Anne Arundel Economic Development Corporation

Federal agency: U.S. Small Business Administration Federal program name: Congressional Grants Inclusive Ventures Small Business Program Assistance listing number: 59.059 Pass-through agency: Anne Arundel County, Maryland Pass-through number: SBAHQ23I0140 Award Period: September 1,2023 through August 31, 2028 Compliance Requirement: Procurement and Suspension and Debarment Type of Findings: Material Weakness in Internal Control over Compliance, Material Noncompliance (Modified Opinion) Criteria or specific requirement: Compliance: Nonfederal entities must follow the procurement standards set out at 2 CFR sections 200.318 through 200.327. 2 CFR section 200.318 states the grant recipient or subrecipient must maintain and use documented procedures for procurement transactions under a Federal award or subaward, including for acquisition of property or services. These documented procurement procedures must be consistent with State, local, and tribal laws and regulations and the standards identified in sections 200.317 through 200.327. Compliance: Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR section 180.220. All non-procurement transactions entered into by a pass-through entity (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR section 180.215. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the nonfederal entity must verify that the entity, as defined in 2 CFR section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the System for Award Management (SAM) Exclusions maintained by the General Services Administration (GSA), (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR section 180.300). Control: Per 2 CFR section 200.303(a), a non-Federal entity must: 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 comply 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). Condition The Corporation did not follow their written procurement procedures which reflect applicable State, local, and tribal laws and regulations which also conform to the applicable federal law and standards identified in the Uniform Guidance. The Corporation could not provide documentation that it ensured contractors were not suspended or debarred before executing contracts with the entities. Questioned Costs Amounts paid to the two contractors for the fiscal year ended June 30, 2025 was $175,000. Context Supporting documentation for the procurement, suspension and debarment status for two of the two contractors selected for testing was not documented. Cause The Corporation has not historically received federal funding so the procurement, suspension and debarment documentation was not deemed necessary. Effect A lack of documented procurement standards for the Corporation could increase the risk of goods and services being procured through a method which is not in accordance with applicable State, local, and tribal law as well as federal regulations including the Uniform Guidance. If the suspension and debarment status is not verified when entering into covered transactions, it is possible that a subaward could be issued to an ineligible entity. Repeat Finding No Recommendation We recommend that management follow their written procurement policies and controls to ensure it maintains documentation of procurement, suspension and debarments checks and that the documentation is available for audit. Views of Responsible Officials Management agrees with finding. See corrective action plan for additional information.

Federal agency: U.S. Small Business Administration Federal program name: Congressional Grants Inclusive Ventures Small Business Program Assistance listing number: 59.059 Pass-through agency: Anne Arundel County, Maryland Pass-through number: SBAHQ23I0140 Award Period: September 1,2023 through August 31, 2028 Compliance Requirement: Cash Management/Program Income Type of Findings: Material Weakness in Internal Control over Compliance, Material Noncompliance (Modified Opinion) Criteria or specific requirement: Compliance: 2 CFR 200.305(b)(8) requires that non-Federal entities must maintain advance payments in interest-bearing accounts and must remit interest earned on Federal advances in excess of $500 annually to the Federal agency. 2 CFR 200.80 defines program income as gross income earned that is directly generated by a supported activity or earned as a result of the Federal award. 2 CFR 200.307(e) requires program income to be properly accounted for, used, and reported in accordance with the terms and conditions of the Federal award. 2 CFR 200.302(b)(3) requires entities to maintain records that identify the source and application of funds, including program income. Condition The Corporation did not track, record, or report program income generated from interest earned on Federal funds received in advance. Interest accumulated in the bank account holding Federal advances was not segregated, monitored, or reported to the Federal awarding agency. As a result, the Corporation could not determine whether interest exceeded the $500 annual threshold requiring remittance. Questioned Costs Total program income identified during the audit was $61,226. Context The Corporation received Federal funds in advance for program activities but did not implement procedures to track interest earned on those funds. Cause The Corporation has not historically received federal funding so tracking program income earned from funds received in advance was not deemed necessary. Effect The Corporation may have retained Federal interest income that should have been remitted to the awarding agency. The Federal awarding agency was not informed of program income generated. Repeat Finding No Recommendation We recommend that management develop and implement written procedures to track, record, and report program income, including interest earned on Federal advances. Views of Responsible Officials Management agrees with finding. See corrective action plan for additional information.

