Osage CountyLocal Government

Condition: Through the process of gaining an understanding of the County’s internal control structure, it was noted that county-wide internal 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 complies with grant requirements. Effect of Condition: Without an adequate system of county-wide controls, there is a greater risk of a breakdown in control activities which could result in unrecorded transactions, undetected errors, or misappropriation of funds. Further, this condition could result in noncompliance with grant requirements and a loss of federal funds. Recommendation: OSAI recommends that the County design and implement a system of internal controls to ensure compliance with grant requirements. Management Response: Chairman of the Board of County Commissioners: These findings trace back to gaps under the prior County Clerk's administration and her lack of cooperation with the Board of County Commissioners, but our focus is on fixing the problems, not dwelling on them. Under the current leadership, the Board of County Commissioners, the new County Clerk and the other elected officials have made addressing these control weaknesses a priority. Together, we are: • strengthening county-wide policies and procedures to meet federal compliance requirements • improving communication and oversight to ensure accurate and timely federal reporting • and establishing clear standards and training for all reporting officers to prevent inaccurate or untimely reporting. Our collective goal is to build a stronger, more accountable system that ensures federal programs are managed with the highest level of integrity. County Clerk: I was not the County Clerk in office at this time. Ensure that the County has standards in place that will deter inaccurate and untimely reporting. In addition, those reporting have the knowledge and understanding to properly report. County Treasurer: The County Officers will work on better communication to more accurately report the Schedule of Expenditures of Federal Awards (SEFA) funds. Criteria: 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.

Condition: During the process of documenting the County’s internal controls regarding federal disbursements, we noted that Osage County has not established procedures to ensure compliance with the following compliance requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Procurement and Suspension and Debarment; Reporting; and Subrecipient Monitoring Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition could result in noncompliance to grant requirements and could lead to a loss of federal funds to the County. Recommendation: OSAI recommends the County gain an understanding of grant requirements for these programs and implement internal control procedures to ensure compliance with grant requirements. Management Response: Chairman of the Board of County Commissioners: The lack of cooperation and oversight during the prior County Clerk's administration left significant gaps that required immediate attention. The current leadership has made addressing these gaps a top priority. Together, we are: • meeting monthly to update procedures and build stronger internal controls, • developing and formalizing policies to ensure full compliance with federal grant requirements, • and improving communication between offices to ensure federal reporting is accurate and timely. Our collective commitment is to put permanent measures in place to prevent these issues from recurring and to uphold the highest level of compliance for all federal programs. County Clerk: I was not the County Clerk in office at this time. The County will comply with all aspects of grant reporting and requirements. The Officials will work together to put policies and procedures in place to ensure more accurate reporting. County Treasurer: The County Officers will work on better communication to more accurately report the SEFA funds. 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). Further, GAO Standards – Section 2 – Establishing an Effective Internal Control System – OV2.23 states in part: Objectives of an Entity – Compliance Objectives 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. Accountability and stewardship should be overall goals in management's accounting of federal funds. Internal controls should be designed to monitor compliance with laws and regulations pertaining to grant contracts.

