Finding 1223264 (2024-002)

Material Weakness Repeat Finding
Requirement
IL
Questioned Costs
-
Year
2024
Accepted
2026-07-08
Audit: 406752
Organization: Grant County (WA)

AI Summary

  • Core Issue: The County lacks adequate internal controls for verifying contractor eligibility and ensuring accurate federal reporting, leading to significant compliance risks.
  • Impacted Requirements: Federal regulations mandate verification of contractor suspension/debarment and accurate reporting of financial data for SLFRF funding.
  • Recommended Follow-Up: Strengthen internal controls for contractor verification and ensure accurate reporting by reviewing Treasury guidance and maintaining proper documentation.

Finding Text

The County did not have adequate internal controls for ensuring compliance with federal suspension and debarment requirements, and it did not comply with federal 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 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 government services to the extent COVID-19 caused a reduction in revenues collected, make necessary investments in water, sewer or broadband infrastructure, and provide emergency relief from natural disasters or their negative economic impacts. In 2024, the County spent $5,035,140 in program funds. 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. Suspension and debarment Federal requirements prohibit recipients from contracting with parties suspended or debarred from doing business with the federal government. Whenever the County enters into contracts paid all or in part with federal funds, it must verify the contractors are not 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. Reporting Counties with a population less than 250,000 residents that are allocated more than $10 million in SLFRF funding are required to submit a Project and Expenditure Report on financial data, projects funded, expenditures, and contracts and subawards more than $50,000. This report is due 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: Obligations and expenditures • Current period obligation • Cumulative obligation • Current period expenditure • Cumulative expenditure Description of Condition Suspension and debarment Our audit found the County did not have internal controls to verify one contractor that it paid more than $25,000 in federal funds was not suspended or debarred from participating in federal programs. We consider this deficiency in internal controls to be a significant deficiency. Reporting Although the County had a process to ensure reports were submitted, its controls were inadequate for ensuring key line items were accurate. The County’s reports of expenditures to date and obligations were not supported by its general ledger or supporting award documentation, which showed the Project and Expenditure Reports to be underreported or overreported for three quarters tested in fiscal year 2024. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Suspension and debarment The County provided the funds to the district court department, which was not aware they needed to check for suspension and debarment for the contractor. Reporting The County had turnover in the grants manager position during the course of the Coronavirus State and Local Fiscal Recovery funding period, which resulted in documentation and tracking of expenditures inconsistencies. Effect of Condition Suspension and debarment The County did not obtain a written certification from the contractor, insert a clause into the contract or check for exclusion records at SAM.gov to verify the contractor it paid $360,665 using federal funds was 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. 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. Failing to submit accurate reports diminishes the federal government’s ability to ensure accountability and transparency of federal spending. The table below summarizes the discrepancies we identified. Line item Quarter 1, 2024 overreported (underreported) Quarter 2, 2024 overreported (underreported) Quarter 3, 2024 overreported (underreported) Current period obligations ($80,230) ($288,509) $949,970 Current period expenditures $20,040 ($136,239) $293,045 Cumulative obligations $2,000,169 $3,972,409 $2,849,262 Cumulative expenditures ($18,596) $833,963 $44,984 Recommendation Suspension and debarment 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. Reporting We recommend the County review Treasury’s reporting guidance including the Compliance and Reporting Guidance and the Project and Expenditure Report User Guide, as well as the reporting webinars available on Treasury’s State and Local Fiscal Recovery Funds website, for all reporting requirements. We also recommend the County maintain quarterly records that trace the Project and Expenditure Reports to underlying documentation to ensure a clear audit trail and thoroughly review these reports for completeness and accuracy before submitting them to Treasury. County’s Response The County would like to thank SAO & Staff for its audit of Grant County, with every audit we are becoming better. The County has established processes to verify that contractors are not suspended or debarred; however, due to significant turnover in key positions across multiple departments, we were unable to demonstrate that these verifications were completed during the audit period. We are committed to strengthening our internal controls and ensuring full compliance with all federal requirements. To address the issues identified, the County is updating relevant policies, standardizing documentation practices, and providing additional training to staff responsible for these compliance activities. These steps will help ensure consistent adherence to requirements and reduce the risk of gaps during periods of staffing transition. Auditor’s Remarks We thank the County for its cooperation and assistance during the audit and acknowledge its commitment to improve the condition described. We will review the status of this issue during our 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. U.S. Department of the Treasury’s Compliance and Reporting Guidance State and Local Fiscal Recovery Funds, Part 2: Reporting Guidance, provides the reporting requirements for the Project and Expenditure Report. U.S. Department of the Treasury’s Project and Expenditure Report User Guide State and Local Fiscal Recovery Funds, a supplement to the Compliance and Reporting Guidance, provides detailed reporting guidance, instructions, and FAQ’s for award recipients in using Treasury’s Portal for submitting the Project and Expenditure Reports. 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: 2024-002 Finding caption: The County did not have adequate internal controls for ensuring compliance with federal suspension and debarment requirements, and it did not comply with federal reporting requirements. Name, address, and telephone of County contact person: Mandy Kim, Chief Financial Officer 35 C Street NW Ephrata, WA 98823 (509) 754-2011 Corrective action the auditee plans to take in response to the finding: The County is strengthening internal controls over suspension/debarment and SLFRF reporting. Actions include: 1. Implementing required suspension/debarment checks and documenting verification for all federally funded contracts. 2. Updating policies and providing staff training on compliance requirements. 3. Establishing quarterly reconciliations to ensure SLFRF obligations and expenditures agrees to the general ledger. 4. Enhancing supervisory review and maintaining supporting documentation for all federal reports. Anticipated date to complete the corrective action: 12/31/2026

