Finding Text
Walla Walla County January 1, 2024 through December 31, 2024 2024-002 The County did not have adequate internal controls for ensuring compliance with federal activities allowed, allowable costs requirements. Assistance Listing Number and Title: 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: N/A Pass-through Award/Contract Number: 2 N/A Known Questioned Cost Amount: $132,000 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 government services to the extent COVID-19 caused a reduction in revenues collected, make necessary investments in water, sewer or broadband infrastructure, provide emergency relief from natural disasters or their negative economic impacts, fund projects eligible under certain programs administered by the U.S. Department of Transportation through three pathways and fund projects eligible under the programs established in Title I of the Housing and Community Development Act of 1974. SLFRF also allowed for premium pay to essential workers for work performed prior to April 10, 2023. During fiscal year 2024, the County spent about $2.45 million in federal funding under the Coronavirus State and Local Fiscal Recovery Funds program. Federal regulations require recipients to establish, document and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal regulations also require recipients to charge only allowable activities and costs to the SLFRF program. Description of Condition Our audit found the County did not have adequate controls for ensuring activities and costs charged to the program were allowable. Specifically, the County paid employees premium pay for work performed in 2024 and charged these costs to the program, which was not allowed for work performed after April 10, 2023. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition County staff responsible for reviewing costs charged to the program were not aware that after April 10, 2023, premium pay expenditures were not allowable under the SLFRF program. Effect of Condition and Questioned Costs The County charged $132,000 of costs to the program for retention and bonus pay that were not allowable for fiscal year 2024. Therefore, we are questioning these costs. Federal regulations require the State Auditor’s Office to report known questioned costs that are more than $25,000 for each type of compliance requirement. We question costs when we find the County has not complied with grant regulations and/or when it does not have adequate documentation to support expenditures. Recommendation We recommend the County implement internal controls to ensure it charges only allowable activities and costs to federal programs. County’s Response Walla Walla County is taking significant steps to address the recent audit finding regarding inadequate internal controls for compliance with federal requirements. To rectify this issue, the county is committed to formulating a new policy specifically tailored to meet federal standards. This development process is already in motion, with the expected completion date set for December 2025. We believe that the new policy will significantly improve our internal controls and ensure full compliance with federal mandates. Additionally, we will seek training opportunities to increase the knowledge of all staff regarding federal programs and compliance requirements, ensuring adherence to these programs and grants Auditor’s Remarks We appreciate the County's commitment to resolving this finding. 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. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the cost principles for how direct costs should be charged to federal programs. Treasury’s Coronavirus State and Local Fiscal Recovery Funds FAQ 4.11 explains why recipients are not allowed to use the premium pay eligible use category for work performed after the end of the National Emergency on April 10, 2023.