Condition Upon inquiry of county personnel and a test of four (4) disbursements totaling $452,184, the following instances of noncompliance were noted: • The County failed to document suspension and debarment of vendors for purchases over $25,000. • The County failed to have written standards of conduct that cover conflicts of interest and that govern the performance of its employees engaged in the selection, award, and administration of contract. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal disbursements are made in accordance with federal compliance requirements. Effect of Condition: This condition resulted in noncompliance with grant requirements and could result in a loss of federal funds. Recommendation: OSAI recommends the County gain an understanding of the grant requirements for this program and implement internal controls to ensure compliance with these grant requirements. Management Response: Chairman of the Board of County Commissioners: These procurement issues originated during the prior County Clerk’s administration, but the current leadership is focused on corrective measures. Together, we are: • developing a SOP to ensure vendor checks for suspension and debarment are conducted on all purchases over $25,000, • establishing written standards of conduct to address conflicts of interest and set clear procurement guidelines, • and enhancing oversight and review to ensure all procurement processes are fully compliant with federal regulations. Our goal is to build a consistent, transparent procurement framework that safeguards both compliance and public trust. County Clerk: I was not the County Clerk in Office at this time. To correct this issue, the County plans to develop a SOP to timely and accurately track and report on the SEFA. The SOP will be reviewed, adopted, and monitored by the Board of County Commissioners. Criteria: Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (8. Procurement, Suspension & Debarment.) reads as follows: Recipients are responsible for ensuring that any procurement using SLFRF funds, or payments under procurement contracts using such funds, are consistent with the procurement standards set forth in the Uniform Guidance at 2 CFR 200.317 through 2 CFR 200.327, unless stated otherwise by Treasury. As outlined in FAQ 13.15, only a subset of the Uniform Guidance requirements at 2 CFR Part 200 Subpart D (Post Federal Award Requirements) applies to recipients’ use of funds in the revenue loss eligible use category. The procurement standards set forth in the Uniform Guidance at 2 CRF 200.317 through 2 CRF 200.327 are not included in FAQ 13.15’s list of applicable Subpart D requirements that apply to recipients’ use of funds in the revenue loss eligible use category. The Uniform Guidance establishes in 2 CFR 200.319 that all procurement transactions for property or services must be conducted in a manner providing full and open competition, consistent with standards outlined in 2 CFR 200.320, which allows for non-competitive procurements only in certain circumstances. Recipients must have and use documented procurement procedures that are consistent with the standards outlined in 2 CFR 200.317 through 2 CFR 200.320. In addition, the Uniform Guidance at 2 CFR 200.214, 2 CFR Part 180, and Treasury’s implementing regulations at 31 CFR Part 19, prohibit recipients from entering into contracts with suspended or debarred parties. The procurement standards outlined in the Uniform Guidance require an infrastructure for competitive bidding and contractor oversight, including maintaining written standards of conduct. Your organization must ensure adherence to all applicable local, State, and federal procurement laws and regulations. Further, 2 CFR § 200.319 Competition (d) reads as follows: The non-Federal entity must have written procedures for procurement transactions.

Condition: Expenditures for federal program, Coronavirus State and Local Fiscal Recovery Funds were not accurately reported on the Compliance Report. Federal expenditures were underreported by $753,744. The County reported $0, resulting in an understatement of $753,744 This was due to the County failing to report expenditures on a cash basis. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition could result in noncompliance with grant requirements. Recommendation: OSAI recommends the County gain an understanding of the grant requirements for this program and implement internal controls to ensure compliance with these grant requirements. Management Response: Chairman of the Board of County Commissioners: This issue originated under the prior County Clerk’s administration where key reporting processes were not followed. The Board of County Commissioners and the other elected officials have made correcting this a top priority. Together, we are: • developing a comprehensive SOP to ensure accurate and timely tracking and reporting of federal funds, • improving communication and oversight between all county offices to ensure consistent reporting standards, • and ensuring annual compliance with federal reporting requirements. Our collective goal is to implement the policies and structures that will keep Osage County operating with the highest standard of accountability and excellence. County Clerk: I was not the County Clerk in office at this time. To correct this issue. the County plans to develop a SOP to timely and accurately track and report on federal funds. The SOP will be reviewed, adopted, and monitored by the Board of County Commissioners. County Treasurer: The County was under the understanding that once we established we were reporting as Loss Revenue, we would not have to submit the report annually. The final reporting was submitted prior to deadline. Criteria: Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting.) reads as follows: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, you organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Further, 2 CFR § 200.329 Monitoring and Reporting Program Performance (c)(1) reads as follows: The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.

