Cottonwood CountyLocal Government

2024-002 Suspension and Debarment Prior Year Finding Number: N/A Year of Finding Origination: 2024 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Significant Deficiency and Other Matter Federal Agency: U.S. Department of the Treasury Program: 21.027 COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Award Number and Year: SLFRP3546; 2021 Pass-Through Agency: N/A - Direct Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Federal requirements prohibit non-federal entities from contracting with or making subawards under covered transactions to parties that are suspended or debarred. Title 2 U.S. Code of Federal Regulations § 180.300 describes a required verification process. Prior to entering into the transaction, one of the following must be performed: (1) checking SAM.gov exclusions, (2) collecting a certification, or (3) adding a clause or condition to the covered transaction. The County’s written procurement policy, however, requires both checking SAM.gov exclusions and obtaining a certification from the contractor prior to entering into a covered transaction. Condition: For three covered transactions tested, the County did not follow its written procurement policy to perform verification for suspended or debarred vendors by checking SAM.gov prior to entering into the covered transactions. Also, certifications were not obtained from contractors for two of the three covered transactions tested. Questioned Costs: None. Context: The County entered into a total of 11 covered transactions for the Coronavirus State and Local Fiscal Recovery Funds program during 2024. At the time of the audit, the County provided a signed certification for one of the three transactions tested and provided support that the vendors tested were not recently listed as suspended or debarred on SAM.gov. The sample size was based on guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: Failure to verify vendors are not suspended, debarred, or otherwise excluded prior to entering into a covered transaction may result in the County entering into a transaction with a vendor that is not authorized to provide goods and services under the grant. Cause: At the time of entering into the covered transactions, the County was not aware which transactions would be used as grant expenditures, and the County did not perform a SAM.gov search. Additionally, the County indicated two of the transactions tested were professional service agreements, and the County was not required to follow a formal bidding process; therefore, certifications were not obtained. Recommendation: We recommend the County maintain documentation to demonstrate that vendors were not debarred, suspended, or otherwise excluded from conducting business with the County; the County should complete this documentation prior to entering into a covered transaction. View of Responsible Official: Acknowledge

Finding Number: 2020-003 Prior Year Finding Number: N/A Repeat Finding Since: N/A Activities Allowed and Unallowed, Allowable Costs/Cost Principles, Period of Performance, and Reporting Program: U.S. Department of the Treasury?s Coronavirus Relief Fund (CFDA No. 21.019), Award No. SLT0016, 2020 Pass-Through Agency: Minnesota Office of Management and Budget Criteria: Title 2 U.S. Code of Federal Regulations ? 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Section 5001(d) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provided the eligible purposes for which COVID-19 ? Coronavirus Relief Fund payments may be used. Payments must have been used to cover costs that were necessary expenditures incurred due to the public health emergency, not accounted for in the County?s budget approved as of March 27, 2020, and incurred during the covered period. The State of Minnesota provided requirements, as the pass-through entity, that the covered period for Minnesota counties began on March 1, 2020, and ended on December 1, 2020, (period of performance). Condition: The following deficiency was noted in a sample of 22 claims tested: ? A vendor was paid $305 more than the claim supported. Additionally, while summarizing the expenditures reported on the November/December Local Government Expenditure Report, the following issues were investigated and found to be deficient: ? $5,000 was paid to a beneficiary outside the period of performance and subsequently reported twice on the November/December Local Government Expenditure Report. ? $7,630 was reported on the November/December Local Government Expenditure Report without supporting a claim or other documentation. ? $65,069 was paid to various vendors, including $55,000 to a subrecipient, outside the period of performance. Questioned Costs: $78,004 Context: It is likely that the County would have eligible payroll expenditures to replace the questioned costs. For items that were outside the period of performance, the County could not provide documentation of a supply chain disruption. The sample size was based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: The County is not meeting federal regulations pertaining to Activities Allowed and Unallowed, Allowable Costs/Cost Principles, and Period of Performance. Additionally, program participants could receive benefits when they are not eligible. Cause: The County indicated it was difficult to carry out the requirements of the grant during the period due to staffing constraints. The overpayment to the vendor was noted as a mistake. Additionally, the unsupported claims resulted from the County anticipating they would expend more than they actually did. For the activity paid after the period of performance, the County indicated they were waiting on support for the purchases before passing the money through to the entity. Recommendation: We recommend the County submit Local Government Expenditure Reports with properly substantiated support for necessary items purchased within the period of performance. View of Responsible Official: Acknowledged

Finding Number: 2020-004 Prior Year Finding Number: N/A Repeat Finding Since: N/A Subrecipient Monitoring Program: U.S. Department of the Treasury?s Coronavirus Relief Fund (CFDA No. 21.019), Award No. SLT0016, 2020 Pass-Through Agency: Minnesota Office of Management and Budget Criteria: Title 2 U.S. Code of Federal Regulations ? 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Also, the County must comply with the requirements for pass-through entities as identified in Title 2 U.S. Code of Federal Regulations ? 200.332, such as clearly identifying the award to the subrecipient; evaluating the subrecipient?s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the award; monitoring the activities of the subrecipient; and verifying the subrecipient is audited, if required. Condition: The following exceptions were noted in the sample of three subrecipients tested: ? The County did not have a signed agreement on file for two subrecipients. ? None of the subrecipients were provided with sufficient award information. ? The two subrecipients tested that required monitoring by the County, did not have sufficient monitoring procedures performed over them. Additionally, the County does not have documented policies and procedures for subrecipient monitoring. Questioned Costs: None. Context: Cottonwood County passed funds to local governments, which the County is familiar with and who have been operating for many years. The sample size was based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: Cottonwood County is not meeting federal regulations pertaining to subrecipient monitoring. Also, the County cannot be assured their subrecipients are administering federal awards in compliance with all applicable federal requirements. Cause: Cottonwood County does not generally provide federal awards to subrecipients and, therefore, did not have policies and procedures in place for subrecipient monitoring activities. Additionally, the County was not aware of the full extent of requirements for subrecipient monitoring. Recommendation: We recommend Cottonwood County work with departments that pass funds through to subrecipients to identify responsibilities such as completing risk assessments and monitoring procedures over federal programs, as well as creating and maintaining proper documentation to meet the requirements of federal programs. This would include documenting the monitoring procedures performed (such as on-site visits and review of the subrecipients? audit findings) and any related follow-up on findings, and performing and documenting a risk assessment of subrecipients. Additionally, we recommend the County include applicable CFDA numbers in communications regarding the program to its subrecipients. We also recommend the County develop and document policies and procedures for monitoring all federal awards. View of Responsible Official: Acknowledged