The County?s internal controls were inadequate for ensuring compliance 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: N/A Description of Condition The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program is to respond to the COVID-19 pandemic?s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected, and make necessary investments in water, sewer, or broadband infrastructure. In 2022, the County spent $8,441,435 in program funds. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Federal requirements prohibit grant 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. The County may accomplish this verification 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 perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Our audit found the County?s controls were inadequate for ensuring staff verified the suspension and debarment status of contractors for purchases exceeding $25,000, paid all or in part with federal funds. Specifically, the County did not verify that two of the six contractors we tested were not suspended and debarred from participating in federal programs before entering into contracts with them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Not all County staff were aware of the federal program?s suspension and debarment verification requirements, and they were unable to provide documentation to support that they verified the two contractors were not suspended or debarred. Effect of Condition 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 federal agency could potentially recover them. Through a search of SAM.gov, we verified all two contractors were not suspended or debarred. Therefore, we are not questioning costs. Recommendation We recommend the County strengthen internal controls to ensure 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 before entering into contracts or purchasing. In addition, the County should maintain documentation demonstrating compliance with this federal requirement. County?s Response Grays Harbor County (?County?) thanks the State Auditor?s Office (?State Auditor?) for bringing this issue to the County?s attention. In February 2022, the County adopted a procurement policy (?Policy?) applicable to all contracts funded by the Coronavirus State and Local Fiscal Recovery program (?Program?). The Policy requires the County to, prior to entering into such a contract, verify that the contractor has not been suspended, debarred, or otherwise excluded. Despite having this Policy, the County did not verify the contractors identified by the State Auditor. Auditor?s Remarks We thank the County for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the County?s corrective action 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. 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.