Douglas County

2024-001 The County did not have adequate internal controls and did not comply with federal suspension and debarment requirements. Assistance Listing Number and Title: 21.027, COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2023-001 Description of Condition Although the County has a process to verify the suspension and debarment status for contractors it pays $25,000 or more, our audit found the County did not follow this process and did not verify that four of 12 contractors were not suspended or debarred before purchasing from them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Although the County has a process to verify the suspension and debarment status for contractors it pays $25,000 or more, our audit found the County did not follow this process and did not verify that four of 12 contractors were not suspended or debarred before purchasing from them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Effect of Condition The County did not obtain a written certification from the contractors, insert a clause into the contracts or check for exclusion records at SAM.gov to verify contractors it paid $1,290,876 using federal funds were not suspended or debarred before contracting. Without adequate internal controls, the County increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments the County made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. We subsequently verified the contractors were not suspended and debarred. Therefore, we are not questioning costs. Recommendation We again recommend the County strengthen its internal controls to verify all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and maintain documentation demonstrating compliance with this requirement. County’s Response Despite our best efforts, we have been unable to effectively implement controls ensuring purchases with federal dollars are compliant with suspension and debarment requirements. The County is developing federal procurement procedures, including purchase requests with a reminder to check suspension and debarment. We take this requirement seriously and will continue to work on systems until we have a fail-safe process. Auditor’s Remarks We thank the County for its cooperation and assistance during the audit and acknowledge its commitment to resolve this finding. We will review the corrective action taken during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.

Finding ref number: 2024-001 Finding caption: The County did not have adequate internal controls and did not comply with federal suspension and debarment requirements. Name, address, and telephone of County contact person: Leah Hurd 140 19th St NW East Wenatchee, WA 98802 (509) 888-6595 Corrective action the auditee plans to take in response to the finding: Despite our best efforts, we have been unable to effectively implement controls ensuring purchases with federal dollars are compliant with suspension and debarment requirements. The County is developing federal procurement procedures, including purchase requests with a reminder to check suspension and debarment. We take this requirement seriously and will continue to work on systems until we have a fail-safe process. Anticipated date to complete the corrective action: 01/01/2026

2023-002

2023-001       The County’s internal controls were inadequate for ensuring compliance with federal suspension and debarment requirements. Assistance Listing Number and Title: 21.027, COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A   Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2022-001     Background The purpose of the Coronavirus State and Local Fiscal Recovery Funds program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected, and make necessary investments in water, sewer or broadband infrastructure. In 2023, the County spent $3,220,677 in program funds. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the County enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors are not suspended, debarred or otherwise excluded. The County may verify this by collecting a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The County must verify this before entering into the contract, and must keep documentation demonstrating compliance with this federal requirement Description of Condition Our audit found the County’s controls were ineffective for ensuring it verified the suspension and debarment status for three of 12 contractors it paid $25,000 or more, all or in part with federal funds. Specifically, the County did not obtain a written certification, include a clause in the contract, or search for exclusion records in SAM.gov to verify the three contractors were not suspended or debarred before entering into contracts with them. The County paid these contractors $560,320 in fiscal year 2023. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition County staff did not consistently follow established procedures to perform this verification for all applicable transactions. Effect of Condition Without this verification, the County increases its risk of providing federal funds to contractors that are excluded from participating in federal programs. Any payments made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. We subsequently verified the contractors were not suspended and debarred, so we are not questioning costs. Recommendation We recommend the County establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs. We also recommend the County maintain documentation demonstrating compliance with this requirement. County’s Response In 2023 the County hired a Grants and Public Relations Specialist.  This position provides technical assistance to county staff and outside contractors to ensure compliance with grant requirements.  Unfortunately, some of the contracts were entered into before this position was filled.  This should not be an issue going forward. Auditor’s Remarks We appreciate the County’s commitment to resolving this issue. We will review the condition during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.

