CUSTER COUNTYLocal Government

NONCOMPLIANCE WITH GRANT TERMS AND CONDITIONS; HOMELAND SECURITY GRANT PROGRAM, AL No. 97.067, GRANT No. EMS-2023-SS-00059, YEAR ENDED JUNE 30, 2025 Criteria: Per Article XV of the grant contract, the county is subject to the non-procurement debarment and suspension regulations implementing Executive Orders (E.O.) 12549 and 12689. These regulations restrict federal financial assistance 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. Condition: The county did not verify that all program recipients/participants were not suspended, debarred, or otherwise excluded from participation in the program in accordance with Article XV of the grant contract Cause: The county does not have a system in place that will allow full compliance with all grant terms and conditions. Effect: Non-compliance with program terms and conditions. Recommendation: Management should develop procedures that will provide reasonable assurance that procurement of goods and services are made in compliance with applicable federal regulations and other procurement requirements specific to a federal award or subaward. The county should obtain the required certifications in order to verify that program recipients/participants were not suspended, debarred, or otherwise excluded from participation in the program. Views of responsible officials and planned corrective actions: The government agrees with this finding and will adhere to the attached corrective action plan.

NONCOMPLIANCE WITH ALLOWABLE COSTS/COST PRINCIPLES; FORMULA GRANTS FOR RURAL AREAS AND TRIBAL TRANSIT PROGRAM; AL No. 20.509, GRANT No’s 113004 AND 112605, YEAR ENDED JUNE 30, 2023 Criteria: The cost principles in 2 CFR part 200, subpart E (Cost Principles), prescribe the cost accounting requirements associated with the administration of federal awards. Direct costs are those costs that can be identified specifically with a particular final cost objective, such as a federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy. Condition: Program expenditures were not separately identified in the general ledger. Further, costs submitted for reimbursement on the quarterly grant reports were higher than the general ledger by $20,159. Questioned Costs: $16,127. Cause: Unknown. Effect: Non-compliance Allowable Costs/Cost Principles and incorrect reimbursement amounts may have been received. Recommendation: The county should develop a process to separately identify program expenditures by cost category in the general ledger. Further, program administration should prepare the grant reimbursement reports from the general ledger and designate an individual to verify that amounts reported to the granting agency actually agree to the general ledger accounting records prior to filing. Views of responsible officials and planned corrective actions: The government agrees with this finding and will adhere to the attached corrective action plan.

SEGREGATION OF DUTIES Criteria: Duties should be segregated to provide reasonable assurance that transactions are handled appropriately. Condition: There is a lack of segregation of duties among personnel. Cause: There are a limited number of personnel for certain functions. Effect: Transactions could be mishandled. Recommendation: The duties should be separated as much as possible, and alternative controls should be used to compensate for lack of separation. The governing board should provide some of these controls. Views of responsible officials and planned corrective action: The government agrees with this finding and will adhere to the attached corrective action plan.

AUDITOR PREPARED FINANCIAL STATEMENTS Criteria: As part of its internal control structure, it is the government?s responsibility to prepare its financial statements in accordance with generally accepted accounting principles (GAAP). Condition: The government does not have the expertise to prepare or evaluate the selection and application of accounting principles and resulting disclosures and presentations within the auditor prepared financial statements. Cause: The government is a small organization with limited resources. Effect: It is common for a small organization to rely on the audit firm to prepare the financial statements; however, an audit firm cannot be considered part of the government?s internal control by professional standards currently in effect. Since some presentations and disclosures may be material to the financial statements, this weakness in internal control would be classified as material. Recommendation: While it may not be cost effective to do so, we recommend the government consider hiring a qualified person to evaluate the auditor prepared financial statements. Views of responsible officials and planned corrective actions: The government agrees with this finding and will adhere to the attached corrective action plan.

SEGREGATION OF DUTIES Criteria: Duties should be segregated to provide reasonable assurance that transactions are handled appropriately. Condition: There is a lack of segregation of duties among personnel. Effect: Transactions could be mishandled. Cause: There are a limited number of personnel for certain functions. Recommendation: The duties should be separated as much as possible, and alternative controls should be used to compensate for lack of separation. The governing board should provide some of these controls. Views of responsible officials and planned corrective actions: The government agrees with this finding and will adhere to the attached corrective action plan.

AUDITOR PREPARED FINANCIAL STATEMENTS: Criteria: As part of its internal control structure, it is the government?s responsibility to prepare its financial statements and Schedule of Expenditures of Federal Awards (SEFA) in accordance with generally accepted accounting principles (GAAP). Condition: The government does not have the expertise to prepare or evaluate the selection and application of accounting principles and resulting disclosures and presentations within the auditor prepared financial statements and SEFA. Cause: The government is a small organization with limited resources. Effect: It is common for a small organization to rely on the audit firm to prepare the financial statements and SEFA; however, an audit firm cannot be considered part of the government?s internal control by professional standards currently in effect. Since some presentations and disclosures may be material to the financial statements and SEFA, this weakness in internal control would be classified as material. Recommendation: While it may not be cost effective to do so, we recommend the government consider hiring a qualified person to evaluate the auditor prepared financial statements and SEFA. Views of responsible officials and planned corrective actions: The government agrees with this finding and will adhere to the attached correction action plan