Luna County

Federal program information: Funding agency: U.S. Department Homeland Security Title: Operation Stonegarden Federal Assistance Listing Number: 97.067 Compliance Requirement Reporting Award Period: July 1, 2021 to June 30, 2022 Condition: During our testwork of the Stonegarden program we noted the following: ? The quarterly report?s expenditures did not match the expenditures of the general ledger in total for a variance of $40,504. The County has not made progress over these deficiencies during the fiscal year 2022 Criteria: The SF-425 quarterly reports should be submitted within the required time period after the end of the reporting period, which is 30 days, and should agree to the general ledger. Grant accounting requires the program revenues to equal the program?s expenditures. Questioned Costs: None. Cause: The County had turnover in the management of this program and the position in a prior year and it has taken the client a lot of time to catch up on work not being done when the position was vacant. For the amounts reported not matching the general ledger and revenue not equaling expenditures, the reason for this is both a timing issue and there not being a proper reconciliation process in place when report amounts are submitted to the granting agency and when recording amounts in the general ledger. Effect: Four of the quarterly reports for the Stonegarden program were not submitted by the required due date, some of the amounts reported were not correctly matching the general ledger amounts. Auditor?s Recommendations: We recommend that there be a reconciliation with the Stonegarden program and with Finance to ensure that the amounts reported in the quarterly reports match the amounts reported on the general ledger and that the County cross-train someone to ensure that if there is turnover again for the program, there is someone who can submit the reports until someone else has been hired to fill the position. There also needs to be a reconciliation process of the grant reports in total and what has been reported in the County?s general ledger when the grant closeout process happens. Agency?s Response: Luna County will work on an implementation plan to ensure timely reports for all grants. Although the plan is in the infancy stage, Luna County anticipates completion in fiscal year 2023. Laura Garcia, grant manager is the responsible position.

Federal program information: Funding agency: All Programs Title: All Programs Federal Assistance Listing Number: All Programs Compliance Requirement Reporting Award Period: July 1, 2021 to June 30, 2022 Condition: During our procedures over the trial balance and the Schedule of Expenditures of Federal Awards we noted the following: ? The County did not timely or accurately complete a Schedule of Expenditures and Federal Awards for audit purposes. The final Schedule of Expenditures and Federal Awards was provided over 90 days after year end. ? The County did not properly identify several federal funds in fiscal year 2022 on the initial Schedule of Expenditures and Federal Awards ? The County does not have a proper mechanism in place or a formal process to properly identify and track all federal funds. ? The County does not have a proper fund structure in place to properly segregate and identify federal funds in the trial balance to ensure the Schedule of Expenditures and Federal Awards is complete and accurate. ? It appears the ARPA funds that were provided upfront to the County, was used as part of the pooled cash in fund 411, to support other federal funds during the reimbursement process of the other federal funds. Criteria: OMB Uniform Guidance requires that the County identify all federal awards expended on the Schedule of Expenditures of Federal Awards. The Circular also requires award identification to include, as applicable, the Federal Assistance Number and title, the award number and years, the name of the federal agency, and the name of any applicable pass-through entities. Cause: The County has a decentralized federal account system and does not have a proper mechanism in place to set up, track, post, and monitor federal transactions in a timely and accurate manner throughout the year or at year end. Effect: The County is in violation of the Uniform Guidance requirements. Auditor?s Recommendation: We recommend that the County implement a system to ensure the following: ? The County should implement a centralized process to properly and accurately set up federal programs in the accounting system that is separate from other non-federal transactions and is easily identifiable as federal programs. ? The County should implement a centralized system that tracks and monitors all federal programs to ensure compliance with rules, laws, and regulations. ? The County should implement systems that ensures items needed to prepare the Schedule of Expenditure and Federal Awards be done in the closing process so that when the audit starts the Schedule of Expenditure and Federal Awards is ready to be audited Agency?s Response: Luna County recognizes this shortfall and is in the process of assigning the SEFA schedule to one individual which will be the focus of their work to ensure the accuracy and identity of all federal awards along with the annual accounting of such awards. Joanne Hethcox, Budget and Procurement Director will be responsible until the position is filled. Luna County anticipates completion in fiscal year 2023.