Condition: During our test of (2) expenditures totaling $332,735, for the Coronavirus State and Local Fiscal Recovery Funds, it was noted the County did not have a subrecipient monitoring policy and did not obtain subrecipient agreements from its two (2) subrecipients comparing the following information: • Subrecipient name. • Subrecipient Authorized Representative and program contact information. • Subrecipient Employee Identification Number (EIN) and Data Universal Numbering System (DUNS) number. • Federal Award Identification Number (FAIN). • Name of Federal Awarding Agency. • Contact information for the official at the Federal Awarding Agency. • Catalog of Assistance Listing (AL) number and name. • Federal award date. • Total amount of the federal award and indirect cost rate. • Federal award project description. • Start and end date of the agreement. • Amount of federal funds budgeted for the agreement and indirect cost rate allowed. • A statement that all activities must be in accordance with federal statutes, regulations, and terms and conditions of the federal award. The subrecipient should receive a copy of the award documents. • A detailed description of any additional requirements you want the subrecipient to be responsible for such as performance and/or financial reports, attending meetings and/or trainings, etc. • A statement about the monitoring activities, such as where/when they will take place; also include a statement indicating the subrecipient will collaborate on monitoring activities including providing requested financial documents. • A statement indicating if any of the items in the agreement change during the period of performance, the agreement will be amended. • Provide close out terms and conditions. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with compliance requirements. Effect of Condition: This condition resulted in noncompliance with grant requirements. Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements. Management Response: Chairman of the Board of County Commissioners: This issue originated under the prior County Clerk’s administration where key reporting processes were not followed. The Board of County Commissioners and the other elected officials have made correcting this a top priority. Together, we are: • developing a comprehensive SOP to ensure accurate and timely tracking and reporting of Federal funds, • improving communication and oversight between all county offices to ensure consistent reporting standards, • and ensuring annual compliance with federal reporting requirements. Our collective goal is to implement the policies and structures that will keep Osage County operating with the highest standard of accountability and excellence County Clerk: I was not the County Clerk in office at this time. To correct this issue, the County plans to develop a SOP to timely and accurately track and report on Grants and Awards. The SOP will be reviewed, adopted, and monitored by the Board of County Commissioners. Criteria: 2 CFR 200, §200.332 Requirements for Pass-Through Entities states in part: All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. (2) All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award. (5) A requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient's records and financial statements as necessary for the pass-through entity to meet the requirements of this part. (6) Appropriate terms and conditions concerning closeout of the subaward.

Condition: Through the process of gaining an understanding of the County’s internal control structure, it was noted that county-wide internal 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 complies with grant requirements. Effect of Condition: Without an adequate system of county-wide controls, there is a greater risk of a breakdown in control activities which could result in unrecorded transactions, undetected errors, or misappropriation of funds. Further, this condition could result in noncompliance with grant requirements and a loss of federal funds. Recommendation: OSAI recommends that the County design and implement a system of internal controls to ensure compliance with grant requirements. Management Response: Chairman of the Board of County Commissioners: These findings trace back to gaps under the prior Clerk's administration and her lack of cooperation with the Board of County Commissioners, but our focus is on fixing the problems, not dwelling on them. Under the current leadership, the Board of County Commissioners, the new County Clerk and the other elected officials have made addressing these control weaknesses a priority. Together, we are: • strengthening county-wide policies and procedures to meet federal compliance requirements • improving communication and oversight to ensure accurate and timely federal reporting • and establishing clear standards and training for all reporting officers to prevent inaccurate or untimely reporting. Our collective goal is to build a stronger, more accountable system that ensures federal programs are managed with the highest level of integrity. County Clerk: I was not the County Clerk in office at this time. Ensure that the County has standards in place that will deter inaccurate and untimely reporting. In addition, those reporting have the knowledge and understanding to properly report. County Treasurer: The County Officers will work on better communication to more accurately report the Schedule of Expenditures of Federal Awards (SEFA) funds. Criteria: 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.

