SAUNDERS COUNTY

Lack of Segregation of Duties Condition: The County does not have enough staff to implement certain internaL controls that would be preferred to provide optimum segregation of duties. Criteria or Specific Requirement: A good system of internal control allows for segregation of duties between authorization, custody, record-keeping, and reconciliation. Context: Although there is oversight from Board members, and there is division of certain duties within the various offices, the Treasurer is still able to perform and oversee most accounting functions, including receipting and depositing of revenue, initiating and approving invoices, writing and signing checks, and preparation and review of financial reports. Effect: When one individual is able to perform all accounting functions, without oversight on a day-to-day basis, intentional or unintentional errors could be made and not detected, transactions could be reported in improper categories, and steps could be taken to cover up fraud. Cause: The County has limited staffing resources with skills, experience, and competency to participate in the financial reporting process. Recommendation: While additional staff would be ideal to segregate the duties to a fuller extent, we realize that may not be possible due to limited resources. Therefore, we recommend that the Board and Treasurer continue to review, implement and monitor their financial procedures to segregate duties to the extent possible. We also encourage Board involvement in oversight, questioning transactions, and reviewing the financial reports monthly. Response: The County will continue to monitor and review their financial procedures and policies, incorporating Board oversight as much as possible. Adding additional staff to provide a more robust system of internal control is not practical.

Financial Reporting Condition: The County does not have the accounting expertise to provide the Board with reasonable assurance that the County's financial statements and related disclosures are presented in accordance with the applicable accounting principles. Criteria or Specific Requirement: Management is responsible for establishing and maintaining internal controls that should include the fair presentation of financial statements, including the notes to the financial statements, in conformity with the cash basis of accounting. Context: The County has requested that the auditor draft the financial statements and accompanying notes, to ensure they meet the required applicable standards, as the County personnel lacks the expertise to prepare these without assistance. Effect: Financial statements prepared by the County could contain errors that might not be detected by the County. Cause: The County has limited staffing resources with skills, experience, and competency to prepare the financial statements in conformity with the basis of accounting described in Note 1. Recommendation: The County should carefully review the adjustments proposed by the auditor, and should evaluate the adequacy of the financial statements prior to approving the final financial statements. Response: The County Board of Supervisors, along with the Clerk and the Treasurer, will carefully review the financial statements drafted by the auditor, prior to issuing their final approval. The Board and management will also review the audit adjustments, and discuss any questions they may have with the auditor.

Lack of Segregation of Duties Condition: The County does not have enough staff to implement certain internal controls that would be preferred to provide optimum segregation of duties. Criteria or Specific Requirement: A good system of internal control allows for segregation of duties between authorization, custody, record-keeping, and reconciliation. Context: Although there is oversight from Board members, and there is division of certain duties within the various offices, the Treasurer is still able to perform and oversee most accounting functions, including receipting and depositing of revenue, initiating and approving invoices, writing and signing checks, and preparation and review of financial reports. Effect: When one individual is able to perform all accounting functions, without oversight on a day-to-day basis, intentional or unintentional errors could be made and not detected, transactions could be reported in improper categories, and steps could be taken to cover up fraud. Cause: The County has limited staffing resources with skills, experience, and competency to participate in the financial reporting process. Recommendation: While additional staff would be ideal to segregate the duties to a fuller extent, we realize that may not be possible due to limited resources. Therefore, we recommend that the Board and Treasurer continue to review, implement and monitor their financial procedures to segregate duties to the extent possible. We also encourage Board involvement in oversight, questioning transactions, and reviewing the financial reports monthly. Response: The County will continue to monitor and review their financial procedures and policies, incorporating Board oversight as much as possible. Adding additional staff to provide a more robust system of internal control is not practical.

Financial Reporting Condition: The County does not have the accounting expertise to provide the Board with reasonable assurance that the County's financial statements and related disclosures are presented in accordance with the applicable accounting principles. Criteria or Specific Requirement: Management is responsible for establishing and maintaining internal controls that should include the fair presentation of financial statements, including the notes to the financial statements, in conformity with the cash basis of accounting. Context: The County has requested that the auditor draft the financial statements and accompanying notes, to ensure they meet the required applicable standards, as the County personnel lacks the expertise to prepare these without assistance. Effect: Financial statements prepared by the County could contain errors that might not be detected by the County. Cause: The County has limited staffing resources with skills, experience, and competency to prepare the financial statements in conformity with the basis of accounting described in Note 1. Recommendation: The County should carefully review the adjustments proposed by the auditor, and should evaluate the adequacy of the financial statements prior to approving the final financial statements. Response: The County Board of Supervisors, along with the Clerk and the Treasurer, will carefully review the financial statements drafted by the auditor, prior to issuing their final approval. The Board and management will also review the audit adjustments, and discuss any questions they may have with the auditor.

