Town of Elkton, Maryland

Prior Year Finding: 2024-003 Federal Agency: U.S. Department of Treasury Federal Program: COVID 19 – Coronavirus State and Local Fiscal Relief Fund Assistance Listing: 21.027 Pass-Through Entity: Maryland Department of Housing and Community Development Pass-Through Award Number and Period: Not Available, (7/1/2024 – 6/30/2025) Compliance Requirement: Suspension and Debarment Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or Specific Requirement: Internal Control: Per 2 CFR 200.303(a), a non‑Federal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the award. These internal controls should comply with the guidance in Standards for Internal Control in the Federal Government or the COSO Internal Control – Integrated Framework. Compliance: Per 2 CFR 200.213, suspension and debarment restrict awards, subawards, and contracts with parties that are debarred, suspended, or otherwise excluded from participation in Federal assistance programs. Per 2 CFR 180.300, an entity may determine suspension and debarment status by: (a) Checking the SAM Exclusions database; (b) Collecting a certification from the vendor; or (c) Including a clause or condition in the covered transaction. Condition/Context: The vendor was not suspended or debarred, and a suspension and debarment check was performed and maintained in the vendor file. However, there was no evidence to confirm that the check was completed prior to contract execution or the initiation of transactions, as documentation did not include a dated “Received” stamp as required by the Town’s internal control process. Questioned Costs: There are no questioned costs related to this finding as the vendors were not federally suspended or debarred. Cause: The Town did not consistently perform its stated control requiring the SAM.gov check to be reviewed, approved, and dated by the Assistant Town Administrator prior to contract execution or the processing of expenditures. Effect: The Town’s internal controls related to federal suspension and debarment were not consistently performed for purchases made under the program. Failure to verify suspension and debarment requirements may result in the Town entering into a contract or purchase with a vendor that is suspended or debarred and not authorized to provide goods or services under the program. Recommendation: We recommend that the Town reinforce the consistent execution of its existing procedures and internal controls to ensure vendors are verified as not suspended or debarred prior to charging goods and services to the program. In addition, the Town should consistently retain documentation evidencing the timely performance and review of suspension and debarment checks for audit purposes. Views of Responsible Officials: Management agrees with the finding.

Suspension and Debarment Recommendation: We recommend that the Town reinforce the consistent execution of its existing suspension and debarment procedures to ensure that vendors are verified as not suspended or debarred prior to contract execution or the processing of program-related expenditures. In addition, the Town should consistently retain documentation evidencing the timely performance, review, and approval of suspension and debarment checks for audit purposes. Explanation of disagreement with audit finding: There is no disagreement with the audit finding. Action taken in response to finding: Management agrees with the finding and will strengthen the consistent execution of its suspension and debarment controls. All vendor eligibility checks will be required to be completed, reviewed, and approved prior to contract execution or the processing of program-related expenditures. Review and approval will be evidenced through a dated "Received" stamp or similar documentation applied by the Assistant Town Administrator and retained in the vendor file. Management will also perform periodic monitoring to ensure that suspension and debarment controls are applied consistently. Name of the contact person responsible for corrective action: Tyler Home, Director of Finance. Planned completion date for corrective action plan: March 31, 2026

2024-003

Prior Year Finding: 2023-005 Federal Agency: U.S. Department of Treasury Federal Program: COVID 19 – Coronavirus State and Local Fiscal Relief Fund Assistance Listing: 21.027 Pass-Through Entity: Maryland Department of Housing and Community Development Pass-Through Award Number and Period: (7/1/2023 - 6/30/2024) Compliance Requirement: Suspension and Debarment Type of Finding: Material Weakness in Internal Control over Compliance, Material Noncompliance (Modified Opinion) Criteria or Specific Requirement: 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 the 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). Compliance: Per 2 CFR section 200.214 Suspension and Debarment restricts 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. Per 2 CFR section 180.300 states that an entity may determine suspension and debarment status by: (a) Checking SAM Exclusion; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. Condition/Context: The suspension and debarment status of five out of five vendors with expenditures exceeding $25,000 was not verified as required by federal regulation. Questioned Costs: There are no questioned costs related to this finding as the vendors were not federally suspended or debarred. Cause: The Town’s internal controls were not sufficient to ensure federal suspension and debarment regulations were followed for purchases made for the program. Effect: Failure to adhere to suspension and debarment requirements may result in the Town entering into a contract or purchase with a vendor that is suspended or debarred and not authorized to provide goods and services to the program. Recommendation: We recommend that the Town enhance its procedures and internal controls to ensure that it verifies vendors are not suspended or debarred from business prior to all goods and services charged to the program. The Town should retain documentation of procurement suspension/debarment status verifications for its vendors audit purposes. Views of Responsible Officials: Management agrees with the finding.