Condition: During the process of documenting the County’s internal controls regarding federal disbursements, we noted that Osage County has not established procedures to ensure compliance with the following compliance requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Procurement and Suspension and Debarment; Reporting; and Subrecipient Monitoring. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition could result in noncompliance to grant requirements and could lead to a loss of federal funds to the County. Recommendation: OSAI recommends the County gain an understanding of grant requirements for these programs and implement internal control procedures to ensure compliance with grant requirements. Management Response: Chairman of the Board of County Commissioners: The lack of cooperation and oversight during the prior County Clerk's administration left significant gaps that required immediate attention. The current leadership has made addressing these gaps a top priority. Together, we are: • meeting monthly to update procedures and build stronger internal controls, • developing and formalizing policies to ensure full compliance with federal grant requirements, • and improving communication between offices to ensure federal reporting is accurate and timely. Our collective commitment is to put permanent measures in place to prevent these issues from recurring and to uphold the highest level of compliance for all federal programs. County Clerk: I was not the County Clerk in office at this time. The County will comply with all aspects of grant reporting and requirements. The Officials will work together to put policies and procedures in place to ensure more accurate reporting. County Treasurer: The County Officers will work on better communication to more accurately report the SEFA funds. 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). Further, GAO Standards – Section 2 – Establishing an Effective Internal Control System – OV2.23 states in part: Objectives of an Entity – Compliance Objectives 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. Accountability and stewardship should be overall goals in management's accounting of federal funds. Internal controls should be designed to monitor compliance with laws and regulations pertaining to grant contracts.

Condition: Upon inquiry of county personnel and a test of fifteen (15) disbursements totaling $810,215, the following instances of noncompliance were noted: • The County failed to document suspension and debarment of vendors for purchases over $25,000. • The County failed to have written standards of conduct that cover conflicts of interest and that govern the performance of its employees engaged in the selection, award, and administration of contract. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal disbursements are made in accordance with federal compliance requirements. Effect of Condition: This condition resulted in noncompliance with grant requirements and could result in a loss of federal funds. Recommendation: OSAI recommends the County gain an understanding of the grant requirements for this program and implement internal controls to ensure compliance with these grant requirements. Management Response: Chairman of the Board of County Commissioners: These procurement issues originated during the prior County Clerk’s administration, but the current leadership is focused on corrective measures. Together, we are: • developing a SOP to ensure vendor checks for suspension and debarment are conducted on all purchases over $25,000, • establishing written standards of conduct to address conflicts of interest and set clear procurement guidelines, • and enhancing oversight and review to ensure all procurement processes are fully compliant with federal regulations. Our goal is to build a consistent, transparent procurement framework that safeguards both compliance and public trust. County Clerk: I was not the County Clerk in office at this time. To correct this issue, the County plans to develop a SOP to timely and accurately track and report on the SEFA. The SOP will be reviewed, adopted, and monitored by the Board of County Commissioners. Criteria: Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (8. Procurement, Suspension & Debarment.) reads as follows: Recipients are responsible for ensuring that any procurement using SLFRF funds, or payments under procurement contracts using such funds, are consistent with the procurement standards set forth in the Uniform Guidance at 2 CFR 200.317 through 2 CFR 200.327, unless stated otherwise by Treasury. As outlined in FAQ 13.15, only a subset of the Uniform Guidance requirements at 2 CFR Part 200 Subpart D (Post Federal Award Requirements) applies to recipients’ use of funds in the revenue loss eligible use category. The procurement standards set forth in the Uniform Guidance at 2 CRF 200.317 through 2 CRF 200.327 are not included in FAQ 13.15’s list of applicable Subpart D requirements that apply to recipients’ use of funds in the revenue loss eligible use category. The Uniform Guidance establishes in 2 CFR 200.319 that all procurement transactions for property or services must be conducted in a manner providing full and open competition, consistent with standards outlined in 2 CFR 200.320, which allows for non-competitive procurements only in certain circumstances. Recipients must have and use documented procurement procedures that are consistent with the standards outlined in 2 CFR 200.317 through 2 CFR 200.320. In addition, the Uniform Guidance at 2 CFR 200.214, 2 CFR Part 180, and Treasury’s implementing regulations at 31 CFR Part 19, prohibit recipients from entering into contracts with suspended or debarred parties. The procurement standards outlined in the Uniform Guidance require an infrastructure for competitive bidding and contractor oversight, including maintaining written standards of conduct. Your organization must ensure adherence to all applicable local, State, and federal procurement laws and regulations. Further, 2 CFR § 200.319 Competition (d) reads as follows: The non-Federal entity must have written procedures for procurement transactions.