Program - AL 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Suspension & Debarment Grant Number & Year - SLFRP3004, March 3, 2021, through December 31, 2024 Federal Grantor Agency - U.S. Department of the Treasury Criteria - Title 2 of the U.S. Code of Federal Regulations (CFR) § 200.303 (January 1, 2023) states the following, in relevant part: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) . . . . The U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards in 2 CFR § 1000.10 (January 1, 2023), which states the following: Except for the deviations set forth elsewhere in this Part, the Department of the Treasury adopts the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, set forth at 2 CFR part 200. 2 CFR § 200.214 (January 1, 2023) states the following: Non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2 CFR part 180 restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. 2 CFR § 180.300 (January 1, 2023) requires non-Federal entities to verify that an entity is not excluded or disqualified prior to entering into a covered transaction by: “(a) Checking SAM Exclusions; or (b) Collecting a certification from that . . . [entity]; or (c) Adding a clause or condition to the covered transaction with that . . . [entity].” A good internal control plan requires the County to have proper procedures in place to verify that contractors paid with Federal funds are not suspended, debarred, or otherwise excluded from or ineligible for participation in Federal programs or activities. Condition - Saunders County could not provide documentation to support the County implemented effective internal controls to ensure that suspension and debarment requirements were followed and adequately documented. We noted the County used Coronavirus State and Local Fiscal Recovery Funds to pay two vendors over $25,000, totaling $1,750,730, during the fiscal year ended June 30, 2023. The County failed to ensure that these vendors were not excluded or disqualified prior to entering into these covered transactions. We reviewed SAM.gov, and noted these vendors were not suspended, debarred, or otherwise excluded from participation in Federal programs or activities as of the date tested was performed. Repeat Finding - No Questioned Costs - None Statistical Sample - No Context - The following table provides details of the covered transactions noted: Cause - Lack of procedures and knowledge regarding suspension and debarment requirements. Effect - Without adequate procedures to ensure contractors are not suspended, debarred, or otherwise excluded from or ineligible for participation in Federal programs or activities, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations, leading to possible Federal sanctions. Recommendation - We recommend the County implement procedures to ensure, prior to entering into a covered transaction, that a contractor is not suspended, debarred, or otherwise excluded from or ineligible for participation in Federal programs or activities, and those procedures are adequately documented. View of Officials - The County Attorney is writing up a policy.

Program - AL 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Reporting Grant Number & Year - SLFRP3004, March 3, 2021, through December 31, 2024 Federal Grantor Agency - U.S. Department of the Treasury Criteria - Title 2 of the U.S. Code of Federal Regulations (CFR) § 200.303 (January 1, 2023) states the following, in relevant part: The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards in 2 CFR § 1000.10 (January 1, 2023), which states the following: Except for the deviations set forth elsewhere in this Part, the Department of the Treasury adopts the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, set forth at 2 CFR part 200. The U.S. Department of the Treasury issued “Compliance and Reporting Guidance” and frequently asked questions, which specify the reporting requirements related to Coronavirus State and Local Fiscal Recovery Funds. A good internal control plan includes establishing effective internal controls through written policies and procedures to ensure Federal reporting requirements are completed accurately. Such plan should include, among other things, appropriate training on Federal reporting requirements and require a documented, detailed review of each report to be completed by a knowledgeable individual, who did not prepare the report, prior to submission. Condition - Saunders County did not implement effective internal controls to ensure that the reporting requirements of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) were completed accurately. The Project and Expenditure report submitted on April 28, 2023, did not contain accurate information. The table below in the “Context” section summarizes the variances noted. Repeat Finding - No Questioned Costs - None Statistical Sample - No Context - The following table summarizes the variances between the 2023 report and the underlying accounting system and County records. Additionally, Saunders County incorrectly listed Motorola Solutions Inc., a communications vendor, as a subrecipient. Cause - Lack of procedures and knowledge regarding the reporting requirements. Effect - Inaccurate information was reported to the U.S. Department of the Treasury on the 2023 Project and Expenditure report. Additionally, there is an increased risk of the County not being in compliance with the reporting requirements set by the U.S Department of the Treasury. Recommendation - We recommend the County implement procedures to ensure Federal reporting requirements are completed accurately. Such procedures could include, among other things, appropriate training on Federal reporting requirements and a documented review by a knowledgeable individual who was not involved in the preparation of the report. View of Officials - The County Attorney is writing up a policy.