HUMBOLDT COUNTY

Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform guidance) requires non-federal entities other than States to follow their own documented procurement procedures, which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable Federal statutes and the procurement requirements identified in 2 CFR sections 200.318 through 200.326. This includes using the small purchase methods only for procurements that meet the applicable criteria under 2 CFR sections 200.320(b). Condition, Cause, and Effect/Potential Effect: Internal controls at the County were not sufficient to ensure full and open competition on grant-funded contracts. Individuals involved in the procurement process incorrectly relied on NRS requirements instead of the County’s procurement policy and federal procurement guidelines. Questioned Costs: None noted. Context: A nonstatistical sample of the procurement transactions funded with the ARPA Coronavirus State and Local Recovery Funds revealed that the County did not conduct procurement transactions in a manner providing fair and open competition on two construction contracts. Recommendation: We recommend that the County provide additional training to grantoversight personnel and ensure controls are sufficiently enhanced to ensure procurement policies are followed on federal grant-funded purchases. Views of Responsible Officials and Planned Corrective Actions: We agree with this finding and will enhance control procedures as recommended. Repeat Finding from Prior Year: Yes; 2024-008.

Criteria: Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.330, .331, and .332 requires that, as a pass-through entity, the County is responsible for identifying and reporting to the subrecipient the award information and applicable requirements to carrying out the award, as well as monitoring the activities of the subrecipient to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals. Condition and Cause: Due to inadequate internal controls, the County did not provide complete and accurate subaward information to the subrecipient. Effect/Potential Effect: Subrecipients may not be aware of the grant reporting or compliance requirements for proper inclusion in their financial reports. Questioned Costs: None noted. Context: The County passed $101,794 through to the McDermitt GID and did not perform adequate procedures to ensure subrecipient compliance. This is not, however, deemed to be a questioned cost as no instances of material non-compliance were noted during our testing of the subrecipient’s grant activities. Recommendation: Internal control procedures should be enhanced to ensure compliance with subrecipient monitoring requirements. Views of Responsible Officials and Planned Corrective Actions: We agree with this finding and will enhance control procedures as recommended. Repeat Finding from Prior Year: Yes; 2024-007

SIGNIFICANT DEFICIENCY IN INTERNAL CONTROL OVER COMPLIANCE 2024-007: U.S. Department of the Treasury ARPA Coronavirus State and Local Recovery Funds, ALN 21.027 Subrecipient Monitoring Criteria: Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.330, .331, and .332 requires that, as a pass-through entity, the County is responsible for identifying and reporting to the subrecipient the award information and applicable requirements to carrying out the award, as well as monitoring the activities of the subrecipient to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals. Condition and Cause: Due to inadequate internal controls, the County did not provide complete and accurate subaward information to the subrecipient. Effect/Potential Effect: Subrecipients may not be aware of the grant reporting or compliance requirements for proper inclusion in their financial reports. Questioned Costs: None noted. Context: The County passed $49,019 through to the Golconda Water District and did not perform adequate procedures to ensure subrecipient compliance. This is not, however, deemed to be a questioned cost as no instances of material non-compliance were noted during our testing of the subrecipient’s grant activities. Recommendation: Internal control procedures should be enhanced to ensure compliance with subrecipient monitoring requirements. Views of Responsible Officials and Planned Corrective Actions: We agree with this finding and will enhance control procedures as recommended. Repeat Finding from Prior Year: Yes