2024-001 Federal agency: U.S. Department of Treasury Federal program name: Coronavirus State and Local Fiscal Recovery Relief Funds Assistance listing number: 21.027 Federal Award Identification Number and Year: Pass-through agency: Anne Arundel County, Maryland Pass-through number: STLT-0698 Award Period: September 1,2022 through December 31, 2024 Compliance Requirement: Procurement and Suspension and Debarment Type of Findings: Material Weakness in Internal Control over Compliance, Material Noncompliance Criteria or specific requirement: Compliance: Nonfederal entities must follow the procurement standards set out at 2 CFR sections 200.318through 200.327. 2 CFR section 200.318 states the grant recipient or subrecipient must maintain and use documented procedures for procurement transactions under a Federal award or subaward, including for acquisition of property or services. These documented procurement procedures must be consistent with State, local, and tribal laws and regulations and the standards identified in sections 200.317 through 200.327. Compliance: Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR section 180.220. All non-procurement transactions entered into by a pass-through entity (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR section 180.215. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the System for Award Management (SAM) Exclusions maintained by the General Services Administration (GSA), (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR section 180.300). Control: Per 2 CFR section 200.303(a), a non-Federal entity must: 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 comply 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). Condition The Corporation did not have written procurement procedures which reflect applicable State, local, and tribal laws and regulations which also conform to the applicable federal law and standards identified in the Uniform Guidance. The Corporation could not provide documentation that it ensured contractors were not suspended or debarred before issuing subawards to the entities. Questioned Costs Amounts paid to the two contractors for the fiscal year ended June 30, 2024 was $165,000. Context Supporting documentation for the procurement process and suspension and debarment status for two of the two contractors selected for testing was not documented. Cause The Corporation has not historically received federal funding so a written procurement policy and suspension and debarment documentation was not deemed necessary. Effect A lack of documented procurement standards for the Corporation could increase the risk of goods and services being procured through a method which is not in accordance with applicable State, local, and tribal law as well as federal regulations including the Uniform Guidance. If the suspension and debarment status is not verified when entering into covered transactions, it is possible that a subaward could be issued to an ineligible entity. Repeat Finding No Recommendation We recommend that management develop and implement written procurement policies and implement controls and procedures to ensure it maintains documentation of suspension and debarments checks and that the documentation is available for audit. Views of Responsible Officials Management agrees with finding. See corrective action plan for additional information.

2021-001 Federal agency: U.S. Department of Treasury Federal program title: Coronavirus Relief Funds ALN: 21.019 Pass-through agency: Anne Arundel County, Maryland Pass-through number: 240492.ON Award Period: March 1, 2020 through December 31, 2021 Compliance Requirement: Allowable Costs/Cost Principles Type of Findings: Significant Deficiency in Internal Control over Compliance, Other Matters Condition 2 out of 60 cash disbursements tested were unable to provide supporting documentation to support the amount spent. For 1 of these disbursements tested, the entire amount was unsupported. For the 2nd disbursements, only $588 out of $5,981 did not have supporting invoices/support. Criteria or specific requirement: The Coronavirus Relief Fund is designed to provide ready funding to address unforeseen financial needs and risks created by the COVID-19 public health emergency. Governments may use Fund payments for eligible expenses subject to the restrictions set forth in section 601(d) of the Social Security Act. Payments must be used to cover costs that are: 1. Necessary expenditures incurred due to the public health emergency with respect to COVID-19; 2. Not accounted for in the governments' most recently approved budget as of March 27, 2020; and 3. Incurred (performance or delivery must occur) during the period that begins on March 1, 2020 and ends on December 31, 2021. Cause The Corporation provided funding to small businesses in Anne Arundel County during the pandemic. The Corporation provided the funds upfront and required the recipients to submit invoices to show how the spent the funds. 2 of the recipients never provided the necessary supporting documentation. Questioned Costs $7,243 Effect The federal funds could have been spent on expenditures that were unallowed under the grant. Recommendation We recommend that management review their policies and procedures and make changes necessary to ensure only allowable costs are charged to grants.