2021‐004 (2020‐005) — High Intensity Drug Trafficking Areas (HIDTA) Overtime Violation (Significant Deficiency) (Repeated) Condition: During the fiscal year June 30, 2021, the County had one employee who was paid more than the allowed amount of overtime per the HIDTA Maximum Overtime amounts requirement. This individual was paid a total of $30,941 in overtime from multiple programs, however this is more than the allowed amount of $21,720 which is 25% of the maximum amount of a GS-12’s salary of $86,881. There was no management progress during fiscal year 2021. Criteria: The HIDTA Program Policy and Budget Guidance and their Office of National Drug Control Policy 7.12.2 Maximum Overtime Amounts states that: “HIDTA-funded annual overtime for individual state, local, and tribal law enforcement officers and uniformed Federal agents shall not exceed the lower of: (1) applicable state, local, and tribal regulations of officer’s parent agency; or (2) 25 percent of the Federal GS-12, Step 1 level pay scale for “Rest of U.S.” in the law enforcement general schedule (GS) in effect at the beginning of the calendar year (CY), the parent agency’s FY, or other 12-month period selected by the parent agency. In addition, this reimbursable overtime rate is the maximum that an officer can receive during the current year, fiscal year, or other 12-month period from all Federal funding sources combined. As the cap on overtime from all Federal sources is imposed by other Federal agencies, including the Department of Justice (DOJ) and Department of Homeland Security (DHS), ONDCP has no authority to waive or increase Federal overtime authorized for HIDTA task force officers who will exceed the limit. Effect: The County is in violation of the HIDTA Overtime requirement. Cause: The County was not keeping track of the overtime being done in total for the HIDTA program. Auditor’s Recommendation: We recommend that the County implement a system to ensure that all law enforcement employees not have overtime pay over the required amount for each fiscal year Agency’s Response: Luna County management along with the Program Commander and Luna County Sheriff will monitor OT more closely to ensure that no employee exceeds the maximum allowable earnings. Luna County will be monitoring closely all Federal programs to ensure compliance with contract/award guidelines on combined OT limits. In addition, the one employee this affected is no longer an employee, however Luna County will continue due diligence to ensure that OT limits are strictly adhered to. Internal controls will be implemented during fiscal year 2022.

2021‐006 (2019‐006) — SF‐425 Reports (Significant Deficiency) (Repeat/Modified) Federal program information: Funding agency: U.S. Department Homeland Security Title: Operation Stonegarden Federal Assistance number: 97.067 Compliance Requirement Reporting Award Period: July 1, 2020 to June 30, 2021 Condition: During our testwork of the Stonegarden program we noted the following:  For the 2019 and 2018 grants, there were two quarterly reports out of six that were not submitted by the due date required.  The quarterly report’s expenditures did not match the expenditures of the general ledger in total for a variance of $13,619.  The program’s revenues were $12,540 more than the expenditures on the trial balance. The County made progress in filing SF-425’s during fiscal year 2021. However, will implement additional internal controls to ensure reports are complete and accurate. Criteria: The SF-425 quarterly reports should be submitted within the required time period after the end of the reporting period, which is 30 days, and should agree to the general ledger. Grant accounting requires the program revenues to equal the program’s expenditures. Questioned Costs: None. Effect: SF-425 reports for the Stonegarden program were not submitted by the required due dates and some of the amounts reported were not correctly matching the general ledger amounts. Cause: The County had turnover in the management of this program and the position wasn’t filled until the middle of the previous fiscal year and the program manager had to go through the documents to know what amounts needed to be reported and as the County was far behind on their reporting it took multiple months for the County to catch up which resulted in the two late reports in the current fiscal year; one for grant 2019 and one for grant 2018. For the amounts reported not matching the general ledger and revenue not equaling expenditures, the reason for this is both a timing issue and there not being a proper reconciliation process in place when report amounts are submitted to the granting agency and when recording amounts in the general ledger. Auditor’s Recommendations: We recommend that there be a reconciliation with the Stonegarden program and with Finance to ensure that the amounts reported in the quarterly reports match the amounts reported on the general ledger and that the County cross-train someone to ensure that if there is turnover again for the program, there is someone who can submit the reports until someone else has been hired to fill the position. Agency’s Response: Luna County continues to improve grant management of these funds and in getting billing and reporting done on a consistent and timely basis. Reporting is currently being prepared and submitted on a quarterly basis for each grant cycle we have open. Reporting is also being prepared throughout the grant cycle to include modifications of Ops Orders, RFA’s and grant progress and closing reports. We are also reviewing a cross-training implementation to ensure that should we have turnover within that department there will be someone able to pick up the grant to continue to monitor and work it without delays. The finance department will be responsible for this issue and internal controls will be implemented in fiscal year 2022. 140

