MCCURTAIN COUNTY

Finding 2021-015 ? Internal Controls and Noncompliance Over the Schedule of Expenditures of Federal Awards PASS-THROUGH GRANTOR: Oklahoma Department of Emergency Management and Oklahoma Office of Management and Enterprise Services FEDERAL AGENCY: U.S. Department of Treasury ASSISTANCE LISTING: 21.019 FEDERAL PROGRAM NAME: Coronavirus Relief Fund FEDERAL AWARD NUMBER: 4530-DR-OK and SA-2445 FEDERAL AWARD YEAR: 2020 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; and Period of Performance QUESTIONED COSTS: $- Condition: The County has not designed and implemented formal internal controls for the reporting of its federal programs as required by federal regulations. During our audit, we identified federal programs that were not listed accurately on the County?s Schedule of Expenditures of Federal Awards (SEFA). Federal expenditures were understated by $245,927. The following misstatements were noted: ? The actual expenditures for the Schools and Roads ? Grants to States (Title 1 - Highway), ALN 10.665 were $50,943 and the County reported $75,144, resulting in an overstatement of expenditures of $24,201. ? The actual expenditures for the Schools and Roads ? Grants to States (Title 1 - Schools), ALN 10.665 were $137,041 and the County reported $0, resulting in an understatement of expenditures of $137,041. ? The actual expenditures for the Community Development Block Grants/State's program and Non- Entitlement Grants in Hawaii, ALN 14.228 were $131,364 and the County reported $0, resulting in an understatement of expenditures of $131,364. ? The actual expenditures for the Violence Against Women Formula Grants, ALN 16.588 were $48,300 and the County reported $48,386, resulting in an overstatement of expenditures of $86. ? The actual expenditures for the State and Community Highway Safety, ALN 20.600 were $419 and the County reported $0, resulting in an understatement of expenditures of $419. ? The actual expenditures for the Coronavirus Relief Fund Pass through State of Oklahoma Department of Emergency Management, ALN 21.019 were $13,766 and the County reported $0, resulting in an understatement of $13,766. ? The actual expenditures for the Coronavirus Relief Fund Pass through Office of Management and Enterprise Services, ALN 21.019 were $1,508,075 and the County reported $1,506,115, resulting in an understatement of $1,960. ? The actual expenditures for the US Army Corp, a non-federal award was $0 and the County reported $14,336, resulting in an overstatement of $14,336. Cause of Condition: Policies and procedures have not been designed and implemented to ensure accurate reporting of expenditures for all federal awards. Effect of Condition: This resulted in the erroneous reporting, a material misstatement of the County?s SEFA and a material noncompliance with federal regulations. Recommendation: OSAI recommends County officials and department heads gain an understanding of federal programs awarded to McCurtain County. Internal control procedures should be designed and implemented to ensure accurate reporting of expenditures on the SEFA and to ensure compliance with federal requirements. Management Response: Chairman of the Board of County Commissioners: McCurtain County will implement the recommendations to address these concerns and prevent reoccurrence. We will assess ways to effectively communicate to county officials and department heads information regarding the importance of accurately reporting of federal program expenditures on the SEFA and compliance with federal requirements. Criteria: 2 CFR ? 200.303(a) Internal Controls reads as follows: The 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 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). 2 CFR ? 200.508(b) Auditee responsibilities reads as follows: The auditee must: Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with ?200.510 Financial statements. 2 CFR ? 200.510(b) Financial statements reads as follows: Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended as determined in accordance with ?200.502 Basis for determining Federal awards expended. [?.] Further, GAO Standards ? Section 2 ? Objective of an Entity - OV2.23 states in part: Compliance Objective Management conducts activities in accordance with applicable laws and regulations. As part of specifying compliance objectives, the entity determines which laws and regulations apply to the entity. Management is expected to set objectives that incorporate these requirements.

