization’s fiscal policy manual including all subsections regarding contractual provisions and procurement. Additional training has been provided and completed by management and staff. The fiscal policy manual procurement section will undergo further review by a third party and if recommended, will be updated and presented to the Finance Committee of the Board of Directors.

Noncompliance with Contract Provisions for Non-Federal Entity Contracts Under Federal Awards and Material Weakness in Internal Control over Procurement and Suspension and Debarment Assistance Listing Number: 10.561 Name of Federal Program or Cluster: State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (SNAP Cluster) Name of Federal Agency: Department of Agriculture Name of Pass-Through Entities: State of Wisconsin Department of Health Services passed through Dane County Procurement and Suspension and Debarment 2 CFR§200.201(a) requires a pass-through entity must decide on the appropriate type of agreement for a Federal award (for example, a grant, cooperative agreements, subaward, or contract). 2 CFR§200.327 contract provisions requires the recipients or subrecipient contracts must contain the applicable provisions described in Appendix II of the Uniform Guidance. Appendix II Part 200-Contract Provisions for Non-Federal Entity Contracts Under Federal Awards requires all contracts made by the non-Federal entity under the Federal award must contain the provisions listed in the section as applicable. 2 CFR§200.303 requires the Organization to establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Organization did not create a written contract with one of its contractors that contains the required contractual provisions listed in the criteria. In addition, the Organization’s internal controls over procurement did not prevent or detect noncompliance with the applicable requirements.Cause: The Organization has policies and procedures related to procurement in its fiscal procedures manual. However, management did not monitor to ensure that the applicable policies and procedures were being followed. Failure to enter into the required contracts that contain the applicable contractual provisions could lead the Organization to inappropriately disburse Federal Award funds to contractors. We recommend that Organization management monitor compliance with procurement procedures to ensure that the required contracting is occurring. No WRTP has reviewed the organization’s fiscal policy manual including all subsections regarding contractual provisions and procurement. Additional training has been provided and completed by management and staff. The fiscal policy manual procurement section will undergo further review by a third party and if recommended, will be updated and presented to the Finance Committee of the Board of Directors.

Noncompliance with Contract Provisions for Non-Federal Entity Contracts Under Federal Awards and Material Weakness in Internal Control over Procurement and Suspension and Debarment Assistance Listing Number: 10.561 Name of Federal Program or Cluster: State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (SNAP Cluster) Name of Federal Agency: Department of Agriculture Name of Pass-Through Entities: State of Wisconsin Department of Health Services passed through Dane County Procurement and Suspension and Debarment 2 CFR§200.201(a) requires a pass-through entity must decide on the appropriate type of agreement for a Federal award (for example, a grant, cooperative agreements, subaward, or contract). 2 CFR§200.327 contract provisions requires the recipients or subrecipient contracts must contain the applicable provisions described in Appendix II of the Uniform Guidance. Appendix II Part 200-Contract Provisions for Non-Federal Entity Contracts Under Federal Awards requires all contracts made by the non-Federal entity under the Federal award must contain the provisions listed in the section as applicable. 2 CFR§200.303 requires the Organization to establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Organization did not create a written contract with one of its contractors that contains the required contractual provisions listed in the criteria. In addition, the Organization’s internal controls over procurement did not prevent or detect noncompliance with the applicable requirements.Cause: The Organization has policies and procedures related to procurement in its fiscal procedures manual. However, management did not monitor to ensure that the applicable policies and procedures were being followed. Failure to enter into the required contracts that contain the applicable contractual provisions could lead the Organization to inappropriately disburse Federal Award funds to contractors. We recommend that Organization management monitor compliance with procurement procedures to ensure that the required contracting is occurring. No WRTP has reviewed the organization’s fiscal policy manual including all subsections regarding contractual provisions and procurement. Additional training has been provided and completed by management and staff. The fiscal policy manual procurement section will undergo further review by a third party and if recommended, will be updated and presented to the Finance Committee of the Board of Directors.

