Walla Walla County
January 1, 2022 through December 31, 2022
2022-002 The County had inadequate controls for ensuring compliance with 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 Treasury
Federal Award/Contract Number: 1505-0271
Pass-through Entity Name: N/A
Pass-through Award/Contract Number: N/A
Known Questioned Cost Amount: $0
Prior Year Audit Finding: Yes, Finding 2021-004
Description of Condition
During fiscal year 2022, the County spent a total of $6.53 million in federal funding under the Coronavirus State and Local Fiscal Recovery Funds program. Of this amount, the County used $3.68 million to provide government services to the extent that the COVID-19 pandemic caused a reduction in revenue collected in its most recent fiscal year. The County awarded the remaining $2.85 million to a subrecipient to provide emergency rental assistance.
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.
Federal requirements prohibit program 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 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 perform this verification before entering into the contract or purchasing from contractors. Additionally, the County must keep documentation demonstrating compliance with this federal requirement.
Our audit found the County did not have effective internal controls for verifying the suspension and debarment status of contractors before entering into contracts with or purchasing from them. Specifically, the County did not verify that seven contractors it paid $25,000 or more during fiscal year 2022 were not suspended or debarred.
We consider this control deficiency to be a material weakness, which led to material noncompliance.
Cause of Condition
After receiving the finding in the prior audit, the County began changing its controls. However, it did not verify contractors were not suspended or debarred and thus did not comply with federal regulations.
Effect of Condition
The County did not verify whether seven contractors were suspended or debarred before entering into contracts with or purchasing from them. The County paid these contractors $6,554,795 during fiscal year 2022.
Without adequate internal controls, the County cannot ensure contractors paid with federal funds are eligible to participate in federal programs. Any program funds the County used to pay contractors that have been suspended or debarred would be unallowable, and the federal grantor could potentially recover them. The County subsequently verified the contractors were not suspended or debarred. Therefore, we are not questioning costs.
Recommendation
We recommend the County improve its internal controls to ensure it verifies that all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred before entering into contracts or purchasing from them.
County’s Response
Noted, the County will work with the departments responsible for administering federal funds to create procedures requiring the review of the System Of Award Management (SAM) for suspended or debarred parties in accordance with Federal Regulation. We agree with the auditor's comments and the county recognizes the challenges with staffing, training, onboarding, and managing unforeseen large amounts of federal funds coming into the county during COVID response. The county will be utilizing a contractor to assist in establishing policies, procedures, training, and strategic improvements to allow quick onboarding of staff in policies, procedures and regulations outlined by CRF 200 for future emergency federal funding and routine federal funding. Walla Walla County is committed to the importance of managing federal funding.
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 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement) establishes nonprocurement debarment and suspension regulations, implementing Executive Orders 12549 and 12689.