Categories

Procurement, Suspension & Debarment Subrecipient Monitoring Allowable Costs / Cost Principles

Programs in Audit

ALN Program Name Expenditures
21.027 COVID-19 - CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS $5.04M
20.205 HIGHWAY PLANNING AND CONSTRUCTION $210,848
93.958 BLOCK GRANTS FOR COMMUNITY MENTAL HEALTH SERVICES $135,930
14.228 COMMUNITY DEVELOPMENT BLOCK GRANTS/STATE'S PROGRAM AND NON-ENTITLEMENT GRANTS IN HAWAII $133,065
16.575 CRIME VICTIM ASSISTANCE $106,902
93.959 BLOCK GRANTS FOR PREVENTION AND TREATMENT OF SUBSTANCE ABUSE $90,861
16.738 EDWARD BYRNE MEMORIAL JUSTICE ASSISTANCE GRANT PROGRAM $90,156
93.563 CHILD SUPPORT SERVICES $83,707
95.001 HIGH INTENSITY DRUG TRAFFICKING AREAS PROGRAM $51,338
16.589 RURAL DOMESTIC VIOLENCE, DATING VIOLENCE, SEXUAL ASSAULT, AND STALKING ASSISTANCE PROGRAM $44,801
16.758 IMPROVING THE INVESTIGATION AND PROSECUTION OF CHILD ABUSE AND THE REGIONAL AND LOCAL CHILDREN'S ADVOCACY CENTERS $43,441
93.671 FAMILY VIOLENCE PREVENTION AND SERVICES/DOMESTIC VIOLENCE SHELTER AND SUPPORTIVE SERVICES $39,732
93.788 OPIOID STR $29,824
97.042 EMERGENCY MANAGEMENT PERFORMANCE GRANTS $25,741
93.243 SUBSTANCE ABUSE AND MENTAL HEALTH SERVICES PROJECTS OF REGIONAL AND NATIONAL SIGNIFICANCE $18,946
16.588 VIOLENCE AGAINST WOMEN FORMULA GRANTS $16,283
97.012 BOATING SAFETY FINANCIAL ASSISTANCE $15,840
90.404 HAVA ELECTION SECURITY GRANTS $12,275
97.067 HOMELAND SECURITY GRANT PROGRAM $6,933
20.600 STATE AND COMMUNITY HIGHWAY SAFETY $4,788
14.276 YOUTH HOMELESSNESS DEMONSTRATION PROGRAM $4,116
97.024 EMERGENCY FOOD AND SHELTER NATIONAL BOARD PROGRAM $4,114