Program: AL 21.029 – COVID-19 Coronavirus Capital Projects Fund – Subrecipient Monitoring Grant Number & Year: CPFFN0183, grant period ending December 31, 2026 Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR § 1000.10 (January 1, 2024), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. 2 CFR § 200.201(b)(1) (January 1, 2024) states the following, in relevant part: The Federal awarding agency or pass-through entity may use fixed amount awards if the project scope has measurable goals and objectives and if adequate cost, historical, or unit pricing data is available to establish a fixed amount award based on a reasonable estimate of actual cost. On May 17, 2023, the U.S. Department of the Treasury issued the SLFRF and CPF Supplementary Broadband Guidance, which states the following, in relevant part: Treasury further clarifies that a subaward that otherwise meets the requirements of 2 CFR 200.201(b) may be considered a fixed amount subaward even if: 1) the recipient uses its discretion to impose a cost-sharing or match requirement on the subrecipient; or 2) the recipient requires ISPs to submit evidence of costs. More specifically, subawards that provide for a maximum payment amount that is calculated based on a reasonable estimate of actual cost (see 2 CFR 200.201(b)(1)) will be considered fixed amount subawards even if the subaward agreement also provides that payments to the ISP subrecipient will be limited to actual costs after review of evidence of costs. Good internal controls require procedures to ensure that fixed amount subawards are based on a reasonable estimate of actual costs. This would include tracing budgeted costs to historical costs for similar projects, unit pricing data, or other documentation. Condition: For all four subrecipients tested, the Agency did not obtain adequate documentation to support that the subrecipients’ fixed amount subawards were based on a reasonable estimate of actual costs. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: The Agency awarded an initial amount of $61,345,287 to 18 subrecipients for broadband infrastructure projects. The Agency considered the subawards to be fixed amount subawards. We tested all the subawards issued to four subrecipients, which totaled $12,774,913. The Agency did not have adequate documentation on file to support that the fixed amount of the subaward was based on a reasonable estimate of actual costs. Documentation on file included a project budget, business plan, technical capability, and a funding breakdown. However, none of the costs included in this documentation was traced to historical costs for similar projects, unit pricing data, or other documentation. The Agency’s procedures include obtaining documentation for all costs actually incurred by the subrecipients when the project is completed. However, none of the projects were completed as of June 30, 2024, so the Agency had not yet obtained additional documentation. Total payments to subrecipients during the fiscal year ended June 30, 2024, were $24,426,287. Cause: Inadequate procedures to verify that the amount of the subaward was based on a reasonable estimate of actual costs. Effect: Without procedures in place to ensure the fixed amount of the subaward is based on a reasonable estimate of actual costs, there is an increased risk Federal funds disbursed could exceed a justifiable amount. Recommendation: We recommend the Agency improve its procedures to include tracing estimated costs of a project to historical costs for similar projects, unit pricing data, or other documentation. Management Response: As a threshold issue, we would note that the referenced supplemental guidance issued by the Treasury on May 17, 2023, stating that these should be considered fixed priced awards even though there is a review of actual costs prior to full reimbursement, came after our first round of applications were filed, budgets reviewed, and applications cured. Modified procedures were put into place for the second round of applications, which occurred after the supplemental guidance was issued. However, we feel the review of submitted budgets for the first round of applications that was conducted by PSC staff, assessed the reasonableness of costs presented using historical experience based on the scope of the project, geography/terrain, and type of technology used for deployment. Applicants based their budgets on prior experience with broadband deployments in similar project areas, which relied on practical knowledge and reasonable estimates. In cases where costs appeared to be outliers, staff would inquire for further explanations and justifications. This process reflects our commitment to ensuring that the funding requests were based on reasonable estimates of actual costs in that first round of applications. We concede that portion of review was not initially fully documented, however we have already implemented processes to better document this going forward. Additionally, we would mention with traditional Fixed Price Awards, awardees are paid the original budget amount with no reconciliation to actual costs. The Treasury nontraditional fixed price awards allow for reimbursements to not exceed actual costs, which we feel eliminates any opportunity for unjust enrichment. There is a complete review of actual costs done at project completion and subrecipients will only be reimbursed for allowable, actual incurred costs up to the award amount. In the unlikely event that support already advanced exceeds the final review of actual costs, awardees are required to repay those amounts as outlined in the grant agreement. APA Response: The U.S. Department of the Treasury requires recipients to follow Uniform Guidance, which requires fixed amount subawards to be based on adequate cost, historical, or unit pricing data. The U.S. Department of the Treasury further clarified in its supplemental guidance dated May 17, 2023, that subawards can be considered fixed amount subawards if the subaward otherwise met the requirements of 2 CFR § 200.201(b). Documentation was not provided to support that the subawards met those requirements.