Condition: Expenditures for the federal program, Coronavirus State and Local Fiscal Recovery Funds were not accurately reported on the Compliance Report. Federal expenditures were underreported by $1,661,921. The County reported $0, resulting in an understatement of $1,661,921. This was due to the County failing to report expenditures on a cash basis. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition could result in noncompliance with grant requirements. Recommendation: OSAI recommends the County gain an understanding of the grant requirements for this program and implement internal controls to ensure compliance with these grant requirements. Management Response: Chairman of the Board of County Commissioners: This issue originated under the prior County Clerk’s administration where key reporting processes were not followed. The Board of County Commissioners and the other elected officials have made correcting this a top priority. Together, we are: • developing a comprehensive SOP to ensure accurate and timely tracking and reporting of federal funds, • improving communication and oversight between all county offices to ensure consistent reporting standards, • and ensuring annual compliance with federal reporting requirements. Our collective goal is to implement the policies and structures that will keep Osage County operating with the highest standard of accountability and excellence. County Clerk: I was not the County Clerk in office at this time. To correct this issue, the County plans to develop a SOP to timely and accurately track and report on federal funds. The SOP will be reviewed, adopted, and monitored by the Board of County Commissioners. County Treasurer: The County was under the understanding that once we established, we were reporting as revenue loss, we would not have to submit the report annually. The final reporting was submitted prior to deadline. Criteria: Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting.) reads as follows: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, you organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Further, 2 CFR § 200.329 Monitoring and Reporting Program Performance (c)(1) reads as follows: The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.

Condition: During our test of (2) expenditures totaling $110,000, for the Coronavirus State and Local Fiscal Recovery Funds, it was noted the County did not have a subrecipient monitoring policy and did not obtain subrecipient agreements from (2) subrecipients comparing the following information: • Subrecipient name. • Subrecipient Authorized Representative and program contact information. • Subrecipient Employee Identification Number (EIN) and Data Universal Numbering System (DUNS) number. • Federal Award Identification Number (FAIN). • Name of Federal Awarding Agency. Contact information for the official at the Federal Awarding Agency. • Catalog of Assistance Listing (AL) number and name. • Federal award date. • Total amount of the federal award and indirect cost rate. • Federal award project description. • Start and end date of the agreement. • Amount of federal funds budgeted for the agreement and indirect cost rate allowed. • A statement that all activities must be in accordance with federal statutes, regulations, and terms and conditions of the federal award. The subrecipient should receive a copy of the award documents. • A detailed description of any additional requirements you want the subrecipient to be responsible for such as performance and/or financial reports, attending meetings and/or trainings, etc. • A statement about the monitoring activities, such as where/when they will take place; also include a statement indicating the subrecipient will collaborate on monitoring activities including providing requested financial documents. • A statement indicating if any of the items in the agreement change during the period of performance, the agreement will be amended. • Provide close out terms and conditions. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with compliance requirements. Effect of Condition: This condition resulted in noncompliance with grant requirements. Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements. Management Response: Chairman of the Board of County Commissioners: This issue originated under the prior County Clerk’s administration where key reporting processes were not followed. The Board of County Commissioners and the other elected officials have made correcting this a top priority. Together, we are: • developing a comprehensive SOP to ensure accurate and timely tracking and reporting of Federal funds, • improving communication and oversight between all county offices to ensure consistent reporting standards, • and ensuring annual compliance with federal reporting requirements. Our collective goal is to implement the policies and structures that will keep Osage County operating with the highest standard of accountability and excellence County Clerk: I was not the County Clerk in office at this time. To correct this issue, the County plans to develop a SOP to timely and accurately track and report on Grants and Awards. The SOP will be reviewed, adopted, and monitored by the Board of County Commissioners. Criteria: 2 CFR 200, §200.332 Requirements for Pass-Through Entities states in part: All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. (2) All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award. (5) A requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient's records and financial statements as necessary for the pass-through entity to meet the requirements of this part. (6) Appropriate terms and conditions concerning closeout of the subaward.