COVID-19- Coronavirus State and Local Relief Funds (CSLRF)-Assistance Listing No. 21 .027 Suspension and Debarment Recommendation: The Town should review and enhance controls and procedures to ensure that it follows procurement policy for all goods and services charged to the program and should ensure that all departments are subject to applicable controls, policies and procedures. Explanation of disagreement with audit finding: There is no disagreement with the audit finding. Action taken in response to finding: The Town will verify vendors are not suspended or debarred from business prior to acquiring goods or services charged to the program. The Town should maintain documentation of procurement suspension/debarment status verifications for its vendors. Name(s) of the contact person(s) responsible for corrective action: Lewis George, Town Administrator Planned completion date for corrective action plan: 01/01/2026

2023-005

Prior Year Finding: 2023-004 Federal Agency: U.S. Department of Treasury Federal Program: COVID 19 – Coronavirus State and Local Fiscal Relief Fund Assistance Listing: 21.027 Pass-Through Entity: Maryland Department of Housing and Community Development Pass-Through Award Number and Period: (7/1/2023 – 6/30/2024) Compliance Requirement: Procurement Type of Finding: Material Weakness in Internal Control over Compliance, Material Noncompliance (Modified Opinion) Criteria or Specific Requirement: 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). Compliance: Per 2 CFR section 200.318, a non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. Per 2 CFR section 200.319, all procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and § 200.320. Per the Town’s purchasing policy, goods or services costing $10,000 or more must be purchased from the lowest responsive bidder meeting specifications after advertising for bids. Condition/Context: The Town failed to provide documentation supporting compliance with required procurement processes for goods or services exceeding $10,000 for five out of five vendors tested. This includes a lack of evidence on how these vendors were selected and whether the procurement process ensured full and open competition. Questioned Costs: Unknown. Cause: The Town's internal controls were not sufficient to ensure that procurement policies were followed for purchases made for the program. Effect: Failure to adhere to procurement policies and procedures may result in obtaining goods or services under terms that are not in the best interest of the federal program. Recommendation: We recommend that the Town enhance its procedures and internal controls to ensure that it verifies vendors are not suspended or debarred from business prior to all goods and services charged to the program. The Town should retain documentation of procurement suspension/debarment status verifications for its vendors audit purposes. Views of Responsible Officials: Management agrees with the finding.

COVID-19 - Coronavirus State and Local Relief Funds (CSLRF)-Assistance Listing No. 21.027 Procurement Recommendation: The Town should review and enhance controls and procedures to ensure that it follows the established procurement policy for all goods and services charged to the program and should ensure that all departments are subject to applicable controls, policies and procedures. Explanation of disagreement with audit finding: There is no disagreement with the audit finding. Action taken in response to finding: The Town will implement procurement processes for goods or services exceeding $10,000 to ensure vendors are selected in a manner providing full and open competition where property or services are being acquired under a Federal award. Name(s) of the contact person(s) responsible for corrective action: Lewis George, Town Administrator Planned completion date for corrective action plan: 01/01/2026

2023-004

Finding Number: 2023-004 Prior Year Finding: 2022-004 Federal Agency: U.S. Department of Treasury Federal Program: COVID 19 – Coronavirus State and Local Fiscal Relief Fund Assistance Listing: 21.027 Pass-Through Entity: Maryland Department of Housing and Community Development Pass-Through Award Number and Period: (7/1/2022 – 6/30/2023) Compliance Requirement: Procurement Type of Finding: Material Weakness in Internal Control over Compliance, Material Noncompliance Criteria or Specific Requirement: 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). Compliance: Per 2 CFR section 200.318, a non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. Per 2 CFR section 200.319, all procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and § 200.320. Per the Town’s purchasing policy, goods or services costing $10,000 or more must be purchased from the lowest responsive bidder meeting specifications after advertising for bids. Condition/Context: The Town failed to provide documentation supporting compliance with required procurement processes for goods or services exceeding $10,000 for four out of six vendors tested. This includes a lack of evidence on how these vendors were selected and whether the procurement process ensured full and open competition. Additionally, two vendors utilized by the police department did not undergo the general bidding process. Questioned Costs: Unknown. Cause: The Town’s internal controls were not sufficient to ensure that procurement policies were followed for purchases made for the program. Effect: Failure to adhere to procurement policies and procedures may result in obtaining goods or services under terms that are not in the best interest of the federal program. Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2022-04. Recommendation: The Town should review and enhance controls and procedures to ensure that it follows procurement policy for all goods and services charged to the program and should ensure that all departments are subject to applicable controls, policies and procedures. Views of Responsible Officials: Management agrees with the finding.