Program: AL 21.029 – COVID-19 Coronavirus Capital Projects Fund – Subrecipient Monitoring Grant Number & Year: CPFFN0183, grant period ending December 31, 2026 Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR § 1000.10 (January 1, 2024), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. 2 CFR § 200.201(b)(1) (January 1, 2024) states the following, in relevant part: The Federal awarding agency or pass-through entity may use fixed amount awards if the project scope has measurable goals and objectives and if adequate cost, historical, or unit pricing data is available to establish a fixed amount award based on a reasonable estimate of actual cost. On May 17, 2023, the U.S. Department of the Treasury issued the SLFRF and CPF Supplementary Broadband Guidance, which states the following, in relevant part: Treasury further clarifies that a subaward that otherwise meets the requirements of 2 CFR 200.201(b) may be considered a fixed amount subaward even if: 1) the recipient uses its discretion to impose a cost-sharing or match requirement on the subrecipient; or 2) the recipient requires ISPs to submit evidence of costs. More specifically, subawards that provide for a maximum payment amount that is calculated based on a reasonable estimate of actual cost (see 2 CFR 200.201(b)(1)) will be considered fixed amount subawards even if the subaward agreement also provides that payments to the ISP subrecipient will be limited to actual costs after review of evidence of costs. Good internal controls require procedures to ensure that fixed amount subawards are based on a reasonable estimate of actual costs. This would include tracing budgeted costs to historical costs for similar projects, unit pricing data, or other documentation. Condition: For all four subrecipients tested, the Agency did not obtain adequate documentation to support that the subrecipients’ fixed amount subawards were based on a reasonable estimate of actual costs. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: The Agency awarded an initial amount of $61,345,287 to 18 subrecipients for broadband infrastructure projects. The Agency considered the subawards to be fixed amount subawards. We tested all the subawards issued to four subrecipients, which totaled $12,774,913. The Agency did not have adequate documentation on file to support that the fixed amount of the subaward was based on a reasonable estimate of actual costs. Documentation on file included a project budget, business plan, technical capability, and a funding breakdown. However, none of the costs included in this documentation was traced to historical costs for similar projects, unit pricing data, or other documentation. The Agency’s procedures include obtaining documentation for all costs actually incurred by the subrecipients when the project is completed. However, none of the projects were completed as of June 30, 2024, so the Agency had not yet obtained additional documentation. Total payments to subrecipients during the fiscal year ended June 30, 2024, were $24,426,287. Cause: Inadequate procedures to verify that the amount of the subaward was based on a reasonable estimate of actual costs. Effect: Without procedures in place to ensure the fixed amount of the subaward is based on a reasonable estimate of actual costs, there is an increased risk Federal funds disbursed could exceed a justifiable amount. Recommendation: We recommend the Agency improve its procedures to include tracing estimated costs of a project to historical costs for similar projects, unit pricing data, or other documentation. Management Response: As a threshold issue, we would note that the referenced supplemental guidance issued by the Treasury on May 17, 2023, stating that these should be considered fixed priced awards even though there is a review of actual costs prior to full reimbursement, came after our first round of applications were filed, budgets reviewed, and applications cured. Modified procedures were put into place for the second round of applications, which occurred after the supplemental guidance was issued. However, we feel the review of submitted budgets for the first round of applications that was conducted by PSC staff, assessed the reasonableness of costs presented using historical experience based on the scope of the project, geography/terrain, and type of technology used for deployment. Applicants based their budgets on prior experience with broadband deployments in similar project areas, which relied on practical knowledge and reasonable estimates. In cases where costs appeared to be outliers, staff would inquire for further explanations and justifications. This process reflects our commitment to ensuring that the funding requests were based on reasonable estimates of actual costs in that first round of applications. We concede that portion of review was not initially fully documented, however we have already implemented processes to better document this going forward. Additionally, we would mention with traditional Fixed Price Awards, awardees are paid the original budget amount with no reconciliation to actual costs. The Treasury nontraditional fixed price awards allow for reimbursements to not exceed actual costs, which we feel eliminates any opportunity for unjust enrichment. There is a complete review of actual costs done at project completion and subrecipients will only be reimbursed for allowable, actual incurred costs up to the award amount. In the unlikely event that support already advanced exceeds the final review of actual costs, awardees are required to repay those amounts as outlined in the grant agreement. APA Response: The U.S. Department of the Treasury requires recipients to follow Uniform Guidance, which requires fixed amount subawards to be based on adequate cost, historical, or unit pricing data. The U.S. Department of the Treasury further clarified in its supplemental guidance dated May 17, 2023, that subawards can be considered fixed amount subawards if the subaward otherwise met the requirements of 2 CFR § 200.201(b). Documentation was not provided to support that the subawards met those requirements.