Finding ref number: 2023-001 Finding caption: The County’s internal controls were inadequate for ensuring compliance with federal suspension and debarment requirements. Name, address, and telephone of County contact person: Leah Hurd 140 19th St NW East Wenatchee, WA 98802 (509) 888-6595 Corrective action the auditee plans to take in response to the finding: The County has hired a Grants and Public Relations Specialist. This position provides technical assistance to county staff and outside contractors to ensure compliance with grant requirements. Unfortunately, some of the contracts were entered into before this position was filled. This should no longer be an issue. Anticipated date to complete the corrective action: Done

2022-001

2023-002       The County’s internal controls were inadequate for ensuring compliance with federal procurement requirements. Assistance Listing Number and Title: 20.205, Highway Planning and Construction Federal Grantor Name: Federal Highway Administration, U.S. Department of Transportation Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Transportation (WSDOT) Pass-through Award/Contract Number: HSIP-5908(012) STPUS-5903(001) Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A     Background During fiscal year 2023, the County spent $2,443,615 in Highway Planning and Construction program funds. The County used this program funding for various road improvement projects. Federal regulations require award recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. When using federal funds to pay for consulting services, governments must apply the more restrictive of federal requirements, state law or local policies. For consulting services, the County must perform a competitive negotiation process, which includes selecting the most qualified firm. Description of Condition When procuring transactions, the County must adhere to the Local Agency Guidelines (LAG) Manual, which WSDOT maintains. The LAG Manual contains requirements for procuring consulting services and specific requirements for limited competition situations. Although the County references the LAG Manual when procuring these types of services, it did not have controls effective to comply with the requirements specific to limited competition. When selecting two consultants, the County did not obtain the minimum three proposals required. For one project, the County only received two proposals, evaluated them and selected the most qualified firm. For the other project, the County only received one proposal, did not perform any further evaluation and awarded the contract to the only submitter. For both projects, the County did not complete or submit a sole source public interest finding to WSDOT for review and approval as required. For the project with one proposal submitted, the County also did not follow requirements to evaluate the consultant's qualifications with a phone interview, at minimum, based on established criteria. Both these procurement activities did not comply with the requirements in the LAG Manual. The County paid a total of about $140,000 to these consultants during the period. Cause of Condition Although County staff responsible for procurement used the LAG Manual, they were unaware of the requirements regarding limited competition. Effect of Condition Without following the required procurement procedures, the County cannot be sure it selected the most qualified firms for consulting services or provided fair and open competition in the selection of public contracts. Recommendation We recommend the County improve its internal controls over procurement requirements to verify that it meets all requirements, including those in the LAG Manual, before awarding contracts. County’s Response The County coordinates all consultant contracts with WSDOT Local Programs on federally funded projects, and it was not mentioned that we needed additional controls.  We recognize now the need for phone interviews and sole source public interest findings.  The County appreciates the opportunity to learn and grow and will endeavor to provide a fair and open selection process for all future public contracts.  Auditor’s Remarks We appreciate the County’s commitment to resolving this issue. We will review the condition during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, Section 318, General procurement standards, establishes requirements for written procedures and for maintaining records sufficient to detail the history of procurement. Title 2 CFR Part 200, Uniform Guidance, Section 319 – Competition, establishes requirements that all procurement transactions are to be conducted in a manner providing full and open competition. Title 2 CFR Part 200, Uniform Guidance, Section 320 – Methods of procurement to be followed, establishes requirements for procuring with Federal funds by nonfederal entities. The Local Agency Guidelines (LAG) manual, chapter 13.2 contains requirements for limited competition. Chapter 31.1 contains requirements for selecting consultants.

Finding ref number: 2023-002 Finding caption: The County’s internal controls were inadequate for ensuring compliance with federal procurement requirements. Name, address, and telephone of County contact person: Leah Hurd 140 19th St NW East Wenatchee, WA 98802 (509) 888-6595 Corrective action the auditee plans to take in response to the finding: The County now recognizes the need for phone interviews and sole source public interest findings. Anticipated date to complete the corrective action: Done