SIGNIFICANT DEFICIENCY IN INTERNAL CONTROL OVER COMPLIANCE 2024-008: U.S. Department of the Treasury ARPA Coronavirus State and Local Recovery Funds, ALN 21.027 Procurement, Suspension, and Debarment Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform guidance) requires non-federal entities other than States to follow their own documented procurement procedures, which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable Federal statutes and the procurement requirements identified in 2 CFR sections 200.318 through 200.326. This includes using the small purchase methods only for procurements that meet the applicable criteria under 2 CFR sections 200.320(b). Condition, Cause, and Effect/Potential Effect: Internal controls at the County were not sufficient to ensure full and open competition on grant-funded contracts. Individuals involved in the procurement process incorrectly relied on NRS requirements instead of the County’s procurement policy and federal procurement guidelines. Questioned Costs: None noted. Context: A nonstatistical sample of the procurement transactions funded with the ARPA Coronavirus State and Local Recovery Funds revealed that the County did not conduct procurement transactions in a manner providing on two construction contracts. Recommendation: We recommend that the County provide additional training to grantoversight personnel and ensure controls are sufficiently enhanced to ensure procurement policies are followed on federal grant-funded purchases. Views of Responsible Officials and Planned Corrective Actions: We agree with this finding and will enhance control procedures as recommended. Repeat Finding from Prior Year: No

Criteria: Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.330, .331, and .332 requires that, as a pass-through entity, the County is responsible for identifying and reporting to the subrecipient the award information and applicable requirements to carrying out the award, as well as monitoring the activities of the subrecipient to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals. Condition and Cause: Due to inadequate internal controls, the County did not provide complete and accurate subaward information to the subrecipient and monitoring procedures were not performed. Effect/Potential Effect: Noncompliance at the subrecipient level may occur and not be detected by the County. Questioned Costs: None noted. Context: The County passed $341,619 through to the McDermitt GID and did not perform adequate procedures to ensure subrecipient compliance. This is not, however, deemed to be a questioned cost as no instances of material non-compliance were noted during our testing of the subrecipient’s grant activities. Recommendation: Internal control procedures should be enhanced to ensure compliance with subrecipient monitoring requirements. Views of Responsible Officials and Planned Corrective Actions: The Humboldt County agrees with this finding and will enhance control procedures as recommended. Repeat Finding from Prior Year: No

Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform AdministrativeRequirements, Cost Principles, and Audit Requirements for Federal Awards (Uniformguidance) requires all grant recipients to ?Establish and maintain effective internal controlover the Federal award that provides reasonable assurance that the non-Federal entity ismanaging the Federal award in compliance with Federal statutes, regulations, and the termsand conditions of the Federal award.?, consistent with the Internal Control IntegratedFramework issued by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO).Condition, Cause, and Effect/Potential Effect: The County did not establish and maintaineffective internal control over the reimbursement requests for this program, resulting inreimbursement requests being submitted with incorrect amounts and requiring revisions.This is the result of the grant manager not having sufficient knowledge of the allowablegrant expenditures, inaccurate collection of financial data, clerical errors in thereimbursements, insufficient communications between the grant manager and the grantoragency, inconsistent updating of internal records, and lack of timely updates to theinformation system to implement grantor-required changes for future reimbursements.These errors could result in unallowable costs being submitted for reimbursement, alsopotentially resulting in incorrect matching calculations.Questioned Costs: None noted.Context: Based on a nonstatistical sample of all 12 monthly reimbursement requests for thefiscal year, 8 were found by the grantor agency to be incorrect and had to be revised. Had thegrantor agency not detected the errors, the County would have been reimbursed approximately$12,500 more than what they were entitled.Repeat Finding from Prior Year: NoRecommendation: In order to ensure the accuracy of the reimbursement requests, the Countyshould enhance control procedures to ensure that a knowledgeable individual reviews grantreimbursement requests and supporting documentation for clerical accuracy and allowabilityprior to submission to the grantor agency, ensure all changes are documented in the grant files,and that reimbursement requests are submitted monthly in order to reflect the revisions infuture grant reimbursements.Views of Responsible Officials: Internal control procedures will be enhanced and supervisoryreview will be implemented to ensure proper completion of reimbursement requests.

