Benton County
January 1, 2022 through December 31, 2022
2022-002 The County’s internal controls were inadequate for ensuring compliance with suspension and debarment requirements and subrecipient monitoring.
Assistance Listing Number and Title:
21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds
Federal Grantor Name:
U.S. Department of the Treasury
Federal Award/Contract Number:
N/A
Pass-through Entity Name:
N/A
Pass-through Award/Contract Number:
N/A
Known Questioned Cost Amount:
$0
Prior Year Audit Finding:
Yes, Finding 2021-002
Description of Condition
The Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program provides direct payment to states, U.S. territories, tribal governments, metropolitan cities, counties and (through states) non-entitlement units of local government.
In 2022, the County spent $6,161,820 of program funds, which included $1,070,710 that it passed through to one subrecipient. The County used the funding to provide premium pay to the County’s employees who performed essential work during the COVID-19 public health emergency, and to provide assistance to the small businesses that faced negative economic impacts due to the pandemic.
Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls.
Suspension and Debarment
Federal requirements prohibit recipients from contracting with 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 from doing business with the federal government. The County may verify this 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 verify this before entering into the contract, and must maintain documentation demonstrating compliance with this federal requirement.
Our audit found the County did not have internal controls for ensuring it verified the suspension and debarment status of contractors before entering into new contracts or making purchases that exceed $25,000, paid all or in part with federal funds. Specifically, the County did not verify that one contractor paid a total of $80,707 was not suspended or debarred from participating in federal programs before contracting with them in 2022.
We consider this deficiency in internal controls to be a material weakness that led to material noncompliance.
Subrecipient Monitoring
Federal regulations require the County to monitor subrecipient’s activities to ensure they are properly spending federal funding. To determine the appropriate level of monitoring, federal regulations require the County to perform risk assessments to determine each subrecipient’s risk of noncompliance with federal statutes and regulations and terms and conditions of the subaward.
The County did not have internal controls in place for ensuring compliance with subrecipient monitoring requirements. Specifically, the County did not have adequate controls for ensuring the awarding document included the required contract elements, and for ensuring it completed and documented the required risk assessments. Further, the County did not monitor subrecipient activities to provide reasonable assurance that the subrecipient administered the subaward in compliance with the terms and conditions of the subaward.
We consider this internal control deficiency to be a material weakness that led to material noncompliance.
Cause of Condition
Suspension and Debarment
County employees responsible for these purchases do not typically manage federal awards and were unaware of the federal requirements for suspension and debarment.
Subrecipient Monitoring
County staff used their usual contract template and were unaware of the required elements that they needed to include in the contract before contracting with the subrecipient. Staff also did not know they were required to complete a risk assessment and to monitor whether the subrecipient was disbursing funds only to eligible participants.
Effect of Condition
Suspension and Debarment
The County did not obtain written certifications, insert clauses into the contracts or check sam.gov before entering into the contracts to verify the contractors were not suspended or debarred.
Without this verification, the County increases its risk of providing federal funds to contractors that are excluded from participating in federal programs. Any payments it makes to an ineligible party would be unallowable, and the federal grantor could potentially recover them.
We subsequently verified the contractors were not suspended or debarred, therefore we are not questioning costs.
Subrecipient Monitoring
The County did not provide its subrecipient with a contract including all the required contract elements, such as the federal award identification number, Assistant Listing Number, unique entity identifier, federal award date and indirect cost rate. Without this information, the subrecipient is less likely know that the award comes from a federal program. This also increases the risk that the subrecipient would not know they need to comply with specific program requirements, which could potentially lead them to spend funds for unallowable purposes.
The County did not document the risk assessment it performed for the subrecipient. Without this documentation, it increases the risk that the County did not perform the risk assessment to ensure the proper level of monitoring of its subrecipient.
The County did not monitor subrecipient activities to provide reasonable assurance the subrecipient administered the subaward in compliance with the terms and conditions of the subaward. Without adequate monitoring, there is a risk that the subrecipient may spend funds for unallowable purposes.
Recommendation
We recommend the County:
• Establish internal controls to verify 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
• Ensure it includes in the contract all the required elements for award identification
• Ensure it performs and documents the required risk assessment sufficiently for management to evaluate the results and demonstrate compliance with federal requirements
• Ensure adequate monitoring of subrecipient expenditures to ensure they spend funds only for an allowable purpose
County’s Response
Auditor’s Remarks
Applicable Laws and Regulations
Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements.
The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.
Title 2 CFR Part 200, Uniform Guidance, section 332 Requirements for pass-through entities, establishes subrecipient monitoring requirements for pass through entities