Condition: Through the process of gaining an understanding of the County’s internal control structure, it was noted that county-wide internal 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 complies with grant requirements. Effect of Condition: Without an adequate system of county-wide controls, there is a greater risk of a breakdown in control activities which could result in unrecorded transactions, undetected errors, or misappropriation of funds. Further, this condition could result in noncompliance with grant requirements and a loss of federal funds. Recommendation: OSAI recommends that the County design and implement a system of internal controls to ensure compliance with grant requirements. Management Response: Chairman of the Board of County Commissioners: These findings trace back to gaps under the prior Clerk’s administration and her lack of cooperation with the Board of County Commissioners, but our focus is on fixing the problems, not dwelling on them. Under the current leadership, the Board of County Commissioners, the new County Clerk and the other elected officials have made addressing these control weaknesses a priority. Together, we are: • strengthening county-wide policies and procedures to meet federal compliance requirements • improving communication and oversight to ensure accurate and timely federal reporting • and establishing clear standards and training for all reporting officers to prevent inaccurate or untimely reporting. Our collective goal is to build a stronger, more accountable system that ensures federal programs are managed with the highest level of integrity. County Clerk: I was not the County Clerk in office at this time. Ensure that the County has standards in place that will deter inaccurate and untimely reporting. In addition, those reporting have the knowledge and understanding to properly report. County Treasurer: The County Officers will work on better communication to more accurately report the Schedule of Expenditures of Federal Awards (SEFA) funds. Criteria: 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.

Condition: During the process of documenting the County’s internal controls regarding federal disbursements, we noted that Osage County has not established procedures to ensure compliance with the following compliance requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Procurement and Suspension and Debarment; Reporting; and Subrecipient Monitoring. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition could result in noncompliance to grant requirements and could lead to a loss of federal funds to the County. Recommendation: OSAI recommends the County gain an understanding of grant requirements for these programs and implement internal control procedures to ensure compliance with grant requirements. Management Response: Chairman of the Board of County Commissioners: The lack of cooperation and oversight during the prior County Clerk’s administration left significant gaps that required immediate attention. The current leadership has made addressing these gaps a top priority. Together, we are: • meeting monthly to update procedures and build stronger internal controls, • developing and formalizing policies to ensure full compliance with federal grant requirements, • and improving communication between offices to ensure federal reporting is accurate and timely. Our collective commitment is to put permanent measures in place to prevent these issues from recurring and to uphold the highest level of compliance for all federal programs. County Clerk: I was not the County Clerk in office at this time. The County will comply with all aspects of grant reporting and requirements. The Officials will work together to put policies and procedures in place to ensure more accurate reporting. County Treasurer: The County Officers will work on better communication to more accurately report the SEFA funds. 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). Further, GAO Standards – Section 2 – Establishing an Effective Internal Control System – OV2.23 states in part: Objectives of an Entity – Compliance Objectives 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. Accountability and stewardship should be overall goals in management’s accounting of federal funds. Internal controls should be designed to monitor compliance with laws and regulations pertaining to grant contracts.