Criteria: The OMB Compliance Supplement requires costs to meet seven general criteria in order to be allowable under Federal awards. Costs must be 1) necessary and reasonable for the performance of the Federal award, 2) conform to limitations or exclusions set forth in 2 CFR part 200, subpart E or in the Federal award as to types or amount of cost items, 3) be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity, 4) be accorded consistent treatment with respect to direct and indirect costs, 5) be determined in accordance with generally accepted accounting principles, 6) not be included as a cost or used to meet cost-sharing or matching requirements of any other federally financed program, and 7) be adequately documented.Condition: Some costs reimbursed under this program were not adequately documented, including instances of insufficient support and inconsistent method of allocation between the two grants received under the program. Cause and Effect: The County does not have adequate internal controls to ensure that all costs are adequately documented consistent with OMB requirements. Under the current system, immaterial amounts could be charged to the incorrect grant under this program. Questioned Costs: None noted. Repeat Finding from Prior Year: Yes; prior year finding 2018-003. Auditor?s Recommendation: The County should enhance controls over the program to ensure that all costs properly documented with sufficient supporting records, allocated properly and consistently between closely-related grants, necessary information is communicated to all individuals involved in the processing of grant transactions, and that there are proper review, reconciliation, and monitoring procedures in place to detect inadequate documentation and incorrect or inconsistent cost allocations. Views of Responsible Officials and Planned Corrective Actions: The County will review our internal controls over grant expenditures and enhance our processes accordingly.

Criteria: The OMB Compliance Supplement requires reports for Federal awards to include all activity of the reporting period, be supported by applicable accounting or performance records, and by fairly presented in accordance with governing requirements. Condition: Reports submitted for the Family Treatment Drug Court grant did not include program income.Cause and Effect: The County does not have adequate internal controls to ensure that all applicable accounts are included in required reports. All quarterly reports submitted for the grant for the fiscal year ended June 30, 2019 were incomplete with regard to reporting of program income. Questioned Costs: None noted. Repeat Finding from Prior Year: Yes, modified; prior year finding 2018-004. Auditor?s Recommendation: The County should enhance controls over the program to ensure that all activity is reported as required. Communication should be enhanced to ensure that all individuals involved in program reporting are aware of the requirements and that sufficient information is available to complete the reports. Views of Responsible Officials and Planned Corrective Actions: The County will review our internal controls over grant expenditures and enhance our processes accordingly.

Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform guidance) requires non-federal entities other than States to follow their own documented procurement procedures, which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable Federal statutes and the procurement requirements identified in 2 CFR sections 200.318 through 200.326. This includes using the small purchase methods only for procurements that meet the applicable criteria under 2 CFR sections 200.320(b).Condition, Cause and Effect: The County does not have adequate controls over procurement with respect to disbursements made using federal funds. Questioned Costs: None noted. Repeat Finding from Prior Year: No Auditor?s Recommendation: The County review internal controls to ensure all procurement transactions are executed under the policy adopted and that documentation of such is maintained in County files. Views of Responsible Officials and Planned Corrective Actions: The County will review our internal controls over grant expenditures and enhance our processes accordingly.

Criteria: The US Department of the Treasury (Treasury) regulations require entities to minimize the time elapsing between the transfer of funds from the US Treasury and disbursement by the non-federal entity for direct program or project costs, consistent with 2 CFR section 200.305(b). The OMB Compliance Supplement requires that non-Federal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and terms and conditions of Federal awards. Condition: On several occasions, reimbursement requests submitted contained duplicated expenses that had already been submitted for reimbursement on a prior request. The situations were later detected and adjusted accordingly on subsequent reimbursements requests, however the duplications lead to excess cash being maintained at various times throughout the year. The excess cash maintained was immaterial and did not result in an interest liability to federal agencies.Cause and Effect: The County does not have adequate internal controls to ensure that reimbursement requests do not contain duplicate disbursements. Incorrect reimbursement requests may be processed and Federal funds received prematurely. Questioned Costs: None noted. Repeat Finding from Prior Year: No Auditor?s Recommendation: The County should enhance reconciliation controls to ensure that requests for reimbursements do not contain any duplicated disbursements prior to submitting the request for reimbursement. Views of Responsible Officials and Planned Corrective Actions: The County will review our internal controls over grant expenditures and reimbursement requests and enhance our processes accordingly.

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