MARYLAND BROADBAND COOPERATIVE INCNon-Profit

Management agrees with Finding 2019-002 but notes that the condition presented because previous, not current, senior management supported a weak control environment of organizational oversight that promoted an environment lacking in accountability, integrity, and ethical values and that it was previous, not current, senior management that failed to implement various internal controls over compliance. MdBC has completed the following recommendations: The Board of Directors and new senior management should review its internal control systems surrounding compliance and reestablish required personal conduct and policies and procedures necessary to support an organization of integrity and ethical values. Management and related staff should be trained in understanding the requirements and responsibilities of a non-Federal entity receiving Federal awards.

Management agrees with Finding 2019-003 but notes that the condition presented because previous, not current, senior management supported a weak control environment of organizational oversight that promoted an environment lacking accountability, integrity, and ethical values. Similarly, previous senior management, not current senior management, set a tone that lacked responsibilities surrounding documentation and accountability, including not providing evidence of proper use of Organization funds was acceptable. MdBC has completed the following recommendations: It is recommended that the organization review its Federal agreements for required funding provisions to determine the proper procedures for submitting for payment, including procedures to identify federal costs and track required cost-sharing as per agreements. It is also recommended the organization implement internal controls to assist in these cash management compliance requirements.

Management notes that previous, not current senior management, treated the agreement as a procurement contract and not as a cooperative agreement. Further, previous external auditor reports treated the agreement as a procurement contract, not a cooperative agreement. MdBC has completed the following recommendations: The organization should adopt and document a procurement policy in compliance with 2 C.F.R. sections 200.318 - 200.326.

Management agrees with Finding 2019-005 but notes that the condition presented because previous, not current, senior management supported a weak control environment of organizational oversight that promoted an environment lacking accountability, integrity, and ethical values. Similarly, previous senior management, not current senior management, set a tone that lacked documentation and accountability responsibilities, including lack of proper submission of Standard Form 269. MdBC has completed the following recommendations: The organization should implement controls to be able to accurately report and file any required reports timely, based on requirements of a Federal agreement.