Condition: During our review of sixty-one (61) disbursements totaling $2,280,846, we noted that eight (8) purchase orders totaling $390,313 were not supported with adequate documentation. Cause of Condition: Policies and procedures have not been designed and implemented to ensure compliance with federal award requirements. Effect of Condition: This condition resulted in noncompliance with federal grant requirements and could result in loss of federal funds to the County. Recommendation: OSAI recommends county officials and department heads gain an understanding of federal programs awarded to the County. Internal control procedures should be designed and implemented to ensure compliance with federal award requirements. Management Response: Chairman of the Board of County Commissioners: These disbursement issues originated during the prior County Clerk’s administration, but the current leadership is focused on corrective measures. Together, we are: • developing a SOP to ensure compliance with grant requirements, • establishing written standards of conduct to address and set clear guidelines over grant requirements, • and enhancing oversight and review to ensure all processes are fully compliant with federal regulations. Our goal is to build a consistent, transparent procurement framework that safeguards both compliance and public trust. County Clerk: I was not the County Clerk in office at this time. To correct this issue. the County plans to develop a SOP to timely and accurately track and report on federal funds. The SOP will be reviewed, adopted, and monitored by the Board of County Commissioners. Criteria: 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.

Condition: Upon inquiry of county personnel and a test of twenty (20) disbursement totaling $303,873, the following instances of noncompliance were noted: • The County failed to document suspension and debarment of vendors for purchases over $25,000. • The County failed to have written standards of conduct that cover conflicts of interest and that govern the performance of its employees engaged in the selection, award, and administration of contract. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal disbursements are made in accordance with federal compliance requirements. Effect of Condition: This condition resulted in noncompliance with grant requirements and could result in a loss of federal funds. Recommendation: OSAI recommends the County gain an understanding of the grant requirements for this program and implement internal controls to ensure compliance with these grant requirements. Management Response: Chairman of the Board of County Commissioners: These procurement issues originated during the prior County Clerk’s administration, but the current leadership is focused on corrective measures. Together, we are: • developing a SOP to ensure vendor checks for suspension and debarment are conducted on all purchases over $25,000, • establishing written standards of conduct to address conflicts of interest and set clear procurement guidelines, • and enhancing oversight and review to ensure all procurement processes are fully compliant with federal regulations. Our goal is to build a consistent, transparent procurement framework that safeguards both compliance and public trust. County Clerk: I was not the County Clerk in office at this time. To correct this issue, the County plans to develop a SOP to timely and accurately track and report on the SEFA. The SOP will be reviewed, adopted, and monitored by the Board of County Commissioners. Criteria: Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (8. Procurement, Suspension & Debarment.) reads as follows: Recipients are responsible for ensuring that any procurement using SLFRF funds, or payments under procurement contracts using such funds, are consistent with the procurement standards set forth in the Uniform Guidance at 2 CFR 200.317 through 2 CFR 200.327, unless stated otherwise by Treasury. As outlined in FAQ 13.15, only a subset of the Uniform Guidance requirements at 2 CFR Part 200 Subpart D (Post Federal Award Requirements) applies to recipients’ use of funds in the revenue loss eligible use category. The procurement standards set forth in the Uniform Guidance at 2 CRF 200.317 through 2 CRF 200.327 are not included in FAQ 13.15’s list of applicable Subpart D requirements that apply to recipients’ use of funds in the revenue loss eligible use category. The Uniform Guidance establishes in 2 CFR 200.319 that all procurement transactions for property or services must be conducted in a manner providing full and open competition, consistent with standards outlined in 2 CFR 200.320, which allows for non-competitive procurements only in certain circumstances. Recipients must have and use documented procurement procedures that are consistent with the standards outlined in 2 CFR 200.317 through 2 CFR 200.320. In addition, the Uniform Guidance at 2 CFR 200.214, 2 CFR Part 180, and Treasury’s implementing regulations at 31 CFR Part 19, prohibit recipients from entering into contracts with suspended or debarred parties. The procurement standards outlined in the Uniform Guidance require an infrastructure for competitive bidding and contractor oversight, including maintaining written standards of conduct. Your organization must ensure adherence to all applicable local, State, and federal procurement laws and regulations. Further, 2 CFR § 200.319 Competition (d) reads as follows: The non-Federal entity must have written procedures for procurement transactions.