2021-006 ? SF-425 Reports (Significant Deficiency) (Repeat/Modified finding FS 2020-007) Federal program information: Funding agency: U.S. Department Homeland Security Title: Operation Stonegarden CFDA number: 97.067 Compliance Requirement Reporting Award Period: July 1, 2020 to June 30, 2021 Condition: During our testwork of the Stonegarden program we noted the following: ? For the 2019 and 2018 grants, there were two quarterly reports out of six that were not submitted by the due date required. ? The quarterly report?s expenditures did not match the expenditures of the general ledger in total for a variance of $13,619. ? The program?s revenues were $23,816 more than the expenditures on the trial balance. The County made progress in filing SF-425?s during fiscal year 2021. However, will implement additional internal controls to ensure reports are complete and accurate. Criteria: The SF-425 quarterly reports should be submitted within the required time period after the end of the reporting period, which is 30 days, and should agree to the general ledger. Grant accounting requires the program revenues to equal the program?s expenditures. Questioned Costs: None. Effect: SF-425 reports for the Stonegarden program were not submitted by the required due dates and some of the amounts reported were not correctly matching the general ledger amounts. Cause: The County had turnover in the management of this program and the position wasn?t filled until the middle of the previous fiscal year and the program manager had to go through the documents to know what amounts needed to be reported and as the County was far behind on their reporting it took multiple months for the County to catch up which resulted in the two late reports in the current fiscal year; one for grant 2019 and one for grant 2018. For the amounts reported not matching the general ledger and revenue not equaling expenditures, the reason for this is both a timing issue and there not being a proper reconciliation process in place when report amounts are submitted to the granting agency and when recording amounts in the general ledger. Auditor?s Recommendations: We recommend that there be a reconciliation with the Stonegarden program and with Finance to ensure that the amounts reported in the quarterly reports match the amounts reported on the general ledger and that the County cross-train someone to ensure that if there is turnover again for the program, there is someone who can submit the reports until someone else has been hired to fill the position

2020-006 ? Requests for Reimbursement Cash Management (Material Weakness) (Repeat/Modified finding FS 2019-005) Federal program information: Funding agency: U.S. Department Homeland Security Title: Operation Stonegarden CFDA number: 97.067 Compliance Requirement Cash Management Award Period: July 1, 2019 to June 30, 2020 Condition: The County did not have any requests for reimbursement until nine months after the fiscal year began, so of the nine requests for reimbursement, only two of the nine were done timely. The County has made great strides in getting billing and reporting done on a consistent basis. Invoicing is currently being prepared and submitted on a monthly basis for each grant cycle we have open. Criteria: Good cash management policies should be put in place where the County requests for reimbursement are placed promptly after the month has ended to ensure that the County?s cash balances for the program are not overdrawn. Questioned Costs: None. Effect: The County is having to use reserves to pay for Operation Stonegarden?s operations. Cause: The County had turnover in the management of this program at the end of the previous fiscal year. The new manager was hired in January of 2020 and it took some time for the County to go through the documents to know what amounts needed to be requested. Auditor?s Recommendations: As it appears the County now has a process in place and is being done timely as of the end of the fiscal year, we recommend that the County cross-train someone to ensure that if there is turnover again for the program, there is someone who can fill in these duties until someone else has been hired to fill the position. Agency?s Response: Processes are being implemented as of November 23, 2020, to be working on one grant year per fiscal year to avoid confusion in grant awards. The County is also reviewing a cross-training implementation to ensure that should we have turnover within that department there will be someone able to pick up the grant to continue to monitor and work it without delays. The Budget and Procurement Director is the responsible party and will have all policies and procedures implemented by June 30, 2021.