Assistance Listing Number, Federal Agency, and Program Name - 21.027, U.S. Department of the Treasury, COVID-19 - Coronavirus State and Local Fiscal Recovery Fund (CSLFRF) Federal Award Identification Number and Year - N/A Pass-through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per 2 CFR 200.201(a), the federal awarding agency or pass-through entity must decide on the appropriate instrument for the federal award (i.e., grant agreement, cooperative agreement, or contract) in accordance with the Federal Grant and Cooperative Agreement Act (31 U.S.C. 631-08). Per guidance within Treasury FAQs, recipients’ use of revenue loss funds does not give rise to subrecipient relationships given that there is no federal program or purpose to carry out in the case of the revenue loss portion of the award. Condition - The County entered into intergovernmental agreements with local communities using the revenue loss provision of the County’s CSLFRF award. Those contracts contained subrecipient language/provisions. The County did not have adequate controls in place to ensure that the form and substance of these agreements were in compliance with the intended nature of the relationship and/or the requirements of the federal award. Questioned Costs - None Identification of How Questioned Costs Were Computed Not applicable, as there were no questioned costs identified Context - The County entered into agreements with local communities to fund various projects to benefit residents in these communities that amounted to approximately $71 million under the revenue loss provisions. During the fiscal year ended September 30, 2023, these communities spent and were reimbursed for approximately $6.7 million of costs under these agreements. The agreements included language that suggested Uniform Guidance applicability and that indicated the existence of a pass through/subrecipient relationship between the County and the local communities. Cause and Effect - The County provided funding to the communities via an intergovernmental agreement that included subrecipient language/provisions. Without further communication to the communities about the intended nature of the relationship, communities may improperly conclude they are subject to certain compliance requirements, including but not limited to incorrectly concluding that they are required to report expenditures incurred under the agreements on their schedule of expenditures of federal awards, which could further lead to those communities to incorrectly concluding that they are subject to the requirement to obtain a single audit and/or to incorrect major program determinations being made in conjunction with their single audit engagements. Recommendation - We recommend the County evaluate its controls to ensure the substance and form of each agreement. We further recommend the County evaluate whether additional guidance needs to be provided to recipients. Views of Responsible Officials and Planned Corrective Actions - Management does not agree with this finding. As noted in the Condition of this finding itself, the agreements in question are intergovernmental agreements , clearly labeled as such. They specifically state they are funding each project with SLFRF funds under the Revenue Replacement Category (Category 6.1). Section 4.01 states “Project Funds must be used for eligible activities for revenue replacement funds as described in the SLFRF final rules, regulations, and guidance.” As Management informed the auditor before auditor edited its preliminary finding to reflect this, “as described in the SLFRF final rules, regulations, and guidance” under 6.1 there are no subrecipients by definition as the County itself is the beneficiary. The County is being "made whole" for calculated revenue loss due to the pandemic under this category; therefore, once the funds are obligated and spent by the County the purpose has been satisfied. The entity receiving those funds would not have subrecipient obligations. FAQ 13.14 confirms this understanding. The communities enter into subrecipient agreements on an annual basis with the County and are very familiar with the format of such agreements. Those agreements always state clearly that they are subrecipient agreements in the title and the introductory paragraph. The communities also enter into intergovernmental agreements with the County on an annual basis. Therefore, they are aware that these two types of agreement are distinct. In this case the agreements are clearly labeled as intergovernmental agreements in the title and the introductory paragraph and there is no mention of subrecipient status in the body of the agreement. In fact, Section 4.05, Relationship of Parties, states “Relationship