Finding 2021-016 ? County-Wide Controls Over Major Federal Program ? Coronavirus Relief Fund PASS-THROUGH GRANTOR: Oklahoma Department of Emergency Management and Oklahoma Office of Management and Enterprise Services FEDERAL AGENCY: U.S. Department of Treasury ASSISTANCE LISTING: 21.019FEDERAL PROGRAM NAME: Coronavirus Relief Fund FEDERAL AWARD NUMBER: 4530-DR-OK and SA-2445 FEDERAL AWARD YEAR: 2020 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; and Period of Performance QUESTIONED COSTS: $-0- Condition: Through the process of gaining an understanding of the County?s internal control structure for federal programs, it was noted that county-wide controls regarding Control Environment, Risk Assessment, Information and Communication, and Monitoring have not been designed. Cause of Condition: Policies and procedures have not been designed and implemented to ensure the County is in compliance with federal award requirements. Effect of Condition: Without an adequate system of county-wide controls, there is greater risk of a breakdown in control activities which could result in noncompliance to federal award requirements. Recommendation: OSAI recommends that the County design and implement a system of county-wide procedures to identify and address risks related to compliance with federal award requirements and to ensure that information is communicated effectively. OSAI also recommends that the County design and implement monitoring procedures to assess the quality of performance over time. These procedures should be written policies and procedures and could be included in the County?s policies and procedures handbook. Management Response: Chairman of the Board of County Commissioners: McCurtain County will implement the recommendations to address these concerns and prevent reoccurrence. Information regarding federal grants will be communicated during the Board of County Commissioner?s Meetings and to the department heads. We will assess ways to identify and address risks related to compliance with federal award requirements including periodic monitoring. Criteria: 2 CFR ? 200.303 Internal Controls (a) reads as follows: The 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 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). Also, the GAO Standards ? Section 1 ? Fundamental Concepts of Internal Control ? OV1.01 states in part: Definition of Internal Control Internal control is a process effected by an entity?s oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. Additionally, GAO Standards ? Section 2 ? Establishing an Effective Internal Control System ? OV2.04 states in part: Components, Principles, and Attributes Control Environment - The foundation for an internal control system. It provides the discipline and structure to help an entity achieve its objectives. Risk Assessment - Assesses the risks facing the entity as it seeks to achieve its objectives. This assessment provides the basis for developing appropriate risk responses. Information and Communication - The quality information management and personnel communicate and use to support the internal control system. Monitoring - Activities management establishes and operates to assess the quality of performance over time and promptly resolve the findings of audits and other reviews.

Finding 2021-017 ? Internal Controls Over Compliance Requirements for Major Federal Program ? Coronavirus Relief Fund PASS-THROUGH GRANTOR: Oklahoma Department of Emergency Management and Oklahoma Office of Management and Enterprise Services FEDERAL AGENCY: U.S. Department of Treasury ASSISTANCE LISTING: 21.019 FEDERAL PROGRAM NAME: Coronavirus Relief Fund FEDERAL AWARD NUMBER: 4530-DR-OK and SA-2445 FEDERAL AWARD YEAR: 2020 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; and Period of Performance QUESTIONED COSTS: $-0- Condition: During the process of documenting the County?s internal controls regarding the disbursement of federal awards, we noted the County has not established procedures to ensure compliance with the following compliance requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; and Period of Performance. compliance with federal award requirements. Effect of Condition: This condition could result in noncompliance to federal grant requirements and loss of federal funds to the County. Recommendation: OSAI recommends the County gain an understanding of requirements for federal awards and design and implement internal controls to ensure compliance with requirements. Management Response: Chairman of the Board of County Commissioners: McCurtain County will implement the recommendations to address these concerns and prevent reoccurrence. The County administrator applying for the federal awards on behalf of the County will be responsible for communicating the necessary information regarding compliance requirements to relevant parties to ensure compliance. Criteria: 2 CFR ? 200.303 Internal Controls (a) reads as follows: The 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 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 GAO Standards ? Section 1 ? Fundamental Concepts of Internal Control ? OV1.01 states in part: Definition of Internal Control Internal control is a process effected by an entity?s oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. Additionally, GAO Standards ? Section 2 ? Establishing an Effective Internal Control System ? OV2.04 states in part: Components, Principles, and Attributes Control Activities ? The actions management establishes through policies and procedures to achieve objectives and respond to risks in the internal control system, which includes the entity?s information system.