Condition: The Coronavirus State and Local Fiscal Recovery Funds (SLFRF) Compliance Report was not maintained and could not be produced. Federal expenditures as reported could not be tested resulting in unreported costs of $2,280,846. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition could result in noncompliance with grant requirements. Recommendation: OSAI recommends the County gain an understanding of the grant requirements for this program and implement internal controls to ensure compliance with these grant requirements. Management Response: Chairman of the Board of County Commissioners: This issue originated under the prior County Clerk’s administration where key reporting processes were not followed. The Board of County Commissioners and the other elected officials have made correcting this a top priority. Together, we are: • developing a comprehensive SOP to ensure accurate and timely tracking and reporting of federal funds, • improving communication and oversight between all county offices to ensure consistent reporting standards, • and ensuring annual compliance with federal reporting requirements. Our collective goal is to implement the policies and structures that will keep Osage County operating with the highest standard of accountability and excellence. County Clerk: I was not the County Clerk in office at this time. To correct this issue, the County plans to develop a SOP to timely and accurately track and report on federal funds. The SOP will be reviewed, adopted, and monitored by the Board of County Commissioners. County Treasurer: The County was under the understanding that once we established we were reporting as revenue loss, we would not have to submit the report annually. The final reporting was submitted prior to deadline. Criteria: Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting.) reads as follows: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles.In addition, where appropriate, you organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Further, 2 CFR § 200.329 Monitoring and Reporting Program Performance (c)(1) reads as follows: The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.

Finding 2020-011 ? Noncompliance with Activities Allowed or Unallowed, Allowable Costs/Cost Principles ? Disaster Grants - Public Assistance (Presidentially Declared Disasters) PASS-THROUGH GRANTOR: Oklahoma Department of Emergency Management FEDERAL AGENCY: U.S. Department of Homeland Security ASSISTANCE LISTING: 97.036 FEDERAL PROGRAM NAME: Disaster Grants - Public Assistance (Presidentially Declared Disasters) FEDERAL AWARD NUMBER: FEMA-4438-DR-OK, FEMA-4453-DR-OK FEDERAL AWARD YEAR: 2020 CONTROL CATEGORY: Activities Allowed or Unallowed, Allowable Costs/Cost Principles QUESTIONED COSTS: $30,610 Condition: During inquiry, review, and testing of 100% of the project worksheets, the following was noted: ? The County was unable to provide supporting documents for federal expenditures totaling $30,610. o District 1 - $9,244 o District 2 - $4,082 o District 3 - $17,284 Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: These conditions resulted in noncompliance to grant requirements and could result in loss of future federal funds to the County. Recommendation: The Oklahoma State Auditor & Inspector?s Office (OSAI) recommends the County gain an understanding of the compliance requirements for federal programs. Moreover, the County needs to maintain all documentation of each federal project for future audits. Management Response: District 1: Federal Emergency Management Agency (FEMA) declaration was from prior administration. For future declarations, District 1 will make sure proper documentation is retained for review. District 2: For future FEMA declarations, District 2 will work closer with the FEMA agent to ensure proper documentation matches the claim. District 3: These disasters occurred under previous administration for myself and my administrative assistant. We spent many hours pouring through the files that were identified as the FEMA disaster files for these particular events. We researched files that were not included and were unable to recover any more documentation. Moving forward, we will be sure as events unfold to be compiling our documentation in a secure and easy to locate manner. Criteria: Title 2 CFR ? 200.400 (d) Policy guide states in part: ? . . . However, the accounting practices of the non-Federal entity must be consistent with these cost principles and support the accumulation of costs as required by the principles, and must provide for adequate documentation to support costs charged to the Federal award.?

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