of the Community to the County is, and will continue to be, that of an independent contractor.” In the subrecipient agreements the County enters into with these communities on an annual basis this clause says the relationship is that of a subrecipient. Therefore, the agreement is clear on the relationship and the communities would know to consult the County if there is any question of compliance requirements. Any language requiring compliance with provisions applicable to subrecipients was paired with the qualifier "applicable." For example Article IX requires compliance with laws only “as applicable”. This is catch-all language and is good legal practice to include for contingencies. In this case, the program being a new federal program, the County intentionally included this catch-all language referencing compliance with 2 CFR 200 (Uniform Guidance) “as applicable” and required the community to “provide any disclosures required by law.” to allow itself the ability to enforce should the laws, rules, or regulations be interpreted in a certain manner to be applicable or even changed. This is based on experience with programs such as the Neighborhood Stabilization Program through HUD where such occurrences were noted. Consequently; the County believes it would actually be irresponsible not to include such language. As far as the recommendation of increased guidance to contracted communities, given the increased guidance available now the County has provided such guidance as needed. Auditor seems to indicate that the communities “may improperly conclude they are subject to certain compliance requirements, including but not limited to incorrectly concluding they are required to report expenditures incurred under the agreements on their schedule of expenditures of federal awards, which could further lead to those communities incorrectly concluding they are subject to the requirement to obtain a single audit and/or incorrect major program determinations being made in conjunction with their single audit engagements.” The finding is essentially noting that if these communities conclude that they have a subrecipient relationship and that the Uniform Guidance is applicable to them as subrecipients it is an improper conclusion. Given the wide availability of FAQs and guidance on this topic, Management agrees it would be an improper conclusion.

Assistance Listing Number, Federal Agency, and Program Name - 21.027, U.S. Department of the Treasury, COVID-19 - Coronavirus State and Local Fiscal Recovery Fund (CSLFRF) Federal Award Identification Number and Year - N/A Pass-through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per 2 CFR 200.201(a), the federal awarding agency or pass-through entity must decide on the appropriate instrument for the federal award (i.e., grant agreement, cooperative agreement, or contract) in accordance with the Federal Grant and Cooperative Agreement Act (31 U.S.C. 631-08). Per guidance within Treasury FAQs, recipients’ use of revenue loss funds does not give rise to subrecipient relationships given that there is no federal program or purpose to carry out in the case of the revenue loss portion of the award. Condition - The County entered into intergovernmental agreements with local communities using the revenue loss provision of the County’s CSLFRF award. Those contracts contained subrecipient language/provisions. The County did not have adequate controls in place to ensure that the form and substance of these agreements were in compliance with the intended nature of the relationship and/or the requirements of the federal award. Questioned Costs - None Identification of How Questioned Costs Were Computed Not applicable, as there were no questioned costs identified Context - The County entered into agreements with local communities to fund various projects to benefit residents in these communities that amounted to approximately $71 million under the revenue loss provisions. During the fiscal year ended September 30, 2023, these communities spent and were reimbursed for approximately $6.7 million of costs under these agreements. The agreements included language that suggested Uniform Guidance applicability and that indicated the existence of a pass through/subrecipient relationship between the County and the local communities. Cause and Effect - The County provided funding to the communities via an intergovernmental agreement that included subrecipient language/provisions. Without further communication to the communities about the intended nature of the relationship, communities may improperly conclude they are subject to certain compliance requirements, including but not limited to incorrectly concluding that they are required to report