Management agrees with Finding 2019-006 but notes that the condition presented because previous, not current, senior management supported a weak control environment of organizational oversight that promoted an environment lacking accountability, integrity, and ethical values. Similarly, previous senior management, not current senior management, set a tone that lacked responsibilities surrounding documentation and accountability, including lack of evidence of proper use of Organization funds was acceptable. The condition presented because previous, not current, senior management approved payment of costs improperly paid with Federal funding. MdBC has completed the following recommendations: The organization should provide training to its employees concerning proper Business practice, including ethical behavior. 2. Actions Completed A. Overview MdBC has addressed Auditor Recommendations and has developed or improved its internal controls beyond Auditor Recommendations to provide reasonable assurance that it is managing compliance with Federal laws, regulations, and the terms and conditions of its agreements as well as to promote an organizational culture of accountability, integrity, and ethical decision-making. Given that laws and regulations require organizations to have an ethics and compliance program suitable to the size of the organization, for an organization of its size, Md BC has made an extraordinary financial and human capital commitment to promptly and effectively institute corrective measures and to enhance its controls B. Review of Internal Controls MdBC C.E.O. and Board, in conjunction with legal counsel, reviewed its internal control environment through an attorney-client privileged internal investigation and a review of its policies and procedures to identify needed controls improvement. Md BC retained experienced defense counsel and forensic auditors to conduct its internal investigation, including witness interviews and document review. Md BC retained experienced federal government contracting counsel to conduct a review of its policies and procedures and its P.A.X. agreement to determine needed controls improvement. MdBC management, in conjunction with legal counsel and collaboration with the Board of directors, reviewed Articles of Incorporation, By-Laws, employee handbooks, and prior accounting policies and procedures. Upon completing the review of documents, Md BC revised, modified, or sunset policies and procedures. In addition, as needed, new policies and procedures were created. C. Governance and Management First, Md BC Board and senior management undertook governance and management actions that have improved its control environment and fostered a tone from leadership that it would hold the organization, its employees, and business partners accountable for complying with laws, regulations, and contractual terms and that it will conduct business with integrity. The Board and MdBC's current C.E.0. meet regularly with outside counsel to develop and improve its internal controls. MdBC has engaged experienced and knowledgeable federal government contracting legal counsel and experienced and knowledgeable business legal counsel to provide both the Board and its current C.E.0. counsel on matters related to legal compliance, regulatory compliance, and ethical decision making. As part of this, MdBC terminated its former C.E.O. Md BC promoted an internal candidate to C.E.O. who regularly seeks legal counsel from external lawyers on legal and regulatory compliance and ethical decision-making. The C.E.0. provides more regular and more detailed reports to the Board. MdBC has retained a C.F.O. on a contract basis with knowledge and experience in federal government contracting. This C.F.O. has devoted a significant portion oftime to working with auditors and developing internal controls in conjunction with the leadership team and outside counsel. MdBC ended its relationship with its previous external auditors and has engaged a new audit firm for its external audits. Similarly, Md BC has implemented human resource improvements, including a new employee handbook, written annual review process and goal setting for all employees, regular training on ethics, compliance, and reporting concerns. Further, MdBC has posted notices as required by the federal government and regularly messages to employees to raise concerns to management, the Board, legal counsel, or the government. D. Financial Controls MdBC's Board and C.E.O. have been educated on and appreciate the requirements to complete financial and progress reports when performing a government contract. Further, MdBC has implemented controls that will facilitate its compliance with reporting requirements in the future. Based on the enhancements to its control environment, its change in leadership, its retention of professionals with federal government contracting knowledge - including new auditors - Md BC is now prepared to comply with these requirements in the future. MdBC has developed the following internal controls to address its financial reporting, cash management, and matching contribution requirements: ? Developed an indirect rate that it will submit for approval for use on future government work; ? Developed financial policies and financial controls to assure detailed, supported invoices; ? Developed controls requiring that detailed books and records must be maintained; ? Upgraded it accounting platform to QuickBooks Enterprise to better support detailed cost accounting allocation by project for time, materials and equipment; ? Instituted an electronic timekeeping system that is consistent with regulations; ? MdBC's Board, C.E.O., and employees have all been educated on invoicing and accounting requirements. E. Policies and Procedures MdBC has updated existing policies and procedures and developed and implemented new policies and procedures. MdBC has also updated its I.T. infrastructure. For policies, procedures, and controls that MdBC is still in the process of executing, MdBC's C.E.0. is responsible for working with the Board and with legal counsel to identify and develop policies and procedures F. Training and Communication In May of 2019, MdBC's external federal government contracts attorney delivered training to MdBC's employees on working with the federal government. All MdBC employees attended this training, as did an MdBC Board member, MdBC legal counsel, and MdBC's C.E.O., to voice the organization's commitment to compliance with laws and ethical decision making. Additionally, for most of the updated or new policies, the Board met with MdBC's new C.E.O., its legal counsel, to discuss in detail the legal mandates for the policies. MdBC's C.E.O. emailed the new policies to explain the policies to Board members and employees. Further, MdBC employees are assigned to present a select new policy to other employees at MdBC's employee meetings. Md BC intends to conduct another training on working with the federal government, highlighting its new policies. G. Managing Third Parties Md BC has enhanced the oversight of its third parties. First, Md BC has a newly created master service agreement template that includes terms, conditions, and regulatory flow downs that make it clear to its subcontractors that they are expected to comply with applicable laws and regulations and perform their work with MdBC integrity. Second, MdBC has adopted policies and procedures for conducting and documenting due diligence on third parties. The policies and procedures also include requirements for competitive selection of its third parties and C.E.O., Board, and legal counsel review and approval of third parties.