2020-007 ? SF-425 Reports (Material Weakness) (Repeat/Modified finding FS 2019-006) Federal program information: Funding agency: U.S. Department Homeland Security Title: Operation Stonegarden CFDA number: 97.067 Compliance Requirement Reporting Award Period: July 1, 2019 to June 30, 2020 Condition: During our testwork of the Stonegarden program we noted the following: ? For the 2017 grant (one of two grants during fiscal year 2020), there were no SF-425 reports completed or submitted throughout the fiscal year. ? The SF-425 reports were not submitted timely for the 2018 grant, the first three quarters were done in June 2020 and the fourth quarter was submitted in September of 2020, all of which were after the required submittal date of 30 days after the quarter end. ? The report?s expenditures did not match the expenditures of the general ledger for any of the quarters reported for a total variance of $5,899. The County made progress in filing SF-425?s during fiscal year 2020. However, will implement additional internal controls to ensure reports are complete and accurate. Criteria: SF-425 reports should be submitted within the required time period after the end of the reporting period, and should agree to the general ledger. Questioned Costs: None. Effect: SF-425 reports for the Stonegarden program were not submitted by the required due dates and some of the amounts reported were not correctly matching the general ledger amounts. Cause: The County had turnover in the management of this program at the end of the previous fiscal year. The new manager was hired in January of 2020 and it took some time for the County to go through the documents to know what amounts needed to be reported. For the amounts reported not matching the general ledger, the reason for this is both a timing issue and amounts being reported not being checked with what was reported on the general ledger for the same period. Auditor?s Recommendations: We recommend that there be a reconciliation with the Stonegarden program and with Finance to ensure that the amounts reported in the SF-425 reports match the amounts reported on the general ledger and that the County cross-train someone to ensure that if there is turnover again for the program, there is someone who can submit the reports until someone else has been hired to fill the position Agency?s Response: Luna County has made great strides in getting billing and reporting done on a consistent basis. Reporting is currently being prepared and submitted on a quarterly basis for each grant cycle we have open. Reporting is also being prepared throughout the grant cycle to include modifications of Ops Orders, RFA?s and grant progress and closing reports. Processes are being implemented to be working on one grant year per fiscal year to avoid confusion in grant awards. We are also reviewing a cross-training implementation to ensure that should we have turnover within that department there will be someone able to pick up the grant to continue to monitor and work it without delays.

2020-008 ? Preparation and Timeliness of Schedule of Expenditures and Federal Awards (Significant Deficiency) Federal program information: Funding agency: All Programs Title: All Programs CFDA number: All Programs Compliance Requirement Reporting Award Period: July 1, 2019 to June 30, 2020 Condition: The Schedule of Expenditures of Federal Awards was not completed with accurate amounts and CFDA numbers at the time of the audit. Criteria: OMB Uniform Guidance requires that the County identify all federal awards expended on the schedule of expenditures of federal awards. The Circular also requires award identification to include, as applicable, the CFDA title and number, the award number and years, the name of the federal agency, and the name of any applicable pass-through entities. Cause: The County was not updating the SEFA timely. Effect: The County is in violation of the Uniform Guidance requirements. Auditor?s Recommendation: We recommend that the County implement a system to ensure that items needed to prepare the SEFA be done in the closing process so that when the audit starts the SEFA is ready to be audited. Agency?s Response: Luna County is going to prepare a perpetual SEFA schedule through the Business Office before June 30, 2021. Draft template has been prepared and will be worked throughout the year to ensure all federal programs are captured and accounted for accurately. The Budget and Procurement Director is the responsible party.