expenditures incurred under the agreements on their schedule of expenditures of federal awards, which could further lead to those communities to incorrectly concluding that they are subject to the requirement to obtain a single audit and/or to incorrect major program determinations being made in conjunction with their single audit engagements. Recommendation - We recommend the County evaluate its controls to ensure the substance and form of each agreement. We further recommend the County evaluate whether additional guidance needs to be provided to recipients. Views of Responsible Officials and Planned Corrective Actions - Management does not agree with this finding. As noted in the Condition of this finding itself, the agreements in question are intergovernmental agreements , clearly labeled as such. They specifically state they are funding each project with SLFRF funds under the Revenue Replacement Category (Category 6.1). Section 4.01 states “Project Funds must be used for eligible activities for revenue replacement funds as described in the SLFRF final rules, regulations, and guidance.” As Management informed the auditor before auditor edited its preliminary finding to reflect this, “as described in the SLFRF final rules, regulations, and guidance” under 6.1 there are no subrecipients by definition as the County itself is the beneficiary. The County is being "made whole" for calculated revenue loss due to the pandemic under this category; therefore, once the funds are obligated and spent by the County the purpose has been satisfied. The entity receiving those funds would not have subrecipient obligations. FAQ 13.14 confirms this understanding. The communities enter into subrecipient agreements on an annual basis with the County and are very familiar with the format of such agreements. Those agreements always state clearly that they are subrecipient agreements in the title and the introductory paragraph. The communities also enter into intergovernmental agreements with the County on an annual basis. Therefore, they are aware that these two types of agreement are distinct. In this case the agreements are clearly labeled as intergovernmental agreements in the title and the introductory paragraph and there is no mention of subrecipient status in the body of the agreement. In fact, Section 4.05, Relationship of Parties, states “Relationship of the Community to the County is, and will continue to be, that of an independent contractor.” In the subrecipient agreements the County enters into with these communities on an annual basis this clause says the relationship is that of a subrecipient. Therefore, the agreement is clear on the relationship and the communities would know to consult the County if there is any question of compliance requirements. Any language requiring compliance with provisions applicable to subrecipients was paired with the qualifier "applicable." For example Article IX requires compliance with laws only “as applicable”. This is catch-all language and is good legal practice to include for contingencies. In this case, the program being a new federal program, the County intentionally included this catch-all language referencing compliance with 2 CFR 200 (Uniform Guidance) “as applicable” and required the community to “provide any disclosures required by law.” to allow itself the ability to enforce should the laws, rules, or regulations be interpreted in a certain manner to be applicable or even changed. This is based on experience with programs such as the Neighborhood Stabilization Program through HUD where such occurrences were noted. Consequently; the County believes it would actually be irresponsible not to include such language. As far as the recommendation of increased guidance to contracted communities, given the increased guidance available now the County has provided such guidance as needed. Auditor seems to indicate that the communities “may improperly conclude they are subject to certain compliance requirements, including but not limited to incorrectly concluding they are required to report expenditures incurred under the agreements on their schedule of expenditures of federal awards, which could further lead to those communities incorrectly concluding they are subject to the requirement to obtain a single audit and/or incorrect major program determinations being made in conjunction with their single audit engagements.” The finding is essentially noting that if these communities conclude that they have a subrecipient relationship and that the Uniform Guidance is applicable to them as subrecipients it is an improper conclusion. Given the wide availability of FAQs and guidance on this topic, Management agrees it would be an improper conclusion.