Finding 2021-018 ? Noncompliance Over Major Federal Program ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles PASS-THROUGH GRANTOR: Oklahoma Office of Management and Enterprise Services FEDERAL AGENCY: U.S. Department of Treasury ASSISTANCE LISTING: 21.019 FEDERAL PROGRAM NAME: Coronavirus Relief Fund FEDERAL AWARD NUMBER: SA-2445 FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Activities Allowed or Unallowed and Allowable Costs/Cost Principles QUESTIONED COSTS: $147,379 Condition: After performing expenditure testwork on 100% of the program, disbursements totaling $147,379 were not expended in accordance with the Activities Allowed or Unallowed and Allowable Costs/Cost Principles due to unsubstantiated, duplicated and ineligible cost, as noted below: ? Payroll expenditures reimbursed totaling $15,772 were already reimbursed by another federal program. ? Sheriff credit card expenditures for routine car maintenance, meals, and fuel totaling $86,424. ? Reimbursement was requested for $100; however, the invoice was $50. ? Payroll expenditures for the Assessor?s office teleworking totaling $34,057. ? Payroll expenditures totaling $3,246 were already claimed on another reimbursement request. ? Expenditures totaling $7,830 were cancelled and never paid by the County. Cause of Condition: Policies and procedures have not been designed and implemented to ensure compliance with federal award requirements. Effect of Condition: These conditions resulted in noncompliance with grant requirements. The County runs the risk of misappropriation of funds and could hinder the County from receiving future federal funding. Further, this could result in the repayment of grant funds to the grantor agency. Recommendation: OSAI recommends that the County design and implement policies and procedures to ensure compliance with applicable grant requirements. Management Response: Chairman of the Board of County Commissioners: McCurtain County will implement the recommendations to address these concerns. The County administrator applying for the federal awards on behalf of the County will be responsible for communicating the necessary information regarding compliance requirements to relevant parties to ensure compliance with applicable grant requirements. Criteria: 2 CFR ? 200.303 Internal Controls (a) reads as follows: The 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 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). Additionally, 2 CFR ? 200.403 - Factors affecting allowability costs states in part, ?Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented.? The Department of the Treasury Federal Register, Vol. 86, No. 10 states in part, ?Fund payments may not be used for expenses that have been or will be reimbursed by another federal program.? Additionally, guidance provided in the Subrecipient Agreement - Federal Funding Certification executed June 3, 2020 between McCurtain County and the State of Oklahoma states in part, 4. Funds provided as direct payment from the State of Oklahoma pursuant to this certification for necessary expenditures that were or will be incurred during the period that begins on March 1, 2020, and ending on December 30, 2020, that are not expended on those necessary expenditures on or before March 31, 2021, by the political subdivision or its grantee(s), must be returned to the State of Oklahoma on or before April 1, 2021. 5. Funds provided as a direct payment from the State of Oklahoma pursuant to this certification must adhere to official federal guidance issued or to be issued on what constitutes a necessary expenditure. Any funds expended by a political subdivision or its grantee(s) in any manner that does not adhere to official federal guidance or in violation of this certification shall be returned to the State of Oklahoma Coronavirus Relief Fund. 6. Any local government entity receiving funds pursuant to this certification shall retain documentation of all uses of the funds,? 8. Any funds provided pursuant to this certification cannot be used as a revenue replacement for lower than expected tax or other revenue collections. 10. I acknowledge and certify that Recipient has not received, and will not apply for, federal funds from any other source, to reimburse it for the expenditures for which funds are sought pursuant hereto.

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