Current plan & Actions being taken and developed. 1. Develop and Update Procurement Policies Create Comprehensive Policies: Ensure that the procurement policy covers all aspects of the procurement process, including vendor selection, bidding, contract management, and expenditure approvals. Regular Reviews: Periodically review and update the policies to reflect changes in laws, regulations, or best practices. 2. Establish Clear Procedures Document Procedures: Develop detailed procedures for each step of the procurement process, from requisition to payment. Create a procurement checklist. Standardize Processes: Ensure consistency across departments by standardizing procedures for procurement activities. Provide each department with the procurement check list. 3. Training and Awareness Conduct Training: Provide regular training for all staff involved in procurement to ensure they understand the policies and procedures. Promote Awareness: Increase awareness about the importance of compliance with procurement policies. 4. Implement Controls and Checks Segregation of Duties: Divide procurement responsibilities among different staff to reduce the risk of errors or fraud. Approval Processes: Establish clear approval hierarchies and limits for procurement activities and expenditures. Audit Trails: Maintain detailed records and documentation for all procurement transactions. 5. Monitor and Review Compliance Regular Audits: Conduct regular internal and external audits of procurement activities to ensure adherence to policies. Performance Metrics: Develop metrics to evaluate the effectiveness of procurement processes and identify areas for improvement. 6. Enforce Accountability Responsibility Assignments: Assign clear responsibilities for monitoring and enforcing procurement policies. 7. Utilize Technology Data Analysis: Use data analytics to track spending patterns, vendor performance, and policy compliance. 8. Encourage Transparency Open Bidding Processes: Ensure that procurement opportunities are advertised openly and fairly. 9. Feedback and Continuous Improvement Solicit Feedback: Gather feedback from staff and vendors on the procurement process to identify areas for improvement. Continuous Improvement: Regularly update procedures and policies based on feedback and audit findings. 10. Departmental Integration Cross-Department Coordination: Ensure that all departments are aligned with procurement policies and procedures. Provide each department with the procurement check list. Name(s) of the contact person(s) responsible for corrective action: All Department Directors, in conjunction with the Finance Department, are collectively accountable for the implementation and oversight of this corrective action plan. Requests for Proposals (RFPs) will be reviewed and approved in an open Town Meeting, with decisions made by the Mayor and Commissioners. Planned completion date for corrective action plan: Implementation commenced around June 1, 2024 and is projected to be fully operational within a year June 1, 2025.

2022-004

Finding Number: 2023-005 Prior Year Finding: 2022-005 Federal Agency: U.S. Department of Treasury Federal Program: COVID 19 – Coronavirus State and Local Fiscal Relief Fund Assistance Listing: 21.027 Pass-Through Entity: Maryland Department of Housing and Community Development Pass-Through Award Number and Period: (7/1/2022 – 6/30/2023) Compliance Requirement: Suspension and Debarment Type of Finding Material Weakness in Internal Control over Compliance Criteria or Specific Requirement: 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 the 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/Context: The Town did not determine the suspension and debarment status of four out of five vendors tested with expenditures exceeding $25,000 as required by federal regulations. Questioned Costs: There are no questioned costs related to this finding as the vendor was not federally suspended or debarred. Cause: The Town’s internal controls were not sufficient to ensure federal suspension and debarment regulations were followed for purchases made for the program. Effect: Failure to adhere to suspension and debarment requirements may result in the Town entering into a contract or purchase with a vendor that is suspended or debarred and not authorized to provide goods and services to the program. Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2022-05. Recommendation: We recommend that the Town enhance its procedures and internal controls to ensure that it verifies vendors are not suspended or debarred from business prior to all goods and services charged to the program. The Town should retain documentation of procurement suspension/debarment status verifications for its vendors audit purposes. Views of Responsible Officials: Management agrees with the finding.

Action taken in response to finding: A checklist has been developed for distribution to all departments. This checklist will ensure that either a printed copy confirming the bidder's non-suspension or non-debarment, or their State of Maryland Certificate of Good Standing (available at www.dat.state.md.us), is attached to the sealed bid envelope and included in the file. Name(s) of the contact person(s) responsible for corrective action: All Department Directors, in conjunction with the Finance Department, are collectively accountable for the implementation and oversight of this corrective action plan. Requests for Proposals (RFPs) will be reviewed and approved in an open Town Meeting, with decisions made by the Mayor and Commissioners. Planned completion date for corrective action plan: Implementation commenced around June 1, 2024 and is projected to be fully operational within a year June 1, 2025.