Program: AL 21.026 ? COVID-19 Homeowner Assistance Fund ? Subrecipient Monitoring Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR ? 1000.10 (January 1, 2022), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. 2 CFR ? 200.332 (January 1, 2022) states the following, in relevant part: All pass through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal award identification (i) Subrecipient name (which must match the name associated with its unique entity identifier); (ii) Subrecipient?s unique entity identifier (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see the definition of Federal award date in ? 200.1 of this part) of award to the recipient by the Federal agency; (v) Subaward Period of Performance Start and End Date; (vi) Subaward Budget Period Start and End Date; (vii) Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; (x) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; (xii) Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; (xiii) Identification of whether the award is R&D; and (xiv) Indirect cost rate for the Federal award (including if the de minimis rate is charged) per ? 200.414. * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR ? 200.333 (January 1, 2022) states the following: With prior written approval from the Federal awarding agency, a pass-through entity may provide subawards based on fixed amounts up to the Simplified Acquisition Threshold, provided that the subawards meet the requirements for fixed amount awards in ?200.201. 2 CFR ? 200.201 (January 1, 2022) states the following, in relevant part: (b) Fixed amount awards. In addition to the options described in paragraph (a) of this section, Federal awarding agencies, or pass-through entities as permitted in ? 200.333, may use fixed amount awards (see Fixed amount awards in ? 200.1) to which the following conditions apply: (1) The Federal award amount is negotiated using the cost principles (or other pricing information) as a guide. The Federal awarding agency or pass-through entity may use fixed amount awards if the project scope has measurable goals and objectives and if adequate cost, historical, or unit pricing data is available to establish a fixed amount award based on a reasonable estimate of actual cost. . . . Good internal controls require procedures for the proper maintenance of program documents. Condition: The Agency lacked adequate procedures for monitoring subrecipients. Repeat Finding: No Questioned Costs: $451,851 known Statistical Sample: No Context: On November 2, 2021, the Agency signed a Memorandum of Understanding (MOU) with the Nebraska Investment Finance Authority (NIFA) to assist the Agency in carrying out the Homeowner Assistance Fund (HAF) Program. The Agency agreed to pay NIFA an amount not to exceed $1,200,000 for services during the initial contract period of November 1, 2021, through January 31, 2023. This included: 1) a flat fee of $78,348 for delivery of an accepted HAF Plan; 2) a flat fee of $90,700 for implementation of the Program, payable the month following program launch; and 3) $69,081 per month, beginning February 2022, for ongoing project administration. During the fiscal year ended June 30, 2022, the Agency paid NIFA $451,581. We noted the following: ? The Agency did not have controls and procedures in place to ensure that subrecipient requirements were met. ? The Agency did not communicate the Federal award identification items required by 2 CFR ? 200.332. ? NIFA was to be paid fixed amounts; however, prior written approval of these fixed-amount payments, as required by 2 CFR ? 200.333, could not be provided. In addition, the Agency did not have adequate support to ensure that the amounts paid were reasonable, as required by 2 CFR ? 200.201. Furthermore, per an Employee Time Summary report, the actual cost for February through June 2022 was $152,301, compared to the $345,404 billed and paid for monthly services. Cause: Inadequate procedures. Effect: Increased risk of fraud and non-compliance with Federal guidelines. Recommendation: We recommend the Agency implement procedures to ensure that Federal guidelines are followed, and controls are in place for subrecipient monitoring. Management Response: The Military Department disagrees with this finding. The Military Department does require NIFA to comply with 2 CFR 200 and executes procedures and controls to ensure the Federal guidelines are followed. These include (but are not limited to) weekly program updates, monthly reporting of plan metrics, compliance reviews, monthly manpower evaluations of NIFA personnel against invoices to substantiate project management supporting the program and reasonableness of administration fees. In addition, the MOU with NIFA was amended to require monthly manpower evaluations to substantiate the monthly fee for project management and administration of the program beginning with July 2022 invoicing, thus changing from a flat fee to actual costs incurred. APA Response: Per 2 CFR ? 1000.10 (January 1, 2022), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200; therefore, the Agency is required to follow 2 CFR part 200. Payments during fiscal year ended June 30, 2022, were made under a fixed amount subaward. Fixed amount subawards are allowable only with prior written approval from the Federal awarding agency. The failure to communicate items required by 2 CFR ? 200.332 (January 1, 2022) illustrates further the inadequacy of Agency procedures.

