Finding 1182527 (2023-002)

Material Weakness Repeat Finding
Requirement
I
Questioned Costs
-
Year
2023
Accepted
2026-03-24
Audit: 393948
Organization: Chelan County (WA)

AI Summary

  • Core Issue: The County lacked adequate internal controls and failed to verify that 25 contractors were not suspended or debarred before using federal funds.
  • Impacted Requirements: Federal regulations mandate that recipients must ensure contractors are eligible to participate in federal programs, particularly for contracts over $25,000.
  • Recommended Follow-Up: Strengthen internal controls to verify contractor eligibility and maintain proper documentation to demonstrate compliance with federal requirements.

Finding Text

The County did not have adequate internal controls and did not comply with federal suspension and debarment 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: Yes, Finding 2022-002 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. In 2023, the County spent $6,940,249 in program funds for these activities. Federal regulations require recipients to establish, document and maintain effective internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. 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 participating in federal programs. The County may verify this by obtaining 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. Description of Condition Although the County has a process to verify the suspension and debarment status for contractors it pays more than $25,000, our audit found the County did not follow this process and did not verify 25 contractors were not suspended or debarred before purchasing from them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Although County staff said they were aware of the requirements, they incorrectly obtained entity profiles instead of exclusion records from SAM.gov to show that they verified the contractors suspension and debarment status. Effect of Condition The County did not obtain a written certification from the contractors, insert a clause into the contracts or properly check for exclusion records at SAM.gov to verify contractors it paid $4,522,552 using federal funds were not suspended or debarred before contracting. Without adequate internal controls, the County increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments the County made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. We subsequently verified the contractors were not suspended or debarred. Therefore, we are not questioning costs. Recommendation We recommend the County strengthen its internal controls to verify all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and maintain documentation demonstrating compliance with this requirement. County’s Response SAM.gov was used for suspension and debarment verifications, however the wrong page was printed and there was no time/date stamp. The correct procedure has been taught and will be used properly, and the verifications will be recorded properly, in the future. Auditor’s Remarks We appreciate the County’s commitment to resolving the issues noted and will follow up during the next 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 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.

Corrective Action Plan

Finding ref number: 2023-002 Finding caption: The County did not have adequate internal controls and did not comply with federal suspension and debarment requirements. Name, address, and telephone of County contact person: Scott Renick, Financial Manager 350 Orondo Avenue Ste 306 Wenatchee, WA 98801 (509) 667-6655 Corrective action the auditee plans to take in response to the finding: SAM.gov was used for suspension and debarment verifications, however the wrong page was printed and there was no time/date stamp. The correct procedure has been taught and will be used properly, and the verifications will be recorded properly, in the future. Anticipated date to complete the corrective action: Completed

Categories

Procurement, Suspension & Debarment Subrecipient Monitoring

Programs in Audit

ALN Program Name Expenditures
21.032 COVID 19 - Local assistance and tribal consistency $7.14M
21.027 COVID 19 - CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS $6.94M
20.224 Federal Lands Access Program $414,905
20.205 Highway Planning and Construction $280,557
81.041 State Energy Program $150,422
16.738 Edward Byrne Memorial Justice Assistance Grant Program $140,737
15.954 National Park Service Conservation, Protection, Outreach, and Education $123,274
97.047 BRIC: Building Resilient Infrastructure and Communities $102,239
97.041 National Dam Safety Program $93,353
15.608 Fish and Aquatic Conservation - Aquatic Invasive Species $72,734
10.665 Schools and Roads - Grants to States $70,744
10.674 Wood Utilization Assistance $67,956
10.664 Cooperative Forestry Assistance $58,520
14.228 Community Development Block Grants/State's program and Non-Entitlement Grants in Hawaii $56,868
97.042 Emergency Management Performance Grants $47,467
11.438 Pacific Coast Salmon Recovery Pacific Salmon Treaty Program $44,970
66.962 Geographic Programs - Columbia River Basin Restoration (CRBR) Program $41,638
97.067 Homeland Security Grant Program $21,255
16.588 Violence Against Women Formula Grants $17,296
93.563 Child Support Services $15,917
81.999 BPA $14,180
97.012 Boating Safety Financial Assistance $11,381
15.230 Invasive and Noxious Plant Management $4,771
10.680 Forest Health Protection $3,071
16.543 Missing Children's Assistance $2,771
10.553 School Breakfast Program $2,588
10.699 Partnership Agreements $2,502
20.616 National Priority Safety Programs $1,541
15.517 Fish and Wildlife Coordination Act $208
97.039 Hazard Mitigation Grant $154