Condition: The County did not make any requests for reimbursement throughout the year under audit to manage the cash balances of the fund and program. Criteria: Good cash management policies should be put in place where the County requests for reimbursement are placed promptly after the month has ended to ensure that the County?s cash balances for the program are not overdrawn. Questioned Costs: None. Cause: The County?s contractor that was hired to do the requests for reimbursements stopped working for the County at the end of the previous fiscal year and the process of requesting was not put in place to continue the process. The County eventually hired someone to take over these duties later in the fiscal year but it took time for the employee to get properly trained to understand what was needed for this process, this employee also left shortly after getting hired and did not complete any requests for reimbursement. Effect: The County is having to use reserves to pay for Operation Stonegarden?s operations. Auditor?s Recommendations: We recommend that the County implement a process to ensure that the requests are being completed and reviewed on a timely basis to confirm that the program will be reimbursed promptly after spending the money to ensure proper cash management. Agency?s Response: Luna County had a large turnover in personnel available to assist in the completion of the administrative procedures for the Operation Stonegarden grant. We currently have one employee in place that is learning the grant and will be responsible for catching up all requests for reimbursement and maintain a monthly request for reimbursement system. Reimbursement requests will be reconciled to the General Ledger ensuring the accuracy of expenditures equals the request for reimbursement. Luna County anticipates by the end of FY 2020 all requests for reimbursement will be brought current and will continue to move forward on a timely basis.

Condition: SF-425 reports for fiscal year June 30, 2019 were not being completed or submitted throughout the fiscal year. Criteria: SF-425 reports should be submitted within the required time period after the end of the reporting period. Questioned Costs: Not Applicable Cause: The County?s contractor that was hired to do the reporting stopped working for the County at the end of the previous fiscal year and the process of filling out and submitting the reports was not put in place to continue the process. The County eventually hired someone to take over these duties later in the fiscal year but it took time for the employee to get properly trained to understand what was needed for this process, this employee also left shortly after getting hired and did not submit any reports. Effect: SF-425 reports for the Stonegarden program were not submitted by the required due dates. Auditor?s Recommendations: Established policies should be adhered to which require financial reports to be submitted within the required time period and have a supervisor responsible to oversee this function to ensure it gets completed Agency?s Response: Luna County had a large turnover in personnel available to assist in the completion of the administrative procedures for the Operation Stonegarden grant. We currently have one employee in place that is learning the grant and will be responsible for submitting all late reporting and maintain a monthly/quarterly/annual reporting system to ensure timely submission of required reporting. Luna County anticipates by the end of FY 2020 all reports will be brought current and will continue to prepare and submit reports on a timely basis.

Condition: The County could not provide support showing that they were reviewing and approving required reports by their subrecipient during fiscal year 2019. Criteria: According to 2 CFR part 200 subpart F, pass-through entities (County) are responsible for establishing requirements, as needed to ensure subrecipient accountability for the use of their funds. Questioned Costs: Not Applicable Cause: The County had a lot of turnover in both the position responsible for this grant as well as in top management who oversaw for Stonegarden and so either the retainage of supporting documentation was not filed or the review and approval was never completed. Effect: The County is not in compliance with subrecipient monitoring. Auditor?s Recommendations: Ensure that the County is keeping up with monitoring subrecipients by having a designated employee and a supervisor over that employee to ensure compliance with subrecipient monitoring. Agency?s Response: Luna County had a large turnover in personnel available to assist in the completion of the administrative procedures for the Operation Stonegarden grant including oversight and review of subrecipient reporting and invoicing. We currently have one employee in place that is learning the grant and will be responsible for reviewing and verifying all sub-recipient requests for reimbursement for compliance and accuracy when preparing authorization for payment to sub-recipients. Luna County will be monitoring subrecipients on a regular basis.

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