2022-001 The County’s internal controls were inadequate for ensuring compliance with federal suspension and debarment requirements. Assistance Listing Number and Title: 21.027, COVID 19 – Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2021-002 Background The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected, and make necessary investments in water, sewer, or broadband infrastructure. In 2022, the County spent $1,422,643 in program funds. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the County enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors have not been suspended, debarred or otherwise excluded. The County may accomplish this verification by collecting a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The County must perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Description of Condition Our audit found the County’s controls were ineffective for ensuring staff verified the suspension and debarment status of contractors for purchases exceeding $25,000, paid all or in part with federal funds. Specifically, the County did not obtain a written certification, include a clause in the contract, or search for exclusion records in SAM.gov to verify that nine contractors paid a total of $872,321 in 2022 were not suspended or debarred before entering into the contracts or charging costs to the federal award. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition County staff responsible for these purchases were not aware of the federal requirements for suspension and debarment. Staff learned about the requirements during the audit of fiscal year 2021, but the County had already entered into these covered transactions. Effect of Condition Without adequate internal controls over suspension and debarment requirements, the County increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments the County made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. We subsequently verified the contractors were not suspended or debarred, so we are not questioning costs. Recommendation We recommend the County establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs. County’s Response The County has hired a Grants and Public Relations Specialist. This position provides technical assistance to county staff and outside contractors to ensure compliance with grant requirements. Auditor’s Remarks We appreciate the County’s commitment to resolving this issue. We will review the condition during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.

Finding ref number: 2022-001 Finding caption: The County’s internal controls were inadequate for ensuring compliance with federal suspension and debarment requirements Name, address, and telephone of County contact person: Karen Goodwin 140 19ᵗʰ Street N.W. 509-888-6596 Corrective action the auditee plans to take in response to the finding: The County has hired a Grants and Public Relations Specialist. This position provides technical assistance to county staff and outside contractors to ensure compliance. Anticipated date to complete the corrective action: Done

2021-002

2021-002 The County?s internal controls were inadequate for ensuring compliance with federal requirements for suspension and debarment. CFDA Number and Title: 21.027, COVID-19 ? Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: SLFRP2214 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Questioned Cost Amount: $0 Description of Condition The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) is to respond to the COVID-19 pandemic?s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected, and make necessary investments in water, sewer or broadband infrastructure. In 2021, the County spent $1,040,917 in program funds for the provision of government services. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Recipients are also required to retain documentation for auditing purposes. Federal requirements prohibit grant recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the County enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors have not been suspended, debarred or otherwise excluded. The County may accomplish this verification by collecting a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration?s System for Award Management at SAM.gov. The County must perform this verification before entering into the contract, and it must maintain documentation demonstrating compliance with this federal requirement. Our audit found the County did not have internal controls for ensuring it verified the suspension and debarment status of contractors for purchases exceeding $25,000, paid all or in part with federal funds. Specifically, the County did not verify that five contractors paid a total of $909,801 were not suspended or debarred from participating in federal programs before contracting with them in 2021. We consider this deficiency in internal controls to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition County staff responsible for these purchases said they were not aware of the federal requirements for suspension and debarment. Effect of Condition The City did not obtain written certifications, insert clauses into the contracts, or check SAM.gov to verify the contractors were not suspended or debarred. Without this verification, the County increases its risk of providing federal funds to contractors that are excluded from participating in federal programs. Any payments made to an ineligible party would be unallowable, and the federal grantor could potentially recover them. We subsequently verified the contractors were not suspended and debarred, therefore, we are not questioning costs. Recommendation We recommend the County establish internal controls to verify all contractors it expects to pay $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs. County?s Response The County has created a procurement checklist for all projects including Federal and State funded projects. This resource will be provided to all county staff, including the Board of Commissioners and County Administrator to ensure proper compliance with all requirements. Auditor?s Remarks We appreciate the County?s commitment to resolving the issue noted, and will follow up during the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.

Finding ref number: 2021-002 Finding caption: The County?s internal controls were inadequate for ensuring compliance with federal requirements for suspension and debarment. Name, address, and telephone of County contact person: Karen Goodwin, Chief Accountant 140 19th Street, NW East Wenatchee, WA 98802 509-888-6596 Corrective action the auditee plans to take in response to the finding: The County has created a procurement checklist for all projects including Federal and State funded projects. This resource has been provided to all county staff, including the Board of Commissioners and County Administrator to ensure proper compliance with all requirements. Anticipated date to complete the corrective action: Done