2022-005

Finding Number: 2022-004 Prior Year Finding: No Federal Agency: U.S. Department of Treasury Federal Program: COVID 19 ? Coronavirus State and Local Fiscal Relief Fund Assistance Listing: 21.027 Pass-Through Entity: Maryland Department of Housing and Community Development Pass-Through Award Number and Period: (7/1/2021 ? 6/30/2022) Compliance Requirement: Procurement Type of Finding: Material Weakness in Internal Control over Compliance, Material Noncompliance Criteria or Specific Requirement: 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). Compliance: Compliance: Per 2 CFR section 200.318, a non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. Per 2 CFR section 200.319, all procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and ? 200.320. Per the Town?s purchasing policy, goods or services costing $10,000 or more must be purchased from the lowest responsive bidder meeting specifications after advertising for bids. Condition/Context: The Town was unable to provide documentation to support compliance with required procurement processes for goods or services over $10,000 for one vendor, including how the vendor was procured and whether there was full and open competition in the procurement process. Draft - March 29, 2023 Subject to Change TOWN OF ELKTON, MARYLAND SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) JUNE 30, 2022 (14) Section III ? Findings and Questioned Costs ? Major Federal Programs (Continued) Questioned Costs: None noted. Cause: The Town?s internal controls were not sufficient to ensure that procurement policies were followed for purchases made for the program. Effect: Failure to adhere to procurement polices and procedures may result in obtaining goods or services under terms that are not in the best interest of the federal program. Recommendation: The Town should review and enhance controls and procedures to ensure that it follows procurement policy for all goods and services charged to the program. Views of Responsible Officials: Management agrees with the finding

U.S. Department of Treasury 2022-004 COVID-19 ? Coronavirus State and Local Relief Funds (CSLRF)? Assistance Listing No. 21.027 Recommendation: The Town should review and enhance controls and procedures to ensure that it follows procurement policy for all goods and services charged to the program. Explanation of disagreement with audit finding: There is no disagreement with the audit finding. Action taken in response to finding: Town's procurement policy will be reviewed and updated to ensure compliance with federal requriements. Name(s) of the contact person(s) responsible for corrective action: Steven Repole Planned completion date for corrective action plan: 6/30/2023 If the U.S. Department of Treasury, Office of Recovery Programs has questions regarding this plan, please call Steven Repole at 410-398-4170.

Finding Number: 2022-005 Prior Year Finding: No Federal Agency: U.S. Department of Treasury Federal Program: COVID 19 ? Coronavirus State and Local Fiscal Relief Fund Assistance Listing: 21.027 Pass-Through Entity: Maryland Department of Housing and Community Development Pass-Through Award Number and Period: (7/1/2021 ? 6/30/2022) Compliance Requirement: Suspension and Debarment Type of Finding Material Weakness in Internal Control over Compliance Criteria or Specific Requirement: 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 the 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/Context: The Town did not determine the suspension and debarment status of a vendor with expenditures exceeding $25,000 as required by federal regulations. Questioned Costs: There are no questioned costs related to this finding as the vendor was not federally suspended or debarred. Cause: The Town?s internal controls were not sufficient to ensure federal suspension and debarment regulations were followed for purchases made for the program. Effect: Failure to adhere to suspension and debarment requirements may result in the Town entering into a contract or purchase with a vendor that is suspended or debarred and not authorized to provide goods and services to the program. Draft - March 29, 2023 Subject to Change TOWN OF ELKTON, MARYLAND SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) JUNE 30, 2022 (16) Section III ? Findings and Questioned Costs ? Major Federal Programs (Continued) Recommendation: We recommend that the Town enhance its procedures and internal controls to ensure that it verifies vendors are not suspended or debarred from business prior to all goods and services charged to the program. The Town should retain documentation of procurement suspension/debarment status verifications for its vendors audit purposes. Views of Responsible Officials: Management agrees with the finding.

U.S. Department of Treasury 2022-005 COVID-19 ? Coronavirus State and Local Relief Funds (CSLRF)? Assistance Listing No. 21.027 Recommendation: We recommend that the Town enhance its procedures and internal controls to ensure that it verifies vendors are not suspended or debarred from business prior to all goods and services charged to the program. The Town should retain documentation of procurement suspension/debarment status verifications for its vendors audit purposes. Explanation of disagreement with audit finding: There is no disagreement with the audit finding. Action taken in response to finding: Town's procurement policy will be reviewed and updated to ensure compliance with federal requirements including documentation of good standing. Name(s) of the contact person(s) responsible for corrective action: Steven Repole Planned completion date for corrective action plan: 6/30/2023 If the U.S. Department of Treasury, Office of Recovery Programs has questions regarding this plan, please call Steven Repole at 410-398-4170.