Program: AL 21.026 ? COVID-19 Homeowner Assistance Fund ? Subrecipient Monitoring Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR ? 1000.10 (January 1, 2022), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. 2 CFR ? 200.332 (January 1, 2022) states the following, in relevant part: All pass through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal award identification (i) Subrecipient name (which must match the name associated with its unique entity identifier); (ii) Subrecipient?s unique entity identifier (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see the definition of Federal award date in ? 200.1 of this part) of award to the recipient by the Federal agency; (v) Subaward Period of Performance Start and End Date; (vi) Subaward Budget Period Start and End Date; (vii) Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; (x) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; (xii) Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; (xiii) Identification of whether the award is R&D; and (xiv) Indirect cost rate for the Federal award (including if the de minimis rate is charged) per ? 200.414. * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR ? 200.333 (January 1, 2022) states the following: With prior written approval from the Federal awarding agency, a pass-through entity may provide subawards based on fixed amounts up to the Simplified Acquisition Threshold, provided that the subawards meet the requirements for fixed amount awards in ?200.201. 2 CFR ? 200.201 (January 1, 2022) states the following, in relevant part: (b) Fixed amount awards. In addition to the options described in paragraph (a) of this section, Federal awarding agencies, or pass-through entities as permitted in ? 200.333, may use fixed amount awards (see Fixed amount awards in ? 200.1) to which the following conditions apply: (1) The Federal award amount is negotiated using the cost principles (or other pricing information) as a guide. The Federal awarding agency or pass-through entity may use fixed amount awards if the project scope has measurable goals and objectives and if adequate cost, historical, or unit pricing data is available to establish a fixed amount award based on a reasonable estimate of actual cost. . . . Good internal controls require procedures for the proper maintenance of program documents. Condition: The Agency lacked adequate procedures for monitoring subrecipients. Repeat Finding: No Questioned Costs: $451,851 known Statistical Sample: No Context: On November 2, 2021, the Agency signed a Memorandum of Understanding (MOU) with the Nebraska Investment Finance Authority (NIFA) to assist the Agency in carrying out the Homeowner Assistance Fund (HAF) Program. The Agency agreed to pay NIFA an amount not to exceed $1,200,000 for services during the initial contract period of November 1, 2021, through January 31, 2023. This included: 1) a flat fee of $78,348 for delivery of an accepted HAF Plan; 2) a flat fee of $90,700 for implementation of the Program, payable the month following program launch; and 3) $69,081 per month, beginning February 2022, for ongoing project administration. During the fiscal year ended June 30, 2022, the Agency paid NIFA $451,581. We noted the following: ? The Agency did not have controls and procedures in place to ensure that subrecipient requirements were met. ? The Agency did not communicate the Federal award identification items required by 2 CFR ? 200.332. ? NIFA was to be paid fixed amounts; however, prior written approval of these fixed-amount payments, as required by 2 CFR ? 200.333, could not be provided. In addition, the Agency did not have adequate support to ensure that the amounts paid were reasonable, as required by 2 CFR ? 200.201. Furthermore, per an Employee Time Summary report, the actual cost for February through June 2022 was $152,301, compared to the $345,404 billed and paid for monthly services. Cause: Inadequate procedures. Effect: Increased risk of fraud and non-compliance with Federal guidelines. Recommendation: We recommend the Agency implement procedures to ensure that Federal guidelines are followed, and controls are in place for subrecipient monitoring. Management Response: The Military Department disagrees with this finding. The Military Department does require NIFA to comply with 2 CFR 200 and executes procedures and controls to ensure the Federal guidelines are followed. These include (but are not limited to) weekly program updates, monthly reporting of plan metrics, compliance reviews, monthly manpower evaluations of NIFA personnel against invoices to substantiate project management supporting the program and reasonableness of administration fees. In addition, the MOU with NIFA was amended to require monthly manpower evaluations to substantiate the monthly fee for project management and administration of the program beginning with July 2022 invoicing, thus changing from a flat fee to actual costs incurred. APA Response: Per 2 CFR ? 1000.10 (January 1, 2022), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200; therefore, the Agency is required to follow 2 CFR part 200. Payments during fiscal year ended June 30, 2022, were made under a fixed amount subaward. Fixed amount subawards are allowable only with prior written approval from the Federal awarding agency. The failure to communicate items required by 2 CFR ? 200.332 (January 1, 2022) illustrates further